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Exhibit 2.1
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STOCK PURCHASE AGREEMENT
among
THE PILLSBURY COMPANY,
PEARLE, INC.
and
XXXX NATIONAL CORPORATION
Dated as of September 24, 1996
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TABLE OF CONTENTS
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Page
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ARTICLE I
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Section 1.1 Specific Definitions.............................................................. 2
Section 1.2 Other Terms....................................................................... 12
Section 1.3 Other Definitional Provisions..................................................... 12
ARTICLE II
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PURCHASE AND SALE OF PSC SHARES AND PEARLE SHARES
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Section 2.1 Purchase and Sale of PSC Shares and Pearle
Shares........................................................................ 12
Section 2.2 Closing; Delivery and Payment..................................................... 13
Section 2.3 Purchase Price Adjustments and Reconciliation
of Debt Reduction Amount...................................................... 14
ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Section 3.1 Organization and Authority of Seller.............................................. 19
Section 3.2 Organization, Authority and Qualification of
Pearle........................................................................ 21
Section 3.3 Capitalization of Pearle and PSC.................................................. 22
Section 3.4 Subsidiaries of Pearle............................................................ 24
Section 3.5 Franchise Agreements.............................................................. 26
Section 3.6 Financial Information............................................................. 27
Section 3.7 Absence of Undisclosed Liabilities................................................ 30
Section 3.8 Absence of Certain Changes or Events.............................................. 30
Section 3.9 Title to Properties; Absence of Liens and
Encumbrances, etc............................................................. 31
Section 3.10 Litigation........................................................................ 33
Section 3.11 Compliance with Law............................................................... 33
Section 3.12 Contracts......................................................................... 34
Section 3.13 Consents and Approvals............................................................ 36
Section 3.14 Tax Matters....................................................................... 36
Section 3.15 Intellectual Property............................................................. 37
Section 3.16 Collective Bargaining Agreements.................................................. 39
Section 3.17 Employee Benefits................................................................. 39
Section 3.18 Environmental Matters............................................................. 45
Section 3.19 Insurance......................................................................... 46
Section 3.20 Improper Payments................................................................. 47
Section 3.21 Warranties........................................................................ 47
Section 3.22 Condition of Assets............................................................... 47
Section 3.23 Brokers and Finders............................................................... 48
Section 3.24 No Other Representations or Warranties............................................ 48
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ARTICLE IV
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REPRESENTATIONS AND WARRANTIES OF BUYER
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Section 4.1 Organization and Authority of Buyer............................................... 49
Section 4.2 Brokers and Finders............................................................... 50
Section 4.3 Financial Capability.............................................................. 50
Section 4.4 Securities Act.................................................................... 51
Section 4.5 Consents and Approvals............................................................ 52
Section 4.6 No Other Representations or Warranties............................................ 52
ARTICLE V
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TAX AND CERTAIN EMPLOYEE MATTERS
--------------------------------
Section 5.1 Tax Sharing....................................................................... 52
Section 5.2 338 Election, Tax Indemnification................................................. 52
Section 5.3 Tax Returns....................................................................... 55
Section 5.4 Contest Provisions................................................................ 56
Section 5.5 Information to Be Provided by Buyer............................................... 58
Section 5.6 Assistance and Cooperation........................................................ 58
Section 5.7 Post-Closing Actions Which May Affect the
Seller's Liability for Taxes.................................................. 59
Section 5.8 Intentionally Deleted............................................................. 60
Section 5.9 Computation of Losses Subject to
Indemnification............................................................... 60
Section 5.10 Transfer Taxes.................................................................... 60
Section 5.11 Certain Employee Payment Obligations.............................................. 60
Section 5.12 Survival of Obligations........................................................... 62
ARTICLE VI
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CERTAIN COVENANTS AND AGREEMENTS
OF SELLER AND BUYER
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Section 6.1 Access and Information............................................................ 62
Section 6.2 Registrations, Filings and Consents............................................... 64
Section 6.3 Conduct of Business............................................................... 65
Section 6.4 Certain Buyer Obligations......................................................... 70
Section 6.5 Employee Matters.................................................................. 71
Section 6.6 Retention of Books and Records.................................................... 74
Section 6.7 Closing Date Financial Information................................................ 75
Section 6.8 Delivery of Corporate Minutes and Bank
Signature Cards............................................................... 75
Section 6.9 Covenant Not-to-Compete........................................................... 76
Section 6.10 Eyelab and Xxxxxx Xxxxx........................................................... 78
Section 6.11 Audited Financial Statements...................................................... 79
Section 6.12 Certain Consents.................................................................. 80
Section 6.13 Transition Services............................................................... 81
Section 6.14 Financing......................................................................... 81
Section 6.15 Insurance Claims.................................................................. 82
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Section 6.16 Ownership of PSC.................................................................. 83
Section 6.17 Further Assurances................................................................ 83
Section 6.18 BV Pension Provision
ARTICLE VII
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CONDITIONS TO CLOSING
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Section 7.1 Conditions to Obligations of Buyer................................................ 86
Section 7.2 Conditions to Obligations of Seller............................................... 89
Section 7.3 Conditions to Obligations of Buyer and
Seller........................................................................ 90
ARTICLE VIII
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TERMINATION
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Section 8.1 Termination....................................................................... 91
Section 8.2 Effect of Termination............................................................. 92
ARTICLE IX
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SURVIVAL AND INDEMNIFICATION
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Section 9.1 Survival of Representations, Warranties,
Covenants and Agreements; Knowledge of
Breach........................................................................ 92
Section 9.2 Indemnification................................................................... 94
Section 9.3 Method of Asserting Claims, etc.................................................. 101
ARTICLE X
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MISCELLANEOUS
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Section 10.1 Amendment and Modification; Waiver................................................105
Section 10.2 Return of Information.............................................................105
Section 10.3 Expenses..........................................................................106
Section 10.4 Public Disclosure.................................................................106
Section 10.5 Assignment........................................................................107
Section 10.6 Entire Agreement..................................................................107
Section 10.7 Fulfillment of Obligations........................................................108
Section 10.8 Parties in Interest; No Third Party
Beneficiaries.................................................................108
Section 10.9 Schedules.........................................................................108
Section 10.10 Counterparts......................................................................108
Section 10.11 Section Headings..................................................................109
Section 10.12 Notices...........................................................................109
Section 10.13 Mediation.........................................................................110
SECTION 10.14 GOVERNING LAW; SUBMISSION TO JURISDICTION;
SELECTION OF FORUM............................................................112
Section 10.15 Severability......................................................................113
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SCHEDULES
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Schedule 2.2(a) PSC Assets and Liabilities
Schedule 2.3(c) Adjustments to Closing Date Working Capital
Schedule 3.4 Subsidiaries of Pearle
Schedule 3.5 Franchise Agreements
Schedule 3.6(a) Financial Information
Schedule 3.6(b) BV Financial Information
Schedule 3.7 Undisclosed Liabilities
Schedule 3.8 Certain Changes or Events
Schedule 3.9 Liens, Encumbrances, etc.
Schedule 3.10 Litigation
Schedule 3.11 Compliance With Law
Schedule 3.12 Contracts
Schedule 3.13 Consents
Schedule 3.14 Tax Matters
Schedule 3.15 Intellectual Property
Schedule 3.16 Collective Bargaining Agreements
Schedule 3.17 Company Plans
Schedule 3.18 Environmental Matters
Schedule 3.19 Insurance Policies
Schedule 3.21 Warranties
Schedule 3.22 Condition of Assets
Schedule 4.3 Financing Arrangements
Schedule 6.3(g) Promotions
Schedule 6.9(a) Competing Businesses
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Schedule 6.9(c) Solicited Employees
Schedule 7.1(b) Form of Opinion of Counsel of Seller
Schedule 7.2(b) Form of Opinion of Counsel of Buyer
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STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of
September 24, 1996, among THE PILLSBURY COMPANY, a Delaware corporation
("Seller"), PEARLE, INC., a Delaware corporation ("Pearle" or the "Company") and
XXXX NATIONAL CORPORATION, a Delaware corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller owns all of the issued and outstanding
shares of capital stock of Pearle;
WHEREAS, Pearle owns, directly or indirectly, all of the
issued and outstanding shares of capital stock of Pearle Service Corporation
("PSC");
WHEREAS, Buyer desires to purchase from Pearle, or one of its
Subsidiaries, all of the issued and outstanding shares of PSC capital stock
(consisting of 100 shares of common stock, par value $1.00 per share (the "PSC
Shares")), after which time Pearle will distribute the proceeds of such sale to
Seller, and Buyer and Pearle, along with Seller and its Continuing Affiliates,
desire to make an election under Section 338(h)(10) of the Code with respect to
the PSC Shares, as more specifically provided herein;
WHEREAS, following the purchase of the PSC Shares and the
distribution of the proceeds of such sale by Pearle, Buyer desires to purchase
from Seller all of the issued and outstanding shares of Pearle capital stock
(consisting of 100 shares of common stock, par value $1.00 per share (the
"Pearle Shares")), as more specifically provided herein; and
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NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and subject to and on the terms and conditions
herein set forth, the parties hereto agree as follows:
ARTICLE I
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Section 1.1 SPECIFIC DEFINITIONS. As used in this Agreement,
the following terms shall have the meanings set forth or as referenced below:
"ADJUSTMENT STATEMENT" shall have the meaning set forth
in Section 2.3(c).
"ADJUSTMENT WORKPAPERS" shall mean the workpapers of KPMG
prepared in the course of auditing the Closing Date Balance Sheet and its
calculation of Closing Date Working Capital and the Adjustment Statement,
excluding any audit planning memoranda or audit programs.
"AFFILIATE", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by or under common control with
that Person.
"AGREEMENT" shall mean this Agreement and all Schedules
hereto.
"ANTITRUST DIVISION" shall mean the Antitrust Division
of the United States Department of Justice.
"AUDITED BV FINANCIAL INFORMATION" shall have the meaning set
forth in Section 3.6(b).
"AUDITED FINANCIAL INFORMATION" shall have the meaning
set forth in Section 3.6(a).
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"BALANCE SHEET" shall have the meaning set forth in
Section 3.6(a).
"BUSINESS" shall have the meaning set forth in Section
6.9.
"BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a day on which banks in New York City, New York are authorized or
obligated by law or executive order to close.
"BUYER" shall have the meaning set forth in the
Preamble.
"BV FINANCIAL INFORMATION" shall have the meaning set
forth in Section 3.6(b).
"BV PENSION PROVISION" shall have the meaning set forth
in Section 6.18.
"CALCULATED RECEIVABLES SETTLEMENT" shall have the
meaning set forth in Section 9.2(a).
"CLAIM NOTICE" shall have the meaning set forth in
Section 9.3.
"CLOSING" shall have the meaning set forth in
Section 2.2(a).
"CLOSING DATE" shall have the meaning set forth in
Section 2.2(a).
"CLOSING DATE BALANCE SHEET" shall mean an audited
consolidated balance sheet of Pearle and the Subsidiaries as of the Closing
Date, which shall be prepared by Seller in accordance with U.S. generally
accepted accounting principles, applied on a
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basis consistent with the Balance Sheet, based on data and financial statements
supplied by Buyer and Pearle, together with the audit report of KPMG.
"CLOSING DATE WORKING CAPITAL" shall mean the current assets
less the current liabilities of Pearle North America at the Closing Date,
prepared in conformity with the calculation set forth on Schedule 2.3(c).
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMPANY PLANS" shall have the meaning set forth in
Section 3.17.
"CONFIDENTIALITY AGREEMENT" shall have the meaning set
forth, in Section 6.1(b).
"CONSENT" shall have the meaning set forth in Section
6.12.
"CONTINUING AFFILIATE" shall mean Affiliates of Seller other
than Pearle and its Subsidiaries.
"DAMAGE THRESHOLD" shall have the meaning set forth in
Section 9.1.
"DEBT REDUCTION AMOUNT" shall have the meaning set
forth in Section 2.3(a).
"DEBT STATEMENT" shall have the meaning set forth in
Section 2.3(c).
"DEDUCTIBLE" shall have the meaning set forth in
Section 9.1.
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"DETERMINED RECEIVABLES AMOUNT" shall have the meaning
set forth in Section 9.2(a).
"ENCUMBRANCES" shall have the meaning set forth in
Section 3.3.
"ENVIRONMENTAL LAW" means any law, regulation, code, license,
permit, order, judgment, decree or injunction relating to the protection of the
environment (including air, water, soil and natural resources) or the use,
storage, handling, release or disposal of any hazardous or toxic substance as in
effect on the date hereof.
"ERISA" shall have the meaning set forth in Section
3.17.
"ERISA AFFILIATE" shall have the meaning set forth in
Section 3.17.
"EYELAB MARKS" shall have the meaning set forth in
Section 6.10.
"ESTIMATED SHORT-TERM DEBT AMOUNT" shall have the meaning set
forth in Section 2.3(a).
"FINAL ADJUSTMENT STATEMENT" shall have the meaning set
forth in Section 2.3(d).
"FINANCIAL INFORMATION" shall have the meaning set
forth in Section 3.6(a).
"FRANCHISE AGREEMENTS" shall have the meaning set forth
in Section 3.5.
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"FRANCHISE LAWS" shall have the meaning set forth in
Section 3.5.
"FRANCHISEE RECEIVABLES" shall have the meaning set
forth in Section 9.2(a).
"FSA" shall have the meaning set forth in Section 3.17
(i).
"FTC" shall mean the Federal Trade Commission.
"HAZARDOUS SUBSTANCE" means any substance listed,
defined, designated or classified as hazardous, toxic or radioactive under any
applicable Environmental Law, including petroleum and any derivative or
by-products thereof, asbestos that is or may become friable, and polychlorinated
biphenyls in regulated concentrations.
"HSR ACT" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"INDEMNIFIED PARTY" shall have the meaning set forth in
Section 9.2.
"INDEMNIFYING PARTY" shall have the meaning set forth
in Section 9.2.
"INITIAL SALE" shall have the meaning set forth in
Section 2.1.
"INTELLECTUAL PROPERTY" shall mean trademarks, service marks,
brand names, certification marks, trade dress, assumed names, trade names and
other indications of origin, the goodwill associated with the foregoing, the
rights thereto and registrations in any jurisdiction of, and applications in any
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jurisdiction to register, the foregoing, including any extension, modification
or renewal of any such registration or application; inventions, discoveries and
ideas, whether patentable or not in any jurisdiction; patents, applications for
patents (including, without limitation, divisions, continuations, continuations
in-part and renewal applications), and any renewals, extensions or reissues
thereof, in any jurisdiction; non-public information, trade secrets and
confidential information and rights in any jurisdiction to limit the use or
disclosure thereof by any Person; all copyrights, in writings and other works,
and writings and other works, whether copyrightable or not in any jurisdiction;
registrations or applications for registration of copyrights in any
jurisdiction, any design rights and any renewals or extensions thereof; any
similar intellectual property or proprietary rights; and any claims or causes of
action arising out of or related to any infringement or misappropriation of any
of the foregoing.
"INTERIM BV FINANCIAL INFORMATION" shall have the meaning set
forth in Section 3.6(b).
"INTERIM FINANCIAL INFORMATION" shall have the meaning
set forth in Section 3.6(a).
"IRS" shall mean the Internal Revenue Service.
"KPMG" shall mean KPMG Peat Marwick LLP.
"LEASE AGREEMENTS" shall have the meaning set forth in
Section 3.9.
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"LIABILITIES" shall have the meaning set forth in
Section 3.7.
"LOSSES" shall have the meaning set forth in Section
9.2(a).
"MAJOR MARKS" shall have the meaning set forth in
Section 3.15(b).
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on the business, assets, liabilities, financial condition, properties,
operations or results of operations of Pearle and the Subsidiaries considered as
a whole.
"NOTE PURCHASE AGREEMENT" shall mean the Note Purchase
Agreement, dated September 27, 1991, by and among Pearle Vision, Inc., the
Company and Societe Generale, New York Branch ("SocGen"), as amended.
"NOTICE PERIOD" shall have the meaning set forth in
Section 9.3.
"OWNED REAL PROPERTY" shall have the meaning set forth
in Section 3.9.
"PAST DUE RECEIVABLES" shall have the meaning set forth
in Section 9.2(a).
"PEARLE" shall have the meaning set forth in the
Preamble.
"PEARLE HOLDINGS" shall mean Pearle Holdings B.V., a
corporation organized under the laws of the Netherlands.
"XXXXXX XXXXX" shall have the meaning set forth in
Section 6.10.
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"PEARLE NORTH AMERICA" shall mean Pearle and its
Subsidiaries to the extent referred to as "Adjusted North America
& Caribbean" on the Condensed Combining Pro Forma Balance Sheet
attached to the Balance Sheet.
"PEARLE SHARES" shall have the meaning set forth in the
Preamble.
"PENSION PLAN" shall have the meaning set forth in
Section 3.17.
"PERMITTED ENCUMBRANCES" shall have the meaning set
forth in Section 3.9.
"PERSON" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust, unincorporated
organization, governmental or regulatory body or other entity.
"PRE-CLOSING TAX PERIOD" shall have the meaning set
forth in Section 5.2(c).
"PRIME RATE" shall mean the rate per annum equal to the
publicly announced prime commercial lending rate of The Xxxxxx Guaranty Trust
Company of New York in effect from time to time, changing as such publicly
announced rate changes, effective as of the date such change is publicly
announced.
"PSC" shall have the meaning set forth in the Preamble.
"PSC SHARES" shall have the meaning set forth in
the Preamble.
"PURCHASE PRICE" shall have the meaning set forth in
Section 2.1.
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"RECEIVABLES CALCULATION DATE" shall have the meaning
set forth in Section 9.2(a).
"RECEIVABLES DETERMINATION PERIOD" shall have the
meaning set forth in Section 9.2(a).
"RECEIVABLES WRITEOFF AMOUNT" shall have the meaning
set forth in Section 9.2(a).
"RECEIVABLES SCHEDULE" shall have the meaning set forth
in Section 9.2(a).
"REPORT" shall have the meaning set forth in
Section 6.2(a).
"SECURITIES ACT" shall mean the Securities Act of 1933,
as amended.
"SELLER" shall have the meaning set forth in the
Preamble.
"SELLER'S GROUP" shall mean any "affiliated group" (as defined
in Section 1504(a) of the Code without regard to the limitations contained in
Section 1504(b) of the Code) that includes Seller and Pearle.
"SUBSEQUENT SALE" shall have the meaning set forth in
Section 2.1.
"SUBSIDIAR[Y][IES]" shall have the meaning set forth in
Section 3.4.
"TAXES" shall mean all federal, state, local or foreign
income, gross receipts, windfall or excess profits, severance, property,
production, sales, use, license, capital, value added, ad valorem, transfer,
excise, franchise, employment, withholding
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or other taxes, duties or similar governmental charges or assessments (whether
or not any such item is accounted for as a tax) imposed by or on behalf of any
governmental authority and, with regard to Pearle Holdings and its subsidiaries,
shall also include customs duties, environmental taxes, national luxury tax on
vehicles, road taxes, social security premiums or employee insurance premiums or
similar governmental charges or assessments (whether or not any such item is
accounted for as a tax) imposed by or on behalf of any governmental authority,
together, in every case, with any interest, additions or penalties with respect
thereto and any interest in respect of such additions or penalties.
"TAX PACKAGE" shall have the meaning set forth in
Section 5.5.
"TAX RETURNS" shall mean all federal, state, local or foreign
tax returns, tax reports, and declarations of estimated tax (including any
schedules or attachments to any thereto), including without limitation
consolidated, combined and unitary state tax returns and consolidated federal
income tax returns.
"THIRD PARTY CLAIM NOTICE" shall have the meaning set forth in
Section 9.3.
"UNAFFILIATED FIRM" shall mean an unaffiliated "big six"
accounting firm to be selected and agreed upon by Buyer and Seller.
"WORKING CAPITAL ADJUSTMENT AMOUNT" shall have the meaning set
forth in Section 2.3(e).
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Section 1.2 OTHER TERMS. Other terms may be defined elsewhere
in the text of this Agreement and, unless otherwise indicated, shall have such
meaning indicated throughout this Agreement.
Section 1.3 OTHER DEFINITIONAL PROVISIONS. (a) The words
"hereof", "herein", and "hereunder" and words of similar import, when used in
this Agreement, shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States
Dollars. The term "NLG" shall mean Dutch guilders.
ARTICLE II
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PURCHASE AND SALE OF PSC SHARES AND PEARLE SHARES
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Section 2.1 PURCHASE AND SALE OF PSC SHARES AND PEARLE SHARES.
Buyer agrees to purchase from Pearle, or one of its Subsidiaries, and Pearle, or
one of its Subsidiaries, agrees to sell to Buyer, the PSC Shares, for an
aggregate purchase price of $22,300,000 (the "Initial Sale"). After Pearle has
distributed the proceeds of such sale to Seller, Buyer agrees to purchase from
Seller, and Seller agrees to sell to Buyer, the Pearle Shares, for an aggregate
purchase price of $137,460,000 and 100,000,000 NLG (the "Subsequent Sale"). The
sum of the aggregate purchase price for the Initial Sale and the aggregate
purchase price for the Subsequent Sale is hereinafter referred to
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as the "Purchase Price". The parties agree to negotiate in good faith between
the date hereof and the Closing Date to reallocate the Purchase Price between
the Initial Sale and the Subsequent Sale if the relative values of the PSC
Shares and the Pearle Shares are determined to be different than implied by this
Section 2.1.
Section 2.2 CLOSING; DELIVERY AND PAYMENT.
(a) The closing of the Initial Sale and Subsequent
Sale (collectively, the "Closing") shall take place at the offices of Xxxxxxxx &
Xxxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 A.M. (local time),
on November 15, 1996, or at such other time and place as the parties hereto may
mutually agree. The Subsequent Sale shall occur immediately following the
consummation of the Initial Sale and the distribution of the proceeds of the
Initial Sale. The date on which the Closing occurs is called the "Closing Date,"
and the closing of the Initial Sale shall be deemed effective at 11:58 P.M.
(local time) on the Closing Date and the closing of the Subsequent Sale shall be
deemed effective at 11:59 P.M. (local time) on the Closing Date. Seller agrees
and represents that the tax bases and book values of PSC's assets and
liabilities as of immediately prior to the Closing shall be substantially as set
forth on Schedule 2.2(a) hereto.
(b) On the Closing Date, Seller shall deliver (or cause to be
delivered) to Buyer certificates representing the PSC Shares and the Pearle
Shares duly endorsed and in form for
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transfer to Buyer, and Buyer shall pay to Seller the Purchase Price (minus any
adjustment made pursuant to Section 2.3) for the PSC Shares and the Pearle
Shares in immediately available funds to an account or accounts designated by
Seller not less than two Business Days prior to the Closing.
(c) On the Closing Date, all intercompany accounts between
Pearle or the Subsidiaries, on the one hand, and Seller or its Continuing
Affiliates, on the other hand, shall be cancelled, and the respective amounts
shall be recorded as contributions to capital or by way of distribution in kind,
as the case may be.
Section 2.3 PURCHASE PRICE ADJUSTMENTS AND
RECONCILIATION OF DEBT REDUCTION AMOUNT.
(a) Not less than two Business Days prior to the
Closing Date, Seller shall deliver to Buyer a written statement
identifying (i) the amount of any long-term debt of Pearle or any
of the Subsidiaries as of the Closing Date, (ii) the amount of
the current maturities of long-term debt of Pearle and the
Subsidiaries as of the Closing Date, (iii) an estimate of the
amount equal to the sum of the short-term debt and any cash
overdraft of Pearle and the Subsidiaries (the "Estimated Short-
Term Debt Amount"), and (iv) an amount representing the sum of
clauses (i) through (iii) above (the "Debt Reduction Amount"), in
each case excluding any amounts that will be discharged or
otherwise eliminated as of the Closing Date. The Purchase Price
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shall be reduced dollar-for-dollar (as set forth in (f)) by the amount of the
Debt Reduction Amount, if any.
(b) Any amount to be set forth in a written statement to be
delivered by Seller pursuant to this Section 2.3 which is in a local currency
shall be converted into U.S. currency at an exchange rate equal to the spot rate
for such currency as published in THE WALL STREET JOURNAL on the last day of its
publication prior to the second Business Day prior to the Closing Date.
(c) As soon as reasonably practicable, but not later than 90
calendar days after the Closing Date, Seller shall deliver to Buyer the Closing
Date Balance Sheet, including a calculation of Closing Date Working Capital
(collectively with the Closing Date Balance Sheet, the "Adjustment Statement"),
together with a determination of actual short-term debt and any cash overdraft
of Pearle and the Subsidiaries at the Closing Date (the "Debt Statement") and
shall cause KPMG to give Buyer and its accountants access to all of the
Adjustment Workpapers. The Adjustment Statement, together with any notes
thereto, will be examined by and accompanied by the report of KPMG stating that
in the opinion of such firm, the Adjustment Statement presents fairly, in all
material respects, the Closing Date Balance Sheet and the Closing Date Working
Capital, prepared in accordance with United States generally accepted accounting
principles, subject to any adjustments set forth in Schedule 2.3(c). Buyer and
its representatives and accountants shall have the right to
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participate in and observe the process of the preparation of the Adjustment
Statement, including the taking of a physical inventory, if any, and the pricing
thereof. Buyer shall, and shall cause Pearle to, provide Seller and KPMG (i) all
data and financial statements reasonably requested by Seller and (ii) reasonable
access to the books and records, any other information, including work papers of
its accountants, and to any employees of Pearle and the Subsidiaries to the
extent necessary for the preparation of the Closing Date Balance Sheet and the
Adjustment Statement.
(d) Within 30 calendar days after receipt of the Adjustment
Statement and the giving of access to all of the Adjustment Workpapers, Buyer
shall either inform Seller in writing that the Adjustment Statement is
acceptable or object to the Adjustment Statement in writing setting forth a
specific description of its objections. If Buyer so objects and the parties do
not resolve such objections on a mutually agreeable basis within 30 calendar
days after Seller's receipt thereof, the disagreement shall be resolved within
an additional 30 calendar day period by an Unaffiliated Firm. The decision of
the Unaffiliated Firm shall be final and binding upon the parties. Upon the
agreement of the parties or the decision of the Unaffiliated Firm as to all
matters objected to, or if Buyer fails to deliver an objection to Seller within
the 30 calendar day period provided above in the first sentence hereof, the
Adjustment Statement (as adjusted, if necessary) shall be deemed
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the Final Adjustment Statement (the "Final Adjustment Statement") and the
determination of Closing Date Working Capital as set forth in the Final
Adjustment Statement shall be deemed final. Each party shall bear the fees,
costs and expenses of its own accountants and shall share equally the fees,
costs and expenses of the Unaffiliated Firm. Buyer and Seller shall (and Buyer
shall cause Pearle to) make readily available to the Unaffiliated Firm all
relevant books and records and any work papers (including those of the parties'
respective accountants and the Adjustment Workpapers) relating to the Balance
Sheet and the Closing Date Balance Sheet and all other items reasonably
requested by the Unaffiliated Firm.
(e) Upon the determination of the Final Adjustment Statement
and Closing Date Working Capital in accordance with Section 2.3(d), the Purchase
Price shall be adjusted, up or down, as follows: (i) if the Closing Date Working
Capital is GREATER than $21,885,000, Buyer shall pay or cause to be paid to
Seller the amount of such difference, and (ii) if the Closing Date Working
Capital is LESS than $21,885,000, Seller shall pay or cause to be paid to Buyer
and/or one or more designees of Buyer the amount of such difference (the
"Working Capital Adjustment Amount"), as adjusted pursuant to Section 2.3(f).
(f) Upon the determination of the Final Adjustment Statement
and Closing Date Working Capital in accordance with Section 2.3(d), the Debt
Reduction Amount shall be adjusted, up or down, as follows: (i) if the
short-term debt and any cash
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overdrafts included in the Debt Statement is GREATER than the Estimated
Short-Term Debt Amount, the Working Capital Adjustment Amount shall be adjusted
dollar-for-dollar so that such difference is for the benefit of Buyer (and/or
its designees), and (ii) if the amount of short-term debt and any cash
overdrafts included in Closing Date Working Capital is LESS than the Estimated
Short-Term Debt Amount, the Working Capital Adjustment Amount shall be adjusted
dollar-for-dollar so that such difference is for the benefit of Seller (and/or
its designees).
(g) An amount equal to the Working Capital Adjustment Amount,
as adjusted pursuant to Section 2.3(f), shall be paid by wire transfer of
immediately available funds within five Business Days after the date that the
determination of Closing Date Working Capital is deemed final in accordance with
Section 2.3(d), together with interest thereon from the Closing Date to the date
of payment calculated at the Prime Rate.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Pearle and Seller, with respect only to Sections 3.1, 3.2,
3.3, 3.13, 3.14, 3.23 and 3.24 hereof, represent and warrant to Buyer as of the
date hereof and as of the Closing Date (except that representations and
warranties that are made as of a specific date need be true only as of such
date) as follows:
Section 3.1 ORGANIZATION AND AUTHORITY OF SELLER.
Seller has been duly incorporated, is validly existing and is in
good standing under the laws of the State of Delaware, with full
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power and authority to enter into this Agreement and to perform its obligations
hereunder. This Agreement has been duly authorized, executed and delivered by
Seller and constitutes a legal, valid and binding obligation of Seller,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles, and no other proceedings on the part of Seller are necessary to
authorize this Agreement and the consummation of the transactions contemplated
hereby. Neither the execution and delivery of this Agreement nor compliance by
Seller with its terms and provisions will (a) violate any provision of the
certificate of incorporation or by-laws of Seller; (b) subject to obtaining the
consents referred to in Section 3.13, conflict with, or result in the breach of,
or constitute a default under, or result in the termination, cancellation or
acceleration (whether after the giving of notice or the lapse of time or both)
of any right or obligation of Seller, or to a loss of any benefit to which
Seller is entitled under, any contract, franchise, license, agreement, lease,
indenture or other instrument to which Seller is a party; or (c) assuming
compliance with the matters set forth in Sections 3.13 and 4.5, to the knowledge
of Seller, violate or result in a breach of or constitute a default under any
law, rule, regulation, judgment, injunction, order, decree or other restriction
of any court or governmental authority to which
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Seller is subject, except where, in all cases, individually or in the aggregate
such violation, conflict, breach, termination, default, cancellation,
acceleration or loss would not be reasonably likely to prohibit or materially
impair or delay Seller's ability to perform its obligations under this
Agreement.
Section 3.2 ORGANIZATION, AUTHORITY AND QUALIFICATION OF
PEARLE. Pearle is duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, with full power and authority to own or lease
its assets and to carry on its business substantially as currently conducted and
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where, individually or in the aggregate, the
failure to be so qualified would be reasonably likely to have a Material Adverse
Effect. Neither the execution and delivery of this Agreement nor compliance by
Pearle or any Subsidiary with its terms and provisions will (a) violate any
provision of the certificate of incorporation or by-laws (or comparable
governing instruments) of Pearle or any Subsidiary; (b) subject to obtaining the
consents referred to in Section 3.13, conflict with, or result in the breach of,
or constitute a default under, or result in the termination, cancellation or
acceleration (whether after the giving of notice or the lapse of time or both)
of any right or obligation of Pearle or any of the Subsidiaries, or to a loss of
any benefit to which Pearle or any of the Subsidiaries is entitled under, any
contract, franchise, license, agreement, lease, indenture or
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other instrument to which Pearle or any of the Subsidiaries is a party; or (c)
assuming compliance with the matters set forth in Sections 3.13 and 4.5, to the
knowledge of Pearle, violate or result in a breach of or constitute a default
under any law, rule, regulation, judgment, injunction, order, decree or other
restriction of any court or governmental authority to which Pearle or any of the
Subsidiaries is subject, except where, in all cases (other than those relating
to the certificate of incorporation or by-laws (or comparable governing
instruments) of Pearle or any Subsidiary or any contract required to be
disclosed on Schedule 3.12 or any governmental permit or license the failure of
which to maintain would be reasonably likely to impair the ability of Pearle or
any Subsidiary to conduct its business substantially in the ordinary and usual
course consistent with past practice), alone or in the aggregate, such
violation, conflict, breach, termination, default, cancellation, acceleration or
loss would not be reasonably likely to have a Material Adverse Effect.
Section 3.3 CAPITALIZATION OF PEARLE AND PSC. (a) The
authorized capital stock of Pearle consists of 1,000 shares of common stock, par
value $1.00 per share, of which only the Pearle Shares are validly issued and
outstanding. The Pearle Shares are duly authorized, validly issued, fully paid
and nonassessable and are owned of record and beneficially by Seller. Seller has
good and valid title to the Pearle Shares and, upon consummation of the
transactions contemplated in this Agreement, shall have
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transferred such title to the Pearle Shares to Buyer pursuant to the terms of
this Agreement, free and clear of any liens, charges, pledges, security
interests, adverse claims or other encumbrances (collectively, "Encumbrances"),
other than such Encumbrances which were incurred by Buyer or caused to be
incurred by Pearle or any Subsidiary by Buyer as a result of the transactions
contemplated by this Agreement. There are no preemptive or other outstanding
rights, subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or arrangements of any
character or nature whatsoever under which Seller, Pearle or its Subsidiaries is
or may become obligated to vote, issue, assign or transfer any shares of the
capital stock, or rights or warrants to acquire, or securities convertible into
shares of capital stock, of Pearle or any of its Subsidiaries.
(b) The authorized capital stock of PSC consists of 1,000
shares of common stock, par value $1.00 per share, of which only the PSC Shares
are validly issued and outstanding. The PSC Shares are duly authorized, validly
issued, fully paid and nonassessable and are owned of record and beneficially by
Pearle. Pearle has good and valid title to the PSC Shares and, upon consummation
of the transactions contemplated in this Agreement, shall have transferred such
title to the PSC Shares to Buyer pursuant to the terms of this Agreement, free
and clear of any Encumbrances, other than such Encumbrances which were incurred
by Buyer or caused to be incurred by Pearle or any Subsidiary by
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Buyer as a result of the transactions contemplated by this Agreement. There are
no preemptive or other outstanding rights, subscriptions, options, warrants,
calls, contracts, demands, commitments, convertible securities or other
agreements or arrangements of any character or nature whatsoever under which
Seller, Pearle or its Subsidiaries is or may become obligated to vote, issue,
assign or transfer any shares of the capital stock, or rights or warrants to
acquire, or securities convertible into shares of capital stock, of PSC or any
of its Subsidiaries.
Section 3.4 SUBSIDIARIES OF PEARLE. Schedule 3.4 hereto lists
the name of each subsidiary of Pearle in which Pearle owns, beneficially or of
record directly or indirectly, securities representing 50 percent (50%) or more
of the aggregate voting power (each a "Subsidiary," and, collectively, the
"Subsidiaries"), together with the jurisdiction of its organization and the
record and beneficial holder of all shares of such Subsidiary. The shares of
capital stock of each Subsidiary that are owned by Pearle or a Subsidiary, as
the case may be, are free and clear of all Encumbrances, other than such
Encumbrances which were incurred by Buyer or caused to be incurred by Buyer,
directly or indirectly, as a result of the transactions contemplated by this
Agreement; all such capital stock is duly authorized, validly issued, fully paid
and nonassessable and, except as set forth on Schedule 3.4 hereto, such shares
are the only shares of capital stock of such Subsidiaries issued and
outstanding. Each Subsidiary is a
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corporation duly organized, validly existing and (in jurisdictions recognizing
the concept of good standing) in good standing under the laws of its
jurisdiction of organization, has the power and authority to own or lease its
assets and to carry on its business substantially as it is now being conducted,
and is duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the ownership or operation of its
properties and assets or the conduct of its business requires such
qualification, except where, individually or in the aggregate, the failure to be
so qualified would not be reasonably likely to have a Material Adverse Effect.
With respect to Pearle Holdings and each of its subsidiaries, there has been no
proposal made or resolution adopted (by the competent corporate body(ies)) for
the dissolution or liquidation of such company nor do any circumstances exist,
to the knowledge of Pearle, which may result in the dissolution or liquidation
of such company, and no proposal has been made or resolution adopted (by the
competent corporate body(ies)) for the statutory merger of such company with
another entity or for a splitting of such company, except where, individually or
in the aggregate, such dissolution or liquidation would not be reasonably likely
to have a Material Adverse Effect. Pearle does not own beneficially or of
record, directly or indirectly, an equity or other ownership interest in any
Person other than the Subsidiaries.
Section 3.5 FRANCHISE AGREEMENTS. All franchise
agreements between Pearle or its Subsidiaries and third parties
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as of the date hereof are hereinafter referred to as the Franchise Agreements.
Schedule 3.5(i) hereto lists substantially all Franchise Agreements, copies of
each of which, including any material addenda, modifications or side letters,
have previously been made available to Buyer. Except as set forth on Schedule
3.5(ii) or to the extent that such defects, individually or in the aggregate,
would not be reasonably likely to have a Material Adverse Effect, all of the
Franchise Agreements are valid and binding in accordance with their terms.
Pearle is in compliance in all respects with all of its obligations under the
Franchise Agreements and there exists, on the part of Pearle, no default with
respect to any Franchise Agreement, except for those defaults listed on Schedule
3.5(iii) hereto and such failures to comply and defaults which, individually or
in the aggregate, would not be reasonably likely to have a Material Adverse
Effect. Neither Pearle nor any Subsidiary has received notice of, and neither
Pearle nor any Subsidiary has knowledge of, any default by any other party under
any Franchise Agreement, except for those defaults listed on Schedule 3.5(iv)
hereto and those defaults which, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect. Pearle is in compliance
with all laws, rules and regulations of all governmental authorities in
jurisdictions in which Pearle has franchises applicable to the sale of
franchises or the service and operation of a franchise system ("Franchise
Laws"), and the enforcement by Pearle or any Subsidiary of any Franchise
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Agreement in accordance with its terms will not violate any Franchise Law,
except where such noncompliance or enforcement, as the case may be, would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect.
Section 3.6 FINANCIAL INFORMATION. (a) Attached hereto as
Schedule 3.6 (a) is a copy of (i) the audited consolidated balance sheets of
Pearle and the Subsidiaries as of September 30, 1994 and September 30, 1995 and
the consolidated statements of operations, stockholder's equity and cash flows
for the fiscal years ended September 30, 1993, September 30, 1994 and September
30, 1995 (collectively, with the notes thereto and independent auditors report
therein, the "Audited Financial Information") and (ii) a copy of the pro forma
unaudited consolidated balance sheet (the "Balance Sheet") of Pearle and the
Subsidiaries as of June 30, 1996 and the related consolidated statements of
operations, stockholder's equity and cash flows for the nine months then ended
(collectively, with the notes thereto, the "Interim Financial Information"). The
Audited Financial Information and the Interim Financial Information (together,
the "Financial Information") have been prepared in accordance with U.S.
generally accepted accounting principles applied on a consistent basis (except
as may be noted therein), and present fairly, in all material respects, the
consolidated financial position of Pearle and its Subsidiaries as of September
30, 1994 and September 30, 1995 and June 30, 1996, respectively, and the
consolidated statements of operations, stockholder's equity and
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cash flows of Pearle and its Subsidiaries for the fiscal years ended September
30, 1993, September 30, 1994 and September 30, 1995 and the nine months ended
June 30, 1996, respectively, subject, in the case of the Interim Financial
Information, to normal year-end adjustments and the notes regarding the pro
forma adjustments reflected therein.
(b) Attached hereto as Schedule 3.6(b) is a copy of (a) the
audited consolidated balance sheets of Pearle Holdings and its subsidiaries as
of September 30, 1994 and September 30, 1995 and the consolidated statements of
operations for the fiscal years ended September 30, 1994 and September 30, 1995
and source of funds for the fiscal year ended September 30, 1995 (collectively,
with the notes thereto and the independent auditors' report thereon, the
"Audited BV Financial Information") and (b) a copy of the pro forma unaudited
consolidated balance sheet of Pearle Holdings and its subsidiaries as of June
30, 1996 and the related consolidated statements of operations and source of
funds for the nine months then ended (collectively, with the notes thereto, the
"Interim BV Financial Information"). The Audited BV Financial Information and
the Interim BV Financial Information (together, the "BV Financial Information")
have been prepared in accordance with Dutch generally accepted accounting
principles applied on a consistent basis (except as may be noted therein), and
present, in all material respects, a true and fair view of the financial
position and results of Pearle Holdings and its subsidiaries as of September 30,
1994, September 30, 1995 and
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June 30, 1996, respectively, and the results for the fiscal years ended
September 30, 1994 and September 30, 1995 and the nine months ended June 30,
1996, respectively, subject, in the case of the Interim BV Financial
Information, to normal year-end adjustments and the notes regarding the pro
forma adjustments reflected therein.
Except as set forth in Schedule 3.6(a) or (b) or Schedule 3.8,
from and after October 1, 1995, there has not been any change by Pearle or
Pearle Holdings in accounting principles (including tax accounting principles),
practices or methods.
Section 3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set
forth in or provided for and fully reserved against in the Financial Information
or the BV Financial Information or as set forth in Schedule 3.7 hereto, there
are no debts, liabilities or obligations, whether accrued, contingent, absolute,
determined, determinable or otherwise (collectively, the "Liabilities"), of
Pearle or the Subsidiaries except for: (i) Liabilities that have arisen in the
ordinary and usual course of business consistent with past practice since June
30, 1996, none of which, alone or in the aggregate would be likely to have a
Material Adverse Effect, (ii) intercompany accounts between Pearle or the
Subsidiaries and Seller or its Affiliates and (iii) Liabilities incurred by
Buyer or caused to be incurred by Pearle or any Subsidiary by Buyer as a result
of the transactions contemplated by this Agreement.
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Section 3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
set forth in Schedule 3.6(a), Schedule 3.6(b), Schedule 3.8 or Schedule 3.12
hereto, from and after July 1, 1996 Pearle and the Subsidiaries have conducted
their businesses only in, and have not engaged in any material transaction other
than according to, the ordinary and usual course of such businesses consistent
with past practice and there has not been (i) any change in the financial
condition, properties, business or results of operations of Pearle and the
Subsidiaries, except those changes that, individually or in the aggregate, are
not reasonably likely to have a Material Adverse Effect or (ii) any material
damage, destruction or other casualty loss with respect to any material asset or
property owned, leased or otherwise used by Pearle or any of the Subsidiaries
not covered by insurance. Except as set forth in Schedule 3.6(a), 3.6(b) or
Schedule 3.8 hereto and except for increases or amendments in the ordinary and
usual course of business consistent with past practice or as required by law,
from and after October 1, 1995, there has not been any material increase in the
compensation payable or to become payable by Pearle or any Subsidiary to any of
their directors, officers or employees or any increase in the benefits under, or
adoption of, any bonus, insurance, pension or other employee benefit plan,
payment or arrangement, for or with any such directors, officers or employees.
Section 3.9 TITLE TO PROPERTIES; ABSENCE OF LIENS AND
ENCUMBRANCES, ETC. (a) All leases and subleases entered into by
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Pearle or its Subsidiaries as of the date hereof are hereinafter referred to as
the Lease Agreements. Schedule 3.9(a)(i) hereto lists substantially all Lease
Agreements, copies of each of which, including any material addenda,
modifications or side letters, have previously been made available to Buyer.
Schedule 3.9(a)(ii) hereto lists all properties owned by Pearle or the
Subsidiaries as of the date hereof (the "Owned Real Property"). Except as set
forth on Schedule 3.9(a)(iii) hereto, each of Pearle and the Subsidiaries has
good and, in the case of the Owned Real Property, marketable title to, or a
valid and binding leasehold interest in, all of the properties and assets owned
or leased by Pearle or any Subsidiary free and clear of any Encumbrances, except
for: (i) any Encumbrances reflected in the Financial Information or the BV
Financial Information; (ii) any Encumbrances incurred or created from and after
July 1, 1996 in the ordinary and usual course of business consistent with past
practice and which, alone or in the aggregate, would not be reasonably likely to
have a Material Adverse Effect; (iii) any Encumbrances which, alone or in the
aggregate, would not materially adversely affect Pearle's ability to conduct its
business substantially as heretofore conducted; (iv) any Encumbrances for taxes,
assessments and other governmental charges not yet due and payable or due but
not delinquent or being contested in good faith by appropriate proceedings; (v)
any mechanics', workmen's, repairmen's, warehousemen's, carriers' or other like
liens and encumbrances arising in the ordinary and
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usual course of business consistent with past practice or being contested in
good faith by appropriate proceedings (the "Permitted Encumbrances"); and (vi)
any Encumbrances which are matters of public record or would be shown by a
current title report or survey or physical inspection, such as easements, quasi
easements, covenants, licenses, rights of way, land use, zoning or other legal
requirements, ordinances or plans, which, alone or in the aggregate, would not
be reasonably likely to materially adversely affect Pearle's ability to conduct
its business substantially as heretofore conducted.
(b) Except as set forth on Schedule 3.9(b) hereto, neither
Pearle nor any Subsidiary is in default under any leases (including, without
limitation, the Lease Agreements) under which Pearle or any Subsidiary is the
lessee of real or personal property, and no event has occurred which, with
notice or lapse of time, or both, would constitute such a default, or permit
termination, modification or acceleration under any such lease, except defaults
or events which, alone or in the aggregate, would not be reasonably likely to
have a Material Adverse Effect.
Section 3.10 LITIGATION. Except as set forth in Schedule 3.10
hereto, there are, as of the date hereof, no claims, actions, suits, proceedings
or investigations pending or, to the knowledge of Pearle, threatened against
Pearle or any Subsidiary or any of their respective properties or assets at law,
in equity or otherwise, in, before, or by, any court or governmental agency or
authority.
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Section 3.11 COMPLIANCE WITH LAW. Except as set forth in
Schedule 3.11, the business of Pearle and the Subsidiaries is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, and all governmental approvals, permits and licenses required to conduct
the business (including, without limitation, the franchise business) of Pearle
and the Subsidiaries have been obtained and are in full force and effect and are
being complied with in all respects, except for any violations or noncompliance
which, alone or in the aggregate, do not and would not be reasonably likely to
have a Material Adverse Effect; it being understood that nothing in this
representation is intended to address any compliance issue that is (x) related
to any Environmental Law or (y) the subject of any other representation or
warranty set forth herein.
Section 3.12 CONTRACTS. Except as set forth in Schedule 3.12
and except for contracts entered into by Buyer or caused by Buyer to be entered
into by Pearle or any Subsidiary in connection with this Agreement and the
transactions contemplated hereby, neither Pearle nor any Subsidiary is a party
to, or bound by, any contract of any kind which is to be performed or as to
which Pearle or any Subsidiary may have any right or obligation after the
Closing Date other than (i) purchase orders, franchise agreements, leases and
general contracts and subcontracts relating to store construction which have
been entered into in the ordinary and usual course of business consistent with
past practice, or (ii) any other contracts entered into in the
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ordinary and usual course of business consistent with past practice pursuant to
which Pearle or the Subsidiary, as the case may be, is or would be obligated to
expend, or entitled to receive, less than $100,000 in any 12-month period or
which is subject to cancellation by Pearle or the Subsidiary, as the case may
be, upon less than three (3) months' notice, without incurring any expenditure
and without penalty or increased cost. All contracts to which Pearle or any
Subsidiary is a party constitute valid and binding obligations of Pearle or any
Subsidiary, as the case may be, enforceable against Pearle or any Subsidiary, as
the case may be, in accordance with their respective terms (subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles) and in full force and effect, except for such
contracts the invalidity or unenforceability of which alone or in the aggregate
would not be reasonably likely to have a Material Adverse Effect. There is not
any pending or, to the knowledge of Pearle, threatened cancellation, existing
default, or event under any such contract which, after notice or lapse of time,
or both, would constitute a default, except for such pending or threatened
cancellations, existing defaults or events which, alone or in the aggregate,
would not be reasonably likely to have a Material Adverse Effect.
Section 3.13 CONSENTS AND APPROVALS. Except as set
forth in Schedule 3.13 or as required by the HSR Act, the
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execution, delivery and performance of this Agreement will not require Seller,
Pearle, or any of its Subsidiaries to obtain any consent, waiver, authorization
or approval of, or make any filing with or give notice to, any Person, except
for such consents, waivers, authorizations or approvals (other than those
relating to any contract required to be disclosed on Schedule 3.12 or any
governmental permit or license the failure of which to maintain would impair the
ability of Pearle or any Subsidiary to conduct their businesses in the ordinary
and usual course consistent with past practice) which the failure to obtain
would not be reasonably likely to have a Material Adverse Effect.
Section 3.14 TAX MATTERS. (a) Except as set forth in Schedule
3.14 hereto, as reflected in the Financial Information or BV Financial
Information or as would not be reasonably likely to have a Material Adverse
Effect, (i) all Tax Returns required to be filed prior to the Closing Date with
respect to the Seller's Group or Pearle and/or any of the Subsidiaries have been
duly filed, (ii) all Taxes shown to be due on such Tax Returns have been paid in
full, (iii) no deficiencies for any Taxes with respect to such Tax Returns have
been asserted and (iv) no waivers of statutes of limitation have been given or
requested with respect to any Taxes with respect to such Tax Returns. Except as
set forth on Schedule 3.14 hereto, no material unresolved issue has been raised
either in writing or, to Seller's knowledge, other than in writing, by any
governmental authority in the course of any audit with respect to Taxes on the
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income, assets, operations, activities, etc. of Pearle or any
Subsidiary.
(b) The information set forth on Schedule 3.14 identifying, as
of June 30, 1996, the tax bases of Pearle in the Subsidiaries organized under
the laws of the Netherlands and the tax bases of Pearle Holdings in its
subsidiaries, the tax bases of the assets of the Subsidiaries organized under
the laws of the Netherlands, the foreign tax credits available to Pearle and the
earnings and profits of Pearle Holdings and its subsidiaries is true and correct
in all material respects.
Section 3.15 INTELLECTUAL PROPERTY.
(a) Schedule 3.15(a) sets forth a list and brief
description (including where applicable the country of registration) of (i) all
patents, patent applications, registered trademarks, trademark applications,
registered copyrights and copyright applications that are owned by Pearle or the
Subsidiaries and used in their businesses and (ii) all agreements under which
Pearle or the Subsidiaries are licensed or otherwise permitted to use
Intellectual Property. Except as set forth on Schedule 3.15(a), Pearle or a
Subsidiary owns all right, title and interest in and to all Intellectual
Property owned or used (other than pursuant to agreements under which Pearle or
the Subsidiaries are licensed or otherwise permitted to use such Intellectual
Property) by Pearle or any Subsidiary, free and clear of all Encumbrances
(except Permitted Encumbrances).
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(b) To the knowledge of Pearle (i) except as set forth in
Schedule 3.15(b)(i), with respect to Intellectual Property of Pearle and the
Subsidiaries other than trademarks, no product (or component thereof or process)
used, sold or manufactured by Pearle and the Subsidiaries infringes on or
otherwise violates the valid and enforceable patents of any other Person or any
confidentiality obligation enforceable against Pearle, (ii) with respect to the
trademarks listed in Schedule 3.15(b)(ii) (the "Major Marks"), except as set
forth in Schedule 3.15(b)(iii), there are no restrictions that would materially
impair the use of the Major Marks in connection with the business of Pearle and
the Subsidiaries and the Major Marks, to the knowledge of Pearle, do not
infringe upon or otherwise violate the valid and registered trademarks of any
other Person, and (iii) no Person is challenging or, to the knowledge of Pearle,
infringing or otherwise violating the Intellectual Property of Pearle and the
Subsidiaries (excluding trademarks included on Schedule 3.15(b)(ii)), except in
each case for challenges, infringements or violations, which alone or in the
aggregate, would not be reasonably likely to materially adversely affect
Pearle's ability to conduct its business substantially as heretofore conducted.
Section 3.16 COLLECTIVE BARGAINING AGREEMENTS. Except
as set forth in Schedule 3.16, neither Pearle nor any Subsidiary
is a party to or bound by any labor agreement or collective
bargaining agreement respecting its employees, nor is there
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pending, or to the knowledge of Pearle threatened, any strike, walkout or other
work stoppage or any union organizing effort by or respecting the employees.
From and after October 1, 1995, Pearle and the Subsidiaries have not experienced
any material labor dispute.
Section 3.17 EMPLOYEE BENEFITS.
(i) Schedule 3.17(i) hereto contains a true and complete
list of each employee benefit plan subject to ERISA and each other material
employee benefit, stock purchase, stock option, severance, change-in-control,
fringe benefit, collective bargaining, bonus, incentive and deferred
compensation plan, agreement, program, policy or other arrangement, with respect
to which current or former employees or directors of Pearle or the Subsidiaries
participate, which is maintained, sponsored or contributed to by Pearle or the
Subsidiaries, and each employment agreement maintained by Pearle or any of the
Subsidiaries that is not terminable on less than 90 days' notice without any
payment (other than agreements mandated by foreign statute ("FSAs")) by Pearle
or any of the Subsidiaries. All such plans, agreements, programs, policies and
arrangements shall be collectively referred to as the "Company Plans".
(ii) With respect to each Company Plan, Seller has
delivered or made available to Buyer a current, accurate and complete copy (or,
to the extent no such copy exists, an accurate description) thereof and, to the
extent applicable: (A) any related trust agreement or other funding instrument;
(B) the most
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recent determination letter; (C) any summary plan description; and (D) for the
three most recent plan years (I) the Form 5500 and attached schedules, (II)
audited financial statements and (III) actuarial valuation reports.
(iii) Except with respect to any "Grand Met Plan which
will not be available after the sale," identified on Schedule 3.17(i), all
Company Plans and all FSAs are in substantial compliance with all applicable
laws, including the Code and the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), the laws of Puerto Rico, Canada and the Netherlands,
and each Company Plan and each FSA has been established, operated and
administered in all material respects, in accordance with all applicable laws,
including ERISA and the Code and the laws of Puerto Rico, Canada and the
Netherlands. Pearle has received or has requested from the IRS within the
applicable remedial amendment period a favorable determination letter from the
IRS with respect to the qualified status of each Company Plan that is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA (a
"Pension Plan") and that is intended to be qualified under Section 401(a) of the
Code, and nothing has occurred, whether by action or failure to act, that would
be reasonably likely to cause the revocation of such letter. Except as set forth
in Schedule 3.10 hereto, there is, as of the date hereof, no pending or, to the
knowledge of Pearle, threatened action, suit, claim or investigation relating to
the Company Plans (other than any "Grand Met plan which will not be available
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after the sale," identified on Schedule 3.17(i)) or the FSAs and, to the
knowledge of Pearle, no facts exist which could give rise to any such action,
suit, claim or investigation. Except with respect to any taxes or penalties
which would not be reasonably likely to result in a material liability, neither
Pearle nor any of the Subsidiaries has engaged in any transactions with respect
to any Company Plan or any FSA that could be reasonably likely to subject Pearle
or any of the Subsidiaries to a tax or penalty imposed by Section 4975 of the
Code or any other applicable rule, regulation or law of any federal, state,
local or foreign governmental authority.
(iv) Except as set forth on Schedule 3.17(iv), as of
the date hereof, no liability under Title IV of ERISA has been or is expected to
be incurred by Pearle or any of the Subsidiaries with respect to any ongoing,
frozen or terminated "single-employer plan", within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered one employer with the
Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"), other than the payment of premiums to the Pension Benefit Guaranty
Corporation, or with respect to any "multiemployer plan" (within the meaning of
Section 3(37) of ERISA) contributed to by Pearle or any of the Subsidiaries or
any ERISA Affiliate. Neither Pearle nor any of the Subsidiaries has contributed,
or been obligated to
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contribute, to a single-employer plan or a multiemployer plan at any time during
the six-year period prior to the date hereof.
(v) Except as set forth on Schedule 3.17(v), all
contributions required to be made by Pearle or any of the Subsidiaries under the
terms of any Company Plan or FSA have been timely made or have been reflected in
the Financial Information or the BV Financial Information. Neither Pearle nor
any of the Subsidiaries has provided, or is required to provide, security to any
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Code. Except as set forth on Schedule 3.17(v), no
Pension Plan that is maintained or contributed to by Pearle or any of the
Subsidiaries has or has incurred an accumulated funding deficiency within the
meaning of Section 302 of ERISA or Section 412 of the Code, nor has any waiver
of the minimum funding standards of Section 302 of ERISA or Section 412 of the
Code been requested of or granted by the IRS with respect to any such Pension
Plan, nor has any lien in favor of any such Pension Plan arisen under Section
412(n) of the Code or Section 302(f) of ERISA.
(vi) Except as set forth on Schedule 3.17(vi) or as
may be required by law, neither Pearle nor any of the Subsidiaries has any
obligations for retiree health and life benefits under any Company Plan.
(vii) Except as set forth on Schedule 3.17(vii), the
consummation of the transactions contemplated by this Agreement
will not (x) entitle any of the directors, employees or former
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employees (or their beneficiaries or dependents) of Pearle or any of the
Subsidiaries to severance pay or (y) accelerate or provide any other rights or
credits under, or increase the amount payable or trigger any other obligation
pursuant to, any of the Company Plans (other than any "Grand Met plan which will
not be available after the sale," as identified on Schedule 3.17(i)).
(viii) Except with respect to any noncompliance which would
not be reasonably likely to result in a material liability, with respect to each
group health plan that is subject to Section 4980B of the Code, Pearle and each
of the Subsidiaries have complied in all material respects with the continuation
requirements of Section 4980B of the Code and Part 6 of Subtitle B of Title I of
ERISA and with respect to each group health plan subject to Section 1862(b)(1)
of the Social Security Act (the "Act"), Pearle and each of its Subsidiaries have
complied with the secondary payer requirement of such Act.
(ix) Except as set forth on Schedule 3.17(ix), no
Company Plan is funded through a "welfare benefit fund" as defined in Section
419(e) of the Code, and no benefits under any Company Plan are provided through
a voluntary employees' beneficiary association (within the meaning of Section
501(c)(9) of the Code) or a supplemental unemployment benefit plan (within the
meaning of Section 501(c)(17) of the Code) and, to the knowledge of Pearle, no
material liability is reasonably expected to be incurred due to excise taxes or
other penalties resulting from any such method of funding or provision of
benefits.
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(x) To the knowledge of Pearle, there are no leased employees
within the meaning of Section 414(n) of the Code who perform services for Pearle
or any of the Subsidiaries in a magnitude which would reasonably be expected to
result in the disqualification of any Company Plan under Section 401(a) of the
Code.
(xi)With respect to any insurance policy providing for the
benefits under any Company Plan or FSA, except as set forth on Schedule 3.17
(xi) or would not result in a material liability: (x) there is no liability of
Pearle or any of the Subsidiaries in the nature of a retroactive or
retrospective rate adjustment, loss sharing arrangement, or other actual or
contingent liability, nor would there be any such liability if such insurance
policy were terminated on the date hereof; and (y) to the knowledge of Pearle,
no insurance company issuing such a policy is in receivership, conservatorship,
liquidation or similar proceedings and no such proceedings with respect to any
insurer are imminent.
(xii) To the knowledge of Pearle except as set forth on
Schedule 3.17(xii), the execution and performance of this Agreement will not
result in payments (or transfers of property) being made by Pearle or any of the
Subsidiaries to any "disqualified individual" (within the meaning of Section
280G(c) of the Code); which payments: (x) constitute "excess parachute payments"
(within the meaning of Section 280G(d)(1) of the Code),
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or (y) result in the imposition of any excise tax under
Section 4999 of the Code.
Section 3.18 ENVIRONMENTAL MATTERS. Except as disclosed in
Schedule 3.18, Pearle and the Subsidiaries are and have been (i) in substantial
compliance with applicable Environmental Laws; (ii) have not received any
written notices from any Person alleging the violation of, or any claim or
liability under, any applicable Environmental Law; (iii) are not the subject of
any court order, administrative order or decree arising under any Environmental
Law; (iv) have not generated, stored, used, emitted, discharged or disposed of
any Hazardous Substance that requires reporting, removal, remedial action or
other response under applicable Environmental Laws; and (v) to Pearle's
knowledge, do not own, lease or operate any real property (and any buildings,
structures or materials on such real property) that contains or includes any
asbestos, polychlorinated biphenyls, lead paint, urea formaldehyde, underground
storage tanks or sumps.
Section 3.19 INSURANCE. Schedule 3.19 hereto lists all
insurance policies maintained by or on behalf of Pearle or any of the
Subsidiaries. All such insurance policies are in full force and effect, all
premiums with respect thereto have been paid to the extent due and no notice of
cancellation or termination has been received with respect to any such policy
(other than policies that have been replaced or are intended to be replaced
prior to the expiration thereof by policies providing
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substantially the same coverage), except where any termination of such policies
or the failure to pay premiums with respect thereto would not be reasonably
likely to have a Material Adverse Effect. Except as set forth on Schedule 3.10
hereto under the heading "Insurance Cases", as of the date hereof, there is no
claim by or on behalf of Pearle or any Subsidiary pending under any of such
policies as to which coverage has been denied or, to Pearle's knowledge, is
being disputed, except where any denial of coverage would not be reasonably
likely to have a Material Adverse Effect.
Section 3.20 IMPROPER PAYMENTS. To Pearle's knowledge, no
improper payment has been made by or on behalf of Pearle or any of the
Subsidiaries which is in violation of any applicable federal, state, local or
foreign law, rule or regulation, public disclosure of which would be reasonably
likely to have a Material Adverse Effect.
Section 3.21 WARRANTIES. All products manufactured or sold by
Pearle or any of the Subsidiaries have been in substantial conformity with
applicable contractual commitments and all express or implied warranties, except
as set forth on Schedule 3.10 or to the extent that nonconformity would,
individually or in the aggregate, not have a Material Adverse Effect. Schedule
3.21 contains an accurate summary of all written warranties offered by Pearle or
any of the Subsidiaries as of the date of this Agreement.
Section 3.22 CONDITION OF ASSETS. Except as set forth
on Schedule 3.22, the personal property owned or leased by Pearle
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or any of the Subsidiaries and the improvements and structures located on the
real property owned or leased by Pearle or any of the Subsidiaries and the
fixtures and appurtenances thereto have been reasonably maintained in the
ordinary course of business, are in working order, reasonable wear and tear
excepted, are reasonably suitable for the uses for which they are intended and
conform to the requirements of applicable law, except in all cases to the extent
that any breach, failure or inaccuracy, individually or in the aggregate, would
not be reasonably likely to have a Material Adverse Effect.
Section 3.23 BROKERS AND FINDERS. Other than Xxxxxx Xxxxxxx &
Co. Incorporated ("Xxxxxx Xxxxxxx"), Seller, Pearle and the Subsidiaries have
not employed any broker, finder, consultant or intermediary in connection with
the transactions contemplated by this Agreement who would be entitled to a
broker's, finder's or similar fee or commission in connection therewith or upon
the consummation thereof, or if the Closing does not occur. Seller agrees to
bear all costs it incurs, including fees and expenses of Xxxxxx Xxxxxxx, in
connection with the transactions contemplated by this Agreement unless otherwise
expressly provided herein.
Section 3.24 NO OTHER REPRESENTATIONS OR WARRANTIES. Except
for the representations and warranties contained in this Article III, neither
Seller, Pearle, the Subsidiaries nor any other Person makes any other express or
implied representation or warranty on behalf of Seller, Pearle, or the
Subsidiaries.
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ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller as of the date hereof
and as of the Closing Date (except that representations and warranties that are
made as of a specific date need be true only as of such date) as follows:
Section 4.1 ORGANIZATION AND AUTHORITY OF BUYER. Buyer has
been duly incorporated, is validly existing and is in good standing under the
laws of its jurisdiction of incorporation, with full power and authority to
enter into this Agreement and perform its obligations hereunder. This Agreement
has been duly authorized, executed and delivered by Buyer and constitutes a
legal, valid and binding obligation of Buyer, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles, and no other proceedings on
the part of Buyer are necessary to authorize this Agreement and the consummation
of transactions contemplated hereby. Neither the execution and delivery of this
Agreement nor compliance by Buyer with its terms and provisions will (a) violate
any provision of the certificate of incorporation or by-laws of Buyer; (b)
subject to obtaining the consents referred to in Section 4.5, conflict with, or
result in the breach of, or constitute a default under, or result in the
termination, cancellation or acceleration (whether after the giving of notice
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or the lapse of time or both) of any right or obligation of Buyer, or to a loss
of any benefit to which Buyer is entitled under, any contract, franchise,
license, agreement, lease, indenture or other instrument to which Buyer is a
party; or (c) assuming compliance with the matters set forth in Sections 3.13
and 4.5, to the knowledge of Buyer, violate or result in a breach of or
constitute a default under any law, rule, regulation, judgment, injunction,
order, decree or other restriction of any court or governmental authority to
which Buyer is subject, except where, in all cases, such a violation would not
be reasonably likely to prohibit or materially impair or delay Buyer's ability
to perform its obligations under this Agreement.
Section 4.2 BROKERS AND FINDERS. Other than Xxxxxxxx Xxxxx
Xxxxxx & Xxxxx and Xxxxx Xxxxxx Inc., Buyer has not employed any broker, finder,
consultant or intermediary in connection with the transactions contemplated by
this Agreement who would be entitled to a broker's, finder's or similar fee or
commission in connection therewith or upon the consummation thereof, or if the
Closing does not occur. Buyer agrees to bear all costs it incurs, including fees
and expenses of Xxxxxxxx Xxxxx Xxxxxx & Xxxxx and Xxxxx Xxxxxx Inc., in
connection with the transactions contemplated by this Agreement unless otherwise
expressly provided herein.
Section 4.3 FINANCIAL CAPABILITY. Schedule 4.3 hereto
sets forth the source of funds which Buyer contemplates it has or
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will have available to it to purchase the PSC Shares and Pearle Shares in
accordance with the terms and conditions contemplated by this Agreement,
including copies of any and all commitments or agreements with financial
institutions to provide funding for such purchase and any "highly confident"
letters with respect to Buyer's ability to obtain such funding. On the Closing
Date, Buyer will have sufficient funds to purchase the PSC Shares and Pearle
Shares on the terms and conditions contemplated by this Agreement.
Section 4.4 SECURITIES ACT. Buyer is acquiring the PSC Shares
and Pearle Shares solely for the purpose of investment and not with a view to,
or for sale in connection with, any distribution thereof in violation of the
Securities Act. Buyer acknowledges that the PSC Shares and Pearle Shares are not
registered under the Securities Act or any applicable state securities law, and
that the PSC Shares and Pearle Shares may not be transferred or sold except
pursuant to the registration provisions of such Securities Act or pursuant to an
applicable exemption therefrom and pursuant to state securities laws and
regulations as applicable.
Section 4.5 CONSENTS AND APPROVALS. Except as required by the
HSR Act, the execution, delivery and performance of this Agreement will not
require Buyer to obtain any consent, waiver, authorization or approval of, or
make any filing with or give notice to, any Person.
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Section 4.6 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for
the representations and warranties contained in this Article IV, neither Buyer
nor any other Person makes any other express or implied representation or
warranty on behalf of Buyer.
ARTICLE V
---------
TAX AND CERTAIN EMPLOYEE MATTERS
--------------------------------
Section 5.1 TAX SHARING. As of the Closing Date, any and all
tax sharing agreements and arrangements shall be cancelled as between Seller and
the Continuing Affiliates, on the one hand, and Pearle and its Subsidiaries on
the other, and no further payments shall be made by Pearle or any of its
Subsidiaries to Seller or any Continuing Affiliate, or by Seller to Pearle or
its Subsidiaries, pursuant thereto.
Section 5.2 338 ELECTION, TAX INDEMNIFICATION. (a) Pearle,
along with Seller and its Continuing Affiliates, and Buyer shall make a joint
election under Section 338(h)(10) of the Code with respect to the purchase of
the PSC Shares and under any similar provisions of state or foreign law. In
consideration of Buyer making such election, 60 days after the Closing Date
Seller shall pay to Buyer $3,500,000. Seller represents that the sale by Pearle
of the PSC Shares is eligible for such election. As soon as practicable after
the date hereof, Seller (and, to the extent required, any Continuing Affiliate)
shall prepare, subject to Buyer's approval, for execution by Pearle and Buyer on
the Closing Date, all IRS Forms, as well as similar state and foreign forms,
necessary to effect such election. Seller and Buyer agree
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that, for purposes of all reports and returns with respect to Taxes, allocations
among the assets of PSC shall be made, subject to the provisions of applicable
law, in accordance with the fair market values of such assets.
(b) Buyer and Seller agree that no election shall be made
under Section 338(h)(10) of the Code or under any similar provisions of state or
foreign law with respect to the purchase of the Pearle Shares.
(c) (i) Seller hereby agrees to indemnify Buyer and hold it
harmless from all liability for Taxes imposed on Pearle and its Subsidiaries
(including without limitation liability under Treasury Regulations section
1.1502-6 or any comparable provision of state or foreign law) for any taxable
year or period ending on or before the Closing Date and, in the case of any
taxable year or period beginning before and ending after the Closing Date, the
portion of such period ending on and including the Closing Date (the
"Pre-Closing Tax Period"), which, for the avoidance of doubt, includes in all
cases all Taxes imposed on Pearle and its Subsidiaries in respect of the sale
of the PSC Shares, the joint election under Section 338(h)(10) of the Code or
under any similar provisions of state or foreign law, and any transaction or
transactions (including transfers of assets) related to either, and (ii) if
Buyer or any Affiliate, within two (2) years following the Closing Date, sells,
in one or more transactions, more than 50% of the capital stock of Pearle
Holdings and/or assets (outside the ordinary course of business) of Pearle
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Holdings and its subsidiaries and distributes the proceeds thereof to Pearle,
Seller agrees to pay Buyer an amount equal to the lesser of (x) the incremental
Taxes imposed upon Buyer or any of its Affiliates by reason of such sale and/or
distribution (after giving effect to any foreign tax credits utilizable by Buyer
or any of its Affiliates or (y) $15,000,000; except to the extent, with respect
to clause (i), such Taxes are reflected as a liability on the Closing Date
Balance Sheet. Seller shall be entitled to all refunds of such Taxes described
in this Section 5.2(c) (except to the extent, with respect to clause (i), such
Taxes are reflected as a liability on the Closing Date Balance Sheet).
(d) Buyer hereby agrees to indemnify Seller and its Affiliates
and hold them harmless from all liability for Taxes imposed on Pearle and its
Subsidiaries for any taxable year or period beginning after the Closing Date
and, in the case of any taxable year or period beginning before and ending after
the Closing Date, the portion of such period beginning after the Closing Date.
Buyer shall be entitled to all refunds of such Taxes.
(e) Whenever it is necessary to determine liability for Taxes
for a portion of a taxable year or period beginning before and ending after the
Closing Date, the determination shall be made assuming that there was a closing
of the books at 11:59 p.m. (local time) on the Closing Date, except that Taxes
(other than Taxes measured by net income or gains), exemptions,
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allowances or deductions that are calculated on an annual basis shall be
apportioned on a time basis.
(f) For purposes of this Article V, a taxable year or period,
or portion thereof (and any phrase of similar import), includes any span of time
(i) for which income is to be determined, with respect to any Tax based on or
measured by income or (ii) during or at the end of which assets are to be
measured, with respect to any Tax based on or measured by assets.
Section 5.3 TAX RETURNS. Seller shall file or cause to be
filed when due all Tax Returns that are required to be filed by or with respect
to Pearle and its Subsidiaries for taxable years or periods ending on or before
the Closing Date and shall pay any Taxes due in respect of such Tax Returns, and
Buyer shall file or cause to be filed when due all Tax Returns that are required
to be filed by or with respect to Pearle and its Subsidiaries for taxable years
or periods ending after the Closing Date and shall remit any Taxes due in
respect of such Tax Returns. Seller shall pay Buyer the Taxes for which Seller
is liable pursuant to Section 5.2(c) but which are payable with Tax Returns to
be filed by Buyer pursuant to the previous sentence not less than 10 days prior
to the due date for the filing of such Tax Returns; provided that an advance
payment calculated by Buyer in respect of any indemnification pursuant to
Section 5.2(c)(ii) shall be made by Seller to Buyer within fifteen (15) days
following the transaction or transactions triggering such indemnification, and
Seller or Buyer, as applicable, shall pay
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over to the other any difference between such advance payment and the
indemnification calculated by reference to the Tax Returns for the taxable year
that includes the triggering transaction or transactions not less than 10 days
prior to the due date for the filing of such Tax Return.
Section 5.4 CONTEST PROVISIONS. Buyer shall promptly notify
Seller in writing upon receipt by Buyer, any of its affiliates or Pearle of
notice of any pending or threatened audits or assessments which may materially
affect the tax liabilities of Pearle for which Seller would be required to
indemnify Buyer pursuant to Section 5.2(c), provided that failure to comply with
this provision shall not affect Buyer's right to indemnification hereunder.
Seller shall have the sole right to represent Pearle's interests in any tax
audit or administrative or court proceeding relating to taxable periods ending
on or before the Closing Date, and to employ counsel of its choice at its
expense; Seller shall keep Buyer informed on a timely basis regarding the
prosecution of such audit or proceeding. Notwithstanding the foregoing, Seller
shall not be entitled to settle, either administratively or after the
commencement of litigation, any claim for Taxes which could adversely affect the
liability for Taxes of the Buyer or Pearle for any period after the Closing Date
to any extent (including, but not limited to, the imposition of income tax
deficiencies, the reduction of asset basis or cost adjustments, the lengthening
of any amortization or depreciation periods, the denial of amortization or
depreciation
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deductions, or the reduction of loss or credit carryforwards) without the prior
written consent of Buyer. Such consent shall not be unreasonably withheld, and
shall not be necessary to the extent that Seller has indemnified the Buyer (and
Buyer agrees that it has been so indemnified) against the effects of any such
settlement.
Seller shall be entitled to participate at its expense in the
defense of any claim for Taxes for a year or period ending after the Closing
Date which may be the subject of indemnification by Seller pursuant to Section
5.2(c) and, with the written consent of Buyer, and at Seller's sole expense, may
assume the entire defense of such tax claim. Neither Buyer nor Pearle may agree
to settle any tax claim for the portion of the year or period ending on the
Closing Date which may be the subject of indemnification by Seller under Section
5.2(c) without the prior written consent of Seller, which consent shall not be
unreasonably withheld.
Section 5.5 INFORMATION TO BE PROVIDED BY BUYER. With respect
to the taxable year of Seller within which the Closing Date occurs, Buyer shall
promptly cause Pearle to prepare and provide to Seller, at Seller's expense, a
package of tax information materials (the "Tax Package"), which shall be
completed in accordance with past practice including past practice as to
providing the information, schedules and work papers and as to the method of
computation of separate taxable income or other relevant measure of income of
Pearle. Buyer
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shall cause the Tax Package for the portion of the taxable period ending on the
Closing Date to be delivered to Seller within one hundred eighty (180) days
after the Closing Date.
Section 5.6 ASSISTANCE AND COOPERATION. After the Closing
Date, each of Seller and Buyer shall at the expense of the party which is either
responsible for the preparation or filing of any Tax Return under this Article V
or for the liability under this Article V, as applicable:
(i) assist (and cause their respective affiliates to
assist) the other party in preparing any Tax Returns or reports which such other
party is responsible for preparing and filing in accordance with this Article V;
(ii) cooperate fully in preparing for any audits of,
or disputes with taxing authorities regarding, any Tax Returns of
Pearle or any Subsidiary;
(iii) make available to the other and to any taxing
authority as reasonably requested all information, records, and
documents relating to Taxes of Pearle or any Subsidiary;
(iv) provide timely notice to the other in writing of
any pending or threatened tax audits or assessments of Pearle or any Subsidiary
for taxable periods for which the other may have a liability under this Article
V; and
(v) furnish the other with copies of all correspondence
received from any taxing authority in connection with any tax audit or
information request with respect to any
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taxable periods for which the other may have a liability under this Article V.
Section 5.7 POST-CLOSING ACTIONS WHICH MAY AFFECT THE SELLER'S
LIABILITY FOR TAXES. Except to the extent required by law, neither Buyer,
Pearle, nor any Affiliate of either shall, without the prior written consent of
the Seller which consent shall not be unreasonably withheld, (i) amend any Tax
Return filed by, or with respect to, Pearle or any of its Subsidiaries for any
taxable period, ending on or before the Closing Date, or (ii) carryback any net
operating loss, capital loss, excess foreign tax credit, or other similar
losses, deductions or credits derived with respect to any period beginning after
the Closing Date to any taxable year of Pearle or any of its Subsidiaries ending
on or before the Closing Date.
Section 5.8 INTENTIONALLY DELETED.
Section 5.9 COMPUTATION OF LOSSES SUBJECT TO INDEMNIFICATION.
The amount of any liability or loss for which indemnification is provided under
Section 5.2 (other than Section 5.2(c)(ii)) shall be computed net of the present
value (based on Buyer's cost of capital) of any Tax benefit or savings realized
or to be realized in the future with respect to such liability or loss.
Section 5.10 TRANSFER TAXES. Seller shall be liable for any
transfer taxes arising from Pearle's sale of the PSC Shares and any assets
transferred in connection therewith. Buyer
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and Seller shall each be liable for one-half of any transfer taxes arising from
the sale of the Pearle Shares.
Section 5.11 CERTAIN EMPLOYEE PAYMENT OBLIGATIONS.
Notwithstanding any other provision of this Agreement to the contrary, Seller
and the Continuing Affiliates shall be responsible for, shall pay and shall
indemnify, defend and hold harmless Buyer and its Affiliates (including, after
the Closing Date, Pearle and the Subsidiaries) against and in respect of all
Losses arising out of any of the following:
(a) Any retention payment obligation created before the
Closing Date (whether or not payable on or before the Closing Date or
thereafter) with respect to any directors or employees of Pearle or any of its
Affiliates, including, without limitation, the retention payments referred to in
Item 9 of Schedule 3.7;
(b) Any severance payment obligation created before the
Closing Date with respect to termination of any executive committee members
named in Schedule 5.11(b);
(c) Any obligation for postretirement medical benefits for any
retired employees or covered dependents to the extent that the amount of any
such obligation exceeds any accrued liability on the Closing Date Balance Sheet;
(d) Any obligation arising out of any plan identified on
Schedule 3.17(i) as "a Grand Met plan which will not be available after the
sale"; and
(e) Any obligation for accumulated liability for accrued
vacation obligation under the vacation policy for periods
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prior to January 1, 1996 (whether or not payable on or before the Closing Date
or thereafter) to the extent that the amount of any such obligation exceeds any
accrued liability on the Closing Date Balance Sheet.
Section 5.12 SURVIVAL OF OBLIGATIONS. The obligations of the
parties set forth in this Article V shall be unconditional and absolute and
shall remain in effect without limitation as to time.
ARTICLE VI
----------
CERTAIN COVENANTS AND AGREEMENTS
OF SELLER AND BUYER
--------------------------------
Section 6.1 ACCESS AND INFORMATION. (a) Seller shall permit
Buyer and its representatives after the date of execution of this Agreement to
have reasonable access, during regular business hours and upon reasonable
advance notice, to the real property owned or leased by Pearle and the
Subsidiaries and to the officers and employees of Pearle and the Subsidiaries,
subject to Seller's reasonable rules and regulations, and shall furnish, or
cause to be furnished, to Buyer any financial and operating data and other
information that is available with respect to the business and properties of
Pearle and the Subsidiaries as Buyer shall from time to time reasonably request;
PROVIDED THAT the foregoing shall not require Seller to permit any inspection,
or to disclose any information, that in its reasonable judgment would result in
the disclosure of any trade secrets of third parties or violate any of Seller's,
Pearle's or
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any of the Subsidiaries' obligations with respect to confidentiality if Seller
shall have used reasonable best efforts to obtain the consent of such third
party to such inspection or disclosure. Seller will assist Buyer and its
representatives in gaining access to the franchisees, the associate store owners
and the licensees of Pearle and the Subsidiaries.
(b) In the event of the termination of this Agreement, Buyer
at its own expense shall promptly deliver (without retaining any copies thereof)
to Seller, or (at Seller's option) confirm in writing to Seller that it has
destroyed all information furnished to Buyer or its representatives by Seller,
Pearle, the Subsidiaries or any of their respective agents, employees or
representatives as a result hereof or in connection herewith, whether so
obtained before or after the execution hereof, and all analyses, compilations,
forecasts, studies or other documents prepared by Buyer or its representatives
which contain or reflect any such information. Buyer shall at all times prior to
the Closing Date, and in the event of termination of this Agreement, cause any
information so obtained to be kept confidential and will not use, or permit the
use of, such information in its business or in any other manner or for any other
purpose except as contemplated hereby.
(c) All information provided or obtained pursuant to clause
(a) above shall be held by Buyer in accordance with and subject to the terms of
the confidentiality agreement, dated
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May 21, 1996, between Buyer and Grand Metropolitan PLC (the "Confidentiality
Agreement").
Section 6.2 REGISTRATIONS, FILINGS AND CONSENTS.
(a) Seller and Buyer will cooperate and use their
respective reasonable best efforts to fulfill the conditions precedent to the
other party's obligations hereunder, including but not limited to, securing as
promptly as practicable all consents, approvals, waivers and authorizations
required, necessary or desirable in connection with the transactions
contemplated hereby; PROVIDED THAT Buyer shall not have any obligation to
undertake any financial obligation in connection therewith (other than that
associated with the filing of the Report or any actions contemplated by Section
6.2(b)). Buyer and Seller will promptly file documentary materials required by
the HSR Act, Environmental Laws and each of the other items listed in Section
3.13 and Section 4.5 and promptly file any additional information requested as
soon as practicable after receipt of request thereof; PROVIDED THAT each party
shall duly file with the FTC and the Antitrust Division the notification and
report form (the "Report") required under the HSR Act with respect to the sale
and purchase of PSC Shares and Pearle Shares no later than three Business Days
after the date hereof.
(b) Without limiting the provisions set forth in paragraph (a)
above, Buyer shall use its reasonable best efforts to take or cause to be taken
all actions necessary, proper or advisable to obtain any consent, waiver,
approval or
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authorization relating to the HSR Act that is required for the consummation of
the transactions contemplated by this Agreement.
Section 6.3 CONDUCT OF BUSINESS. Prior to the Closing, and
except as otherwise expressly permitted by this Agreement or consented to or
approved by Buyer in writing, Seller covenants and agrees that:
(a) Pearle and the Subsidiaries shall, and Seller shall cause
Pearle and the Subsidiaries to, operate their business only in the
ordinary and usual course consistent with past practice and use
reasonable best efforts which are consistent with past practice to
preserve their properties and business and relationships with
franchisees, associate store owners, employees, suppliers, customers
and other Persons with whom they have commercial dealings, of Pearle
and the Subsidiaries;
(b) Seller shall cause insurance coverage at presently
existing levels to be maintained on behalf of Pearle and the
Subsidiaries so long as such insurance is available at commercially
reasonable rates;
(c) Pearle and the Subsidiaries shall not, and Seller shall
cause Pearle and the Subsidiaries not to, (i) change or amend their
certificates of incorporation or by-laws (or comparable governing
instruments), (ii) authorize, issue or sell any shares of their capital
stock, or authorize, issue or sell any securities convertible into, or
options with respect to, or warrants to purchase or rights to subscribe
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for, any shares of their capital stock or enter into any agreement
obligating them to do any of the foregoing, or (iii) declare or set
aside for payment any dividends or other distributions to be paid after
the Closing; notwithstanding the foregoing, but subject to clause (iii)
above, Pearle and the Subsidiaries shall be permitted at all times
prior to the Closing Date to make distributions of cash to Seller
except to the extent of any applicable cash balances that Pearle or any
Subsidiary is required to maintain pursuant to any applicable rule,
regulation or law;
(d) Pearle and the Subsidiaries shall not, and Seller shall
cause Pearle and the Subsidiaries not to, directly or indirectly,
redeem, purchase or otherwise acquire any of the PSC Shares, Pearle
Shares or shares of any Subsidiary;
(e) Pearle and the Subsidiaries shall not, and Seller shall
cause Pearle and the Subsidiaries not to, merge or consolidate with or
into any other Person;
(f) Pearle and the Subsidiaries shall, and Seller shall cause
Pearle and the Subsidiaries to, (i) not approve any new capital
expenditures (other than those for cooling or heating units or
commitments identified on the Attachment to Item 4 of Schedule 3.7) in
excess of $50,000 individually and $500,000 in the aggregate; (ii) not
dispose of or incur, create or assume any Encumbrance on any individual
capital asset of Pearle or the Subsidiaries if the greater of the book
value and the fair market value of such capital asset
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exceeds $100,000 other than Permitted Encumbrances or pursuant to
current forecasts of Pearle's business; (iii) not incur any
indebtedness for money borrowed other than bank loans and overdrafts
that consist of issued and outstanding accounts payable and payroll
checks which have not been presented for payment or indebtedness
incurred in the ordinary and usual course of business consistent with
past practice as financed by Seller or a Continuing Affiliate; and (iv)
not enter into a contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(g) Pearle and the Subsidiaries shall not, and Seller shall
cause Pearle and the Subsidiaries not to, (i) promote any employees
(other than such promotions that were being processed prior to the date
hereof and which are identified on Schedule 6.3(g) or have the effect
of filling a vacated position), (ii) set any new bonus targets or
opportunities for any period beginning after September 30, 1996, or
(iii) except for increases in the ordinary and usual course of business
consistent with past practice or as required by law, increase the
compensation payable or to become payable by Pearle or any of the
Subsidiaries to any of their directors, officers or employees or
increase the benefits under or establish any bonus, insurance, pension
or other employee benefit plan, payment or arrangement, for or with any
such directors, officers or employees, PROVIDED THAT in
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no event shall the sum total of merit pay increases with respect to all
employees eligible for such merit pay increases exceed current levels
of compensation by more than four percent in the aggregate;
(h) Pearle and the Subsidiaries shall not, and Seller shall
cause Pearle and the Subsidiaries not to, change their respective
selling, collection, or payment practices, or the accounting practices
utilized in the preparation of the Financial Information or BV
Financial Information, or the tax accounting practices utilized in the
preparation of Tax Returns, except as required by applicable law;
(i) Pearle and the Subsidiaries shall not, and Seller shall
cause Pearle and the Subsidiaries not to, conduct their business in
violation of any law, ordinance or regulation of any governmental
entity (including, without limitation, those relating to environmental
protection, sales or operation of franchises and occupational safety
and health practices), except for possible violations which alone or in
the aggregate do not and are not reasonably likely to have a Material
Adverse Effect;
(j) Pearle and the Subsidiaries shall not, and Seller shall
cause Pearle and the Subsidiaries not to, (i) loan or advance any
monies, except travel and other employee expenses in the ordinary and
usual course of business consistent with past practice, (ii) discharge
any obligation for money borrowed (other than money owed to Seller and
its
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Continuing Affiliates incurred in the ordinary and usual course of
business consistent with past practice), (iii) forgive, release, waive
or terminate any rights of substantial value other than in the ordinary
and usual course of business consistent with past practice, or (iv)
enter into any contract, agreement, commitment or arrangement with
respect to advertising in excess of $250,000; and
(k) Except in connection with the items set forth on the
Attachment to Item 4 of Schedule 3.7 or with the consent of Buyer
(whose consent with respect to this paragraph (k) shall not be
unreasonably withheld), Pearle and the Subsidiaries shall not, and
Seller shall cause Pearle and the Subsidiaries not to, enter into any
franchise agreement or lease agreement or amend in any material respect
or terminate any Franchise Agreement or Lease Agreement or enter into a
contract, agreement, commitment or arrangement with respect to any of
the foregoing.
Section 6.4 CERTAIN BUYER OBLIGATIONS.
(a) Buyer shall promptly amend the Pearle Vision Uniform
Franchise Offering Circular, as amended, to reflect the purchase and sale of the
PSC Shares and the Pearle Shares.
(b) Seller shall, or shall cause one of its Continuing
Affiliates to, satisfy all payment obligations of Pearle Vision, Inc. and Pearle
under the Note Purchase Agreement and Buyer shall cause each of Pearle and
Pearle Vision, Inc. to comply with its
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respective obligations under the terms of the Note Purchase Agreement with
respect to franchisees and shall use its best efforts to cause Pearle and Pearle
Vision, Inc. to collect all principal, interest and other amounts due from the
franchisees on the notes and to cause such amounts to be paid to the Lock-Box
(as defined in the Note Purchase Agreement) or directly to SocGen or, with
respect to any note required to be repurchased by Seller or one of its
Continuing Affiliates under the terms of the Note Purchase Agreement, directly
to Seller or one of its Continuing Affiliates. To the extent that Buyer, Pearle,
Pearle Vision, Inc. or one of their Affiliates, including through lock box
accounts or otherwise, receives any type of payment from franchisees, such party
shall promptly remit a pro rata portion of the amount of such payment from a
franchisee having amounts due on the notes to the Lock-Box, SocGen or Seller or
one of its Continuing Affiliates, as the case may be. With respect to any note
required to be repurchased under the terms of the Note Purchase Agreement, Buyer
shall cooperate with Seller and its Continuing Affiliates to the same extent
that Pearle and Pearle Vision, Inc. are obligated on the date hereof under the
terms of the Note Purchase Agreement to assist in the collection on the amounts
due from the franchisees on the notes and to perform such other obligations to
SocGen.
Section 6.5 EMPLOYEE MATTERS. (a) Buyer shall cause
Pearle to retain in employment all employees of Pearle and the
Subsidiaries who were employed on the Closing Date, for a period
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of at least 30 days, at the same rate of compensation in effect immediately
prior to the Closing, except for any employees (i) who are terminated for cause,
(ii) who voluntarily terminate their employment or (iii) who were employed for a
limited time period and are terminated upon expiration of that time period.
Except for any plan, program or policy, or portion thereof referred to in
Section 5.11 for which Seller or any of the Continuing Affiliates are
responsible and except with respect to any plan, program or policy identified on
Schedule 3.17(i) as "a Grand Met plan which will not be available after the
sale," Buyer shall cause Pearle and the Subsidiaries to maintain for a period of
at least one year after the Closing Date employee compensation and benefit
plans, programs and policies that, in the aggregate, will provide benefits to
employees of Pearle and the Subsidiaries that are substantially equivalent in
the aggregate as those provided pursuant to the employee benefit plans, programs
and policies of Pearle and the Subsidiaries in effect on the date hereof (as
disclosed on Schedule 3.17(i) hereto); PROVIDED, HOWEVER, that any severance
plans maintained by Pearle or any of the Subsidiaries as of the date of this
Agreement shall remain in effect without any modification adverse to the
participants thereunder for at least two years after the Closing Date, and any
participant in either such plan whose employment is terminated and is otherwise
eligible for severance benefits shall be entitled to severance benefits based
upon base pay and employment position at levels at least equal to those
applicable as of the
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Closing Date (other than on account of any reduction in position voluntarily
agreed to in writing by any participant).
(b) Employees of Pearle and the Subsidiaries shall be given
credit for all service with Pearle, the Subsidiaries and Seller and its
Affiliates (including any other service credited for purposes of the Company
Plans) under all employee benefit plans, programs and policies of Buyer
(including vacation) in which they become participants for purposes of
eligibility and vesting and benefit accrual (but not credit for benefit accrual
under defined benefit pension plans).
(c) Subject to the rights of Pearle and the Subsidiaries to
amend, modify or terminate Company Plans in accordance with their terms, Buyer
shall, and shall cause Pearle and its Subsidiaries to, honor all Company Plans
in accordance with their terms other than any "Grand Met plan which will not be
available after the sale," identified on Schedule 3.17(i). Effective as of the
Closing Date, Pearle and its Subsidiaries shall cease being participating
employers with respect to any employee benefit plans maintained by Seller or the
Continuing Affiliates. Effective as of, or as soon as practicable following the
Closing Date, Buyer shall cause Pearle to cause the Trustee of the Pearle, Inc.
Profit Sharing Plus Plan Trust to withdraw from the Pooled Investment Trust
Agreement establishing the Grand Metropolitan ADS Group Trust.
(d) Except as expressly provided in this Agreement, nothing
herein shall create any restriction on the ability of
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Buyer or any of its Affiliates (including Pearle and the Subsidiaries after the
Closing Date), to amend, modify or terminate any employee benefit plan of Buyer
or any of Buyer's Affiliates.
Section 6.6 RETENTION OF BOOKS AND RECORDS. Each party shall
and shall cause its respective Affiliates to, retain until all applicable tax
statutes of limitations (including periods of waiver) have expired all books,
records and other documents pertaining to Pearle and the Subsidiaries in
existence on the Closing Date that are required to be retained under current
retention policies and to make the same available after the Closing Date for
inspection and copying by the other party or its agents at such other party's
expense, during regular business hours and upon reasonable request and upon
reasonable advance notice. After the expiration of such period, no such books
and records shall be destroyed by either party without first advising the other
party in writing detailing the contents thereof and giving the other party at
least 120 days to obtain, at its expense, possession thereof. Each party agrees
that any such records made available by the other party will be kept strictly
confidential and used only for tax purposes or as reasonably required in
connection with any third party claim.
Section 6.7 CLOSING DATE FINANCIAL INFORMATION. For a
period of one year from and after the Closing Date, to the extent
reasonably necessary for Seller or its Affiliates to prepare
consolidated financial statements or any governmental permits,
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licenses or required filings and to comply with reporting obligations in respect
thereof, upon written request of Seller, Pearle and the Subsidiaries will
provide, and Buyer shall use its reasonable best efforts to cause Pearle and the
Subsidiaries to provide, at Seller's expense, to Seller and its accountants
within 20 Business Days of such request with such computer support, access to
employees and Buyer's accountants and financial information of Pearle or the
Subsidiaries as of the Closing Date as Seller may reasonably request in the
format customarily required by Seller or its Affiliates and, upon Seller's
request, it will be accompanied by supplemental financial schedules customarily
required by Seller or its Affiliates in support of such financial information.
Seller agrees that such records will be kept strictly confidential and used only
for tax purposes.
Section 6.8 DELIVERY OF CORPORATE MINUTES AND BANK SIGNATURE
CARDS. At the Closing, Seller shall deliver to Buyer the minutes and stock books
of Pearle and each of the Subsidiaries, and promptly following the Closing shall
deliver signature cards from all banks or financial institutions with which
Pearle or any Subsidiary has any account designating signatures approved by
Buyer.
Section 6.9 COVENANT NOT-TO-COMPETE.
(a) Seller acknowledges and agrees that the value to Buyer of
the transactions provided for herein would be substantially diminished if Seller
or any of the Continuing
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Affiliates were to enter into certain business activities, and Seller has agreed
to the covenant in this Section 6.9 as an inducement to Buyer to enter into this
Agreement. Seller specifically acknowledges and agrees that the covenants in
this Section 6.9 are commercially reasonable and reasonably necessary to protect
the interests Buyer intends to acquire hereunder. If any court of competent
jurisdiction shall in any proceedings refuse to enforce such covenant, in whole
or in part, because the time limit or geographical extent applicable thereto is
deemed unreasonable in the jurisdiction, it is expressly understood and agreed
that such covenant shall not be void. Instead, for the purpose of such
proceedings, such temporal or geographic limitations shall be deemed to be
reduced to the extent necessary to permit the enforcement of such covenant in
the particular jurisdiction. Seller agrees that, for five years after the
Closing Date, it shall not, directly or indirectly through the Continuing
Affiliates, franchisees or otherwise, engage in the ownership, operation or
management of retail stores offering eyecare products anywhere in the world (the
"Business"); PROVIDED, HOWEVER, that Seller and the Continuing Affiliates may:
(i) acquire up to 10% of the outstanding securities
and other interests in any Person that competes with the
Business;
(ii) acquire any securities and other interests in any
Person if (x) the revenues of such Person that are attributable to
business that compete with the Business
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exceed 10% of such Person's total annual revenues, provided that the
Seller hereby agrees to divest or cause the divestiture of such
interest that directly competes with the Business within one calendar
year from any such acquisition or (y) the revenues of such Person that
are attributable to business that compete with the Business do not
exceed 10% of such Person's total annual revenues;
(iii) maintain and continue in accordance with current
and past practice the operations described on Schedule
6.9(a);
(iv) perform any act or conduct any business
contemplated by this Agreement.
(b) Seller and Buyer agree that money damages would be an
inadequate remedy for a violation of the covenant set forth in Section 6.9(a).
(c) Seller agrees that, for a period of two (2) years
following the Closing Date, neither Seller nor any Continuing Affiliate shall
solicit the employment of any person, other than an individual listed on
Schedule 6.9(c) hereto, it knows to be an employee of Pearle or any of its
Subsidiaries or employ any person it knows to be such an employee (other than
any hourly worker or any Employee who serves in a clerical function) without the
prior written consent of Buyer; PROVIDED, HOWEVER, that (i) general
solicitations of employment published in a journal, newspaper or other
publication of general circulation and not specifically directed towards such
employees shall not be deemed
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to constitute solicitation for purposes of this Section 6.9(c) and (ii) Seller,
its Continuing Affiliates and representatives shall not be prohibited from
employing any such person who contacts them on his or her own initiative and
without any solicitation by Seller, its Continuing Affiliates and
representatives.
Section 6.10 EYELAB AND XXXXXX XXXXX. Prior to the Closing
Date, each of Seller and its Continuing Affiliates which might have an interest
therein will quitclaim to Pearle all its right, title and interest in any of the
"Eyelab" trademarks listed on Schedule 3.15(a) hereto (the "Eyelab Marks") and
all derivatives thereof or in any of the "Pearle" or "Pearle Vision" trademarks
and all derivatives thereof (the "Xxxxxx Xxxxx") and will assign all rights and
the goodwill associated therewith to Pearle. Seller and its Continuing
Affiliates will cease to use the Eyelab Marks, the Xxxxxx Xxxxx or any
confusingly similar names as of the Closing Date. Notwithstanding the foregoing,
Buyer shall permit Seller and its Continuing Affiliates to continue to use the
Eyelab Marks, the Xxxxxx Xxxxx and derivatives thereof for non-commercial
purposes, including winding down their affairs; provided that Seller and its
Continuing Affiliates may continue to use the Eyelab Marks, the Xxxxxx Xxxxx or
any derivatives thereof in its financial reporting, and otherwise may not use
the Eyelab Marks or any derivatives thereof for more than 90 days following the
Closing Date, and following Closing, each of Seller and its Continuing
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Affiliates shall not hold itself out as doing business under the Eyelab Marks,
the Xxxxxx Xxxxx or any derivatives thereof. On or before the Closing Date,
Seller shall cause any Continuing Affiliate which has in its name the word
"Pearle" or the phrase "Pearle Vision" to change such name to eliminate the word
"Pearle" or the phrase "Pearle Vision", as applicable. The parties agree to
negotiate in good faith between the date hereof and the Closing Date upon any
alternative proposals to effect the transfer of the Eyelab Marks.
Section 6.11 AUDITED FINANCIAL STATEMENTS. (a) As soon as
reasonably practicable after September 30, 1996, Seller shall cooperate with
Buyer to prepare (i) an audited consolidated balance sheet and consolidated
statements of income and cash flows of Pearle and the Subsidiaries as of, and
for the year ended, September 30, 1996, accompanied by a standard opinion report
of KPMG, (ii) such other financial statements and schedules as Buyer shall
reasonably request, in each case in order for Buyer to comply with the
requirements of the Securities and Exchange Commission.
(b) Seller acknowledges that KPMG has agreed, subject to
review of the offering documents, to the inclusion of the Audited Financial
Information, together with the additional information to be provided pursuant to
Section 6.11, in any materials, including materials filed with the Securities
and Exchange Commission and any state or foreign regulatory authority, used in
connection with obtaining the financing of the
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transaction contemplated by this Agreement, any registered exchange offer
required to be made in connection with such financing and any subsequent
financing or securities offering. Seller shall use reasonable efforts to cause
KPMG to provide to Buyer, at Buyer's expense, (i) any consents required in
connection with such use of such financial information, (ii) comfort letters, in
form and substance customary for such matters, with respect to the periods
covered by such financial information, and (iii) such other assistance as Buyer
may reasonably request.
Section 6.12 CERTAIN CONSENTS. Prior to the Closing, each of
Seller and Pearle shall use its reasonable best efforts to obtain (and Buyer
shall cooperate in obtaining) all consents, approvals, authorizations, waivers
or notifications from any third party, including any governmental authority
(each a "Consent") necessary to effect the transfer of all contracts, Franchise
Agreements, Lease Agreements, governmental permits and licenses and other
instruments and arrangements as contemplated hereby; PROVIDED, HOWEVER, that
neither party shall be required to pay or commit to pay any amount to (or incur
any obligation in favor of) any person from whom any such Consent may be
required (other than nominal governmental filing fees payable to any
governmental authority).
Section 6.13 TRANSITION SERVICES. Seller shall
provide Buyer certain transition services that Seller or its
Continuing Affiliates currently provide for Pearle or the
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Subsidiaries, including cash management, insurance, treasury, tax and data
processing services, at current charges for a period (a) with respect to all
services other than data processing, not to exceed six months after the Closing
Date and (b) with respect to data processing services not to exceed 18 months
after the Closing Date, in each case pursuant to and in accordance with the
terms of an agreement to be negotiated in good faith by Buyer and Seller and
executed on or before the Closing Date.
Section 6.14 FINANCING. Buyer shall use its reasonable best
efforts to obtain the funds necessary to purchase the PSC Shares and the Pearle
Shares as contemplated by Section 4.3 hereof or otherwise.
Section 6.15 INSURANCE CLAIMS. Following the Closing, but with
respect only to occurrences occurring prior to Closing: (a) Seller and the
Continuing Affiliates shall provide Pearle and the Subsidiaries with (i) the
benefit of such existing workers compensation or general liability, automobile
liability or other insurance policies as currently cover Pearle and the
Subsidiaries and (ii) the benefit of such existing claims made policies,
including director and officer and pension trust liability insurance policies,
which policies will be continued in force by Seller or a Continuing Affiliate
for claims made after the Closing Date based upon wrongful acts committed or
allegedly committed prior to the Closing Date, but only to the extent Seller or
such Continuing Affiliate is able, using its reasonable best efforts (which
shall not require the expenditure of funds in
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excess of amounts reimbursed as provided in Section 6.15(b), or the filing of
any lawsuit), to obtain such benefits and (b) Buyer shall, or shall cause Pearle
or a Subsidiary to, promptly reimburse Seller or any such Continuing Affiliate,
with respect to any amounts required to be paid after the Closing Date by Seller
and the Continuing Affiliates with respect to insurance premiums, including any
taxes, assessments and claims handling charges, and deductibles or self-insured
retentions applicable to such policies. Notwithstanding the foregoing, nothing
in this Agreement shall prevent or interfere with Seller's or any of its
Continuing Affiliates' right to terminate or otherwise discontinue any insurance
policy applicable to losses relating to claims arising from incidents occurring
after the Closing Date for any reason, including without limitation, in
connection with the settlement or discharge of any claim. Buyer agrees to assume
any obligation of Seller or any of its Continuing Affiliates to provide
collateral or security on behalf of Pearle or any Subsidiary with respect to
such insurance polices covering workers' compensation, general liability,
product liability and auto liability; PROVIDED that the aggregate amount of
collateral or security in respect of any such coverage shall not be required to
exceed at any time the sum of (a) the reserves then allocable to the liability
covered thereby and (b) the applicable claims handling expenses.
Section 6.16 OWNERSHIP OF PSC. Buyer agrees that, for a period
of two (2) years following the Closing Date, neither
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Pearle nor any Subsidiary shall become the owner of the PSC Shares nor shall PSC
be merged or liquidated with or into Pearle or any Subsidiary.
Section 6.17 FURTHER ASSURANCES. At any time after the Closing
Date, Seller and Buyer shall, and Buyer shall cause Pearle or any Subsidiary to,
promptly execute, acknowledge and deliver any other assurances or documents
reasonably requested by Buyer or Seller, as the case may be, and necessary for
Buyer or Seller, as the case may be, to satisfy its obligations hereunder or
obtain the benefits contemplated hereby.
Section 6.18 BV PENSION PROVISION. To the extent all of the
following time periods are commercially reasonable, within 21 calendar days
after the date hereof, Seller shall cause its actuary to calculate the provision
for pension backservice liabilities of Pearle Holdings and its subsidiaries, as
of September 30, 1996, determined on the same basis as used in calculating the
pension backservice liability provision of NLG 1,424,612 reflected in the
September 30, 1995 balance sheet included in the Audited BV Financial
Information; PROVIDED that Seller's actuary shall use the most recent available
actuarial tables in use in the Netherlands including, without limitation, the
most recent available mortality rates, and Seller shall deliver such calculation
(the "BV Pension Provision") to Buyer, together with all relevant books and
records and any work papers (including those of Seller's actuary) relating to
the calculation of the BV Pension Provision. Within 10 calendar days after
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receipt of the calculation of the BV Pension Provision, Buyer shall either
inform Seller in writing that the BV Pension Provision is acceptable or object
to it in writing setting forth a specific description of its objections. If
Buyer so objects and the parties do not resolve such objection on a mutually
agreeable basis within 10 calendar days after Seller's receipt thereof, the
disagreement shall be resolved within an additional 14 calendar day period by an
Unaffiliated Firm. The decision of the Unaffiliated Firm shall be final and
binding upon the parties. Upon the agreement of the parties or the decision of
the Unaffiliated Firm as to all matters objected to, or if Buyer fails to
deliver an objection to Seller within the 10 calendar day period provided above,
the BV Pension Plan shall be deemed final. Each party shall bear the fees, costs
and expenses of its own accountants and shall share equally the fees, costs and
expenses of the Unaffiliated Firm. Buyer and Seller shall (and prior to the
Closing Date Seller shall cause Pearle to and, if the BV Pension Provision is
not then final, after the Closing Date Buyer shall cause Pearle to) make readily
available to the Unaffiliated Firm all relevant books and records and any work
papers (including those of the parties' respective actuaries) relating to the
calculation of the BV Pension Provision and all other items reasonably requested
by the Unaffiliated Firm. Promptly following the final determination of the BV
Pension Provision, (a) if such determination is made on or prior to the Closing
Date, Seller shall cause to remain in Pearle Holdings or
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the applicable pension plans a cash balance (together with insurance for which
premiums have been paid) in an amount equal to the lesser of the amount of the
BV Pension Provision or NLG 2,000,000 or (b) if such determination is made after
the Closing Date, (i) in the event Seller shall have caused to remain in Pearle
Holdings or the applicable pension plans a cash balance (together with insurance
for which premiums have been paid) of NLG 2,000,000 and such amount exceeds the
later determined BV Pension Plan Provision, Buyer shall pay to Seller such
difference, or (ii) Seller shall pay to Buyer an amount equal to the lesser of
the amount of the BV Pension Provision or NLG 2,000,000.
ARTICLE VII
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CONDITIONS TO CLOSING
---------------------
Section 7.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligation
of Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction or waiver by Buyer in writing on or prior to the
Closing Date of each of the following conditions:
(a) Each of the representations and warranties of Seller and
Pearle contained in this Agreement which refer to a Material Adverse
Effect or otherwise reference a concept of materiality shall be true
when made and as of the Closing Date, and each of the other
representations and warranties of Seller and Pearle contained in this
Agreement shall be true in all material respects when made and as of
the
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Closing Date, with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except (i)
representations and warranties that are made as of a specific date need
be true, or true in all material respects, as the case may be, only as
of such date and (ii) as expressly permitted by this Agreement to
change between the date of this Agreement and the Closing Date);
PROVIDED, THAT exclusively for purposes of this Section 7.1(a), the
representations and warranties contained in Sections 3.10 and Section
3.18 shall be read as though they were qualified by reference to a
requirement of, or the requirement of a reasonable likelihood of,
"Material Adverse Effect"; each of the covenants and agreements of
Seller to be performed on or prior to the Closing Date shall have been
duly performed in all material respects; and Buyer shall have received
at the Closing certificates to that effect dated as of the Closing Date
and executed on behalf of each of Pearle and Seller by its President or
any of its Vice Presidents and its Secretary or any of its Assistant
Secretaries.
(b) Buyer shall have received from Seller an opinion of Xxxxxx
X. Xxxxx, counsel to Seller, dated as of the Closing Date,
substantially in the form of Schedule 7.1(b) hereof.
(c) Seller shall have delivered to Buyer resignations
of all directors of Pearle and the Subsidiaries (in their
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capacity as directors) and all officers of Pearle and the
Subsidiaries who are not also employees of Pearle or a
Subsidiary.
(d) Buyer shall have funds available to it sufficient to
purchase the PSC Shares and the Pearle Shares in accordance with the
terms and conditions contemplated by this Agreement.
(e) Pearle, Pearle Vision, Inc. and Seller or one of its
Continuing Affiliates shall have entered into an amendment to the Note
Purchase Agreement with SocGen pursuant to which (i) Seller or one of
its Continuing Affiliates shall have assumed all payment obligations of
Pearle Vision, Inc. and Pearle under the terms of the Note Purchase
Agreement and (ii) Pearle and Pearle Vision, Inc. shall have been
released from all payment obligations thereunder and from all of their
respective covenant obligations under the Note Purchase Agreement to
the extent that such covenant obligations relate solely to Pearle
and/or Pearle Vision, Inc. and not to their obligations to assist in
the collection of the principal, interest and other amounts due from
the franchisees on the notes or to cause franchisees to take, or
prevent them from taking, certain actions.
Section 7.2 CONDITIONS TO OBLIGATIONS OF SELLER. The
obligation of Seller to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver
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in writing by Seller on or prior to the Closing Date of each of
the following conditions:
(a) Each of the representations and warranties of Buyer
contained in this Agreement qualified by a concept of materiality shall
be true when made and as of the Closing Date, and each of the other
representations and warranties of Buyer contained in this Agreement
shall be true in all material respects when made and as of the Closing
Date, with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except (i)
representations and warranties that are made as of a specific date need
be true, or true in all material respects, as the case may be, only as
of such date and (ii) as expressly permitted by this Agreement to
change between the date of this Agreement and the Closing Date); each
of the covenants and agreements of Buyer to be performed on or prior to
the Closing Date shall have been duly performed in all material
respects; and Seller shall have received at the Closing certificates to
that effect dated as of the Closing Date and executed on behalf of
Buyer by its President or any of its Vice Presidents and its Secretary
or any of its Assistant Secretaries.
(b) Seller shall have received from Xxxxx, Day, Xxxxxx &
Xxxxx, as counsel for Buyer, an opinion, dated as of the Closing Date,
substantially in the form of Schedule 7.2(b) hereof.
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Section 7.3 CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER. The
obligations of the parties to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver by both parties on or
prior to the Closing Date of the following conditions:
(a) Each party shall have duly filed with the FTC and the
Antitrust Division the Report required under the HSR Act with respect
to the sale and purchase of the PSC Shares and the Pearle Shares and
the waiting period required by the HSR Act, and any extensions thereof
obtained by request or other action of the FTC and/or the Antitrust
Division, shall have expired or been earlier terminated by the FTC and
the Antitrust Division.
(b) No court or governmental authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, or non-appealable judgment,
decree, injunction or other order which is in effect on the Closing
Date and prohibits the consummation of the Closing.
ARTICLE VIII
------------
TERMINATION
-----------
Section 8.1 TERMINATION. This Agreement may be terminated at
any time prior to the Closing:
(a) by agreement of Buyer and Seller;
(b) by either Buyer or Seller, by giving written notice of
such termination to the other party, if (x) any
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condition to the terminating party's obligations hereunder has not been
satisfied or waived and (y) the Closing shall not have occurred on or prior to
January 31, 1997; PROVIDED THAT the terminating party is not in material breach
of its obligations under this Agreement;
(c) by either Buyer or Seller, by giving written notice of
such termination to the other party, if (x) each condition thereto shall have
been satisfied or waived and (y) the Closing shall not have occurred on or prior
to January 31, 1997; PROVIDED THAT the terminating party is not in material
breach of its obligations under this Agreement;
(d) by either Buyer or Seller if there shall be in effect any
law or regulation that prohibits the consummation of the Closing or if
consummation of the Closing would violate any non-appealable final order, decree
or judgment of any court or governmental body having competent jurisdiction;
(e) by Seller if the Closing shall not have occurred on or
prior to 10 Business Days following the satisfaction of all the conditions to
Closing set forth in Sections 7.1 and 7.3 hereof as a result of any action or
inaction by Buyer.
(f) by Buyer if the Closing shall not have occurred on or
prior to 10 Business Days following the satisfaction of all the conditions to
Closing set forth in Sections 7.2 and 7.3 hereof as a result of any action or
inaction by Seller.
Section 8.2 EFFECT OF TERMINATION. In the event of
the termination of this Agreement in accordance with Section 8.1
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hereof, this Agreement shall thereafter become void and have no effect, and no
party hereto shall have any liability to the other party hereto or their
respective Affiliates, directors, officers or employees, except for the
obligations of the parties hereto contained in this Section 8.2 and in Sections
10.2, 10.3, 10.4, 10.11 and 10.12 hereof, and except that nothing herein will
relieve any party from liability for any breach of this Agreement prior to such
termination.
ARTICLE IX
----------
SURVIVAL AND INDEMNIFICATION
----------------------------
Section 9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS; KNOWLEDGE OF BREACH. Notwithstanding any otherwise applicable
statute of limitations, the representations and warranties included or provided
for herein shall survive the Closing until the later to occur of: (i) April 30,
1998 and (ii) the first anniversary of the Closing Date; PROVIDED, HOWEVER, that
any representation or warranty contained in Section 3.18 hereof shall survive
the Closing until the third anniversary of the Closing Date and any
representation, warranty, covenant or agreement contained in Sections 3.14,
3.23, 4.2 and 4.4 and Article V hereof shall survive the Closing until the
expiration of the applicable statute of limitations (including any waivers or
extensions thereof) with respect to such matters and PROVIDED, FURTHER, however,
that any representation, warranty, covenant or agreement contained in Sections
3.1, 3.2 and 3.3 shall survive the Closing and shall remain in effect
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without limitation as to time. The covenants and other agreements contained in
this Agreement shall survive the Closing until the date or dates specified
therein or (except as to Section 6.5(a)) the expiration of the applicable
statute of limitations (including any waivers or extensions thereof) with
respect to such matters, whichever is later. Except with respect to the
representations, warranties, covenants and agreements contained in Sections 2.4,
3.14(b), 3.23, 4.2 and 6.4 and Article V hereof, in no event shall Buyer be
liable to Seller or Seller be liable to Buyer, as the case may be, for any
breach of the representations, warranties, covenants and agreements included or
provided for herein or in any schedule or certificate or other document
delivered pursuant to this Agreement, unless and until all claims for which
Losses are recoverable hereunder by Buyer or Seller, as the case may be, exceed
$2,500,000 (the "Deductible") (PROVIDED THAT those Losses recoverable by Buyer
pursuant to Section 9.2(a)(ii) shall not be included in the calculation of such
Deductible), in which case Buyer or Seller, as the case may be, shall be
entitled to Losses in an amount up to the Purchase Price in the aggregate;
PROVIDED, HOWEVER, that Buyer or Seller, as the case may be, shall be liable
only for the amount by which all such Losses exceed the Deductible, PROVIDED,
FURTHER, that to the extent any representation or warranty is not qualified by
the terms "material", "materiality" or "Material Adverse Effect" Buyer or
Seller, as the case may be, shall only be liable for such Losses attributable to
each individual proven
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damage (or group of damages arising from the same event, condition or course of
conduct) that is in excess of $50,000 (the "Damage Threshold") without regard to
the Damage Threshold once the amount of the Damage Threshold has been exceeded
in the particular instance.
Section 9.2 INDEMNIFICATION.
(a) (i) With respect to any claim for which the Seller, on the
one hand, or Buyer, on the other hand (the "Indemnifying Party"), receives
notice from the Buyer, on the one hand, or Seller, on the other hand, as the
case may be (the "Indemnified Party") during the period commencing on the
Closing Date and ending, as the case may be, upon the expiration of the periods,
if any, specified in Section 9.1 hereof, the Indemnifying Party shall, subject
to the limitations set forth in Sections 9.1 hereof, indemnify, defend and hold
harmless the Indemnified Party, against and in respect of all losses, damages,
liabilities, costs and expenses (including reasonable attorneys' fees and
expenses incurred in investigating, preparing or defending any claims covered
hereby, net of the recovery of any insurance proceeds) ("Losses") sustained or
incurred arising out of any breaches of the Indemnifying Party's or Pearle's
representations, warranties, covenants and agreements set forth in this
Agreement (other than representations, warranties, covenants and agreements set
forth in Article V, as to which the indemnification provisions set forth in
Article V shall govern) and (ii) Seller shall, subject to the limitations set
forth in
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Sections 9.1 hereof other than the Deductible and the Damage Threshold,
indemnify, defend and hold harmless Buyer against and in respect of:
(A) all Losses sustained or incurred arising out of the
presence, removal or cleanup relating to the underground storage tanks
referred to in Item 7 of Schedule 3.7; PROVIDED THAT Seller shall only
be liable for Losses in an amount up to $250,000;
(B) 75% of the aggregate sum of (I) the excess (the
"Determined Receivables Amount") of the resultant of (a) the amount of
any and all writeoffs, writedowns and/or reductions as reflected in the
audited financial statements of the Buyer for the fiscal years ending
February 1, 1997, January 31, 1998 and January 30, 1999 (the
"Receivables Determination Period") specifically relating to or in
connection with the failure to collect any receivables owed by
franchisees pursuant to any notes, accounts and deferred rents, in each
case, as reflected in the Closing Date Balance Sheet (the "Franchisee
Receivables"), less any recovery of fixed assets or inventory (in each
case, valued on a basis consistent with the respective valuation
practices of Pearle in effect as of the date hereof) recognized upon
store closings, takebacks or the seizure of assets in connection
therewith during, and as reflected in the audited financial statements
of the Buyer for, each fiscal year during the Receivables Determination
Period
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(individually, with respect to each such fiscal year, and collectively,
with respect to all such fiscal years, the "Receivables Writeoff
Amount"), over (b) the amount reserved for bad debts specifically
identified in connection with the Franchisee Receivables reflected in
the Closing Date Balance Sheet and (II) an amount (the "Calculated
Receivables Settlement") equal to the aggregate sum of the principal
amounts of the notes, accounts and deferred rents underlying the
Franchisee Receivables in which payments of interest on or of such
principal as of January 30, 1999 (the "Receivables Calculation Date")
are more than 90 days past due (the "Past Due Receivables") as set
forth on a Franchisee Receivables aging schedule to be delivered by
Buyer to Seller no later than April 30, 1999 (the "Receivables
Schedule"). Within 30 calendar days after receipt of the Receivables
Schedule, Seller shall either inform Buyer in writing that the
Receivables Schedule, Determined Receivables Amount and the Calculated
Receivables Settlement are acceptable or object to any of them in
writing setting forth a specific description of its objections. If
Seller so objects and the parties do not resolve such objections on a
mutually agreeable basis within 30 calendar days after Seller's receipt
thereof, the disagreement shall be resolved within an additional 30
calendar day period by an Unaffiliated Firm. The decision of the
Unaffiliated Firm shall be final and binding upon the
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parties. Upon the agreement of the parties or the decision of the
Unaffiliated Firm as to all matters objected to, or if Seller fails to
deliver an objection to Buyer within the 30 calendar day period
provided above, the Receivables Schedule, Determined Receivables Amount
and the Calculated Receivables Settlement (as adjusted, if necessary)
shall be deemed final. Each Party shall bear the fees, costs and
expenses of its own accountants and shall share equally the fees, costs
and expenses of the Unaffiliated Firm. Buyer and Seller shall (and
Buyer shall cause Pearle to) make readily available to the Unaffiliated
Firm all relevant books and records and any work papers (including
those of the parties' respective accountants) relating to the
Receivables Schedule and the calculation of the Determined Receivables
Amount and the Calculated Receivables Settlement and all other items
reasonably requested by the Unaffiliated Firm. Seller shall pay Buyer
75% of the Determined Receivables Amount with respect to any fiscal
year in which there is a cumulative positive Determined Receivables
Amount and 75% of the Calculated Receivables Settlement within 15
Business Days of the final determination of each such amount; PROVIDED
THAT, if with respect to any fiscal year in which there is a cumulative
positive Receivables Writeoff Amount there is not a cumulative positive
Determined Receivables Amount, the Receivables Writeoff Amount shall be
carried forward into the next fiscal year. Within 15
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Business Days of April 30, 2003, Buyer shall pay Seller an amount equal
to 75% of the sum of any and all receivables collected between January
31, 1999 and April 30, 2003 and fixed assets and inventory recovered
(in each case, valued on a basis consistent with the respective
valuation practices of Pearle in effect as of the date hereof), in each
case in connection with (i) the Determined Receivables Amounts and (ii)
the Calculated Receivables Settlement; PROVIDED THAT the maximum amount
of such payment shall not exceed 75% of the sum of all Determined
Receivables Amounts and the Calculated Receivables Settlement.
(C) 50% of all Losses relating to workers' compensation
claims arising from incidents occurring prior to the Closing Date which
are first presented, filed or made within one year after the Closing
Date, to the extent that the amount of all such Losses exceed the
reserve relating to workers' compensation liabilities reflected in the
Closing Date Balance Sheet.
(D) 50% of all Losses relating to personal injury claims
arising from incidents occurring prior to the Closing Date which are
first presented, filed or made within three years after the Closing
Date, to the extent that the amount of all such Losses exceed the
reserve relating to personal injury claims reflected in the Closing
Date Balance Sheet;
(E) all Losses relating to obligations of Seller or
any of its Affiliates with respect to Pearle GMBH;
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(F) all Losses relating to any liabilities for net costs
incurred by Buyer or any of its Affiliates in connection with the
closing of stores closed prior to the Closing Date to the extent such
costs exceed the amounts reflected in the Closing Date Balance Sheet;
(G) up to NLG 300,000 of Losses sustained or incurred
arising out of any breaches of Seller's or Pearle's representations or
warranties set forth in Section 3.18 to the extent they relate to
Pearle Holdings or its subsidiaries;
(H) all Losses relating to any breach by Seller of any funding
obligation in Section 6.18.
The parties agree that, with respect to all claims for which
Losses would be recoverable pursuant to clauses (A) through (H) above, Section
9.2(a)(ii) hereto shall be the sole and exclusive remedy of Buyer and any
amounts not recovered pursuant to Section 9.2(a)(ii) shall be deemed not to be
Losses for any other purposes.
Any payments pursuant to this Section 9.2 or Article V shall
be treated as an adjustment to the Subsequent Sale Purchase Price for all Tax
purposes.
(b) Seller releases and waives any right of indemnity
and contribution from Pearle and the Subsidiaries.
(c) The indemnity provided herein and in Article V as it
relates to this Agreement and the transactions contemplated by this Agreement
shall be the sole and exclusive remedy of the
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parties hereto, their Affiliates, successors and assigns with respect to any and
all claims for losses, damages, liabilities, costs and expenses sustained or
incurred arising out of this Agreement and the transactions contemplated by this
Agreement, except for the right of the parties hereto to seek specific
performance of the obligations set forth in Article II and Sections 6.4, 6.5 and
6.9 of this Agreement.
Section 9.3 METHOD OF ASSERTING CLAIMS, ETC. All claims for
indemnification by any Indemnified Party hereunder shall be asserted and
resolved as set forth in this Section 9.3 except for claims pursuant to Article
V hereof (as to which the provisions of Article V shall be applicable). In the
event that any written claim or demand for which an Indemnifying Party would be
liable to any Indemnified Party hereunder is asserted against or sought to be
collected from any Indemnified Party by a third party, such Indemnified Party
shall promptly, but in no event more than 15 days following such Indemnified
Party's receipt of such claim or demand, notify the Indemnifying Party of such
claim or demand and the amount or the estimated amount thereof to the extent
then feasible (which estimate shall not in any manner prejudice the right of the
Indemnified Party to indemnification to the fullest extent provided hereunder)
(the "Third Party Claim Notice") and in the event that an Indemnified Party
shall assert a claim for indemnity under this Article IX, not including a third
party claim, the Indemnified Party shall notify the Indemnifying Party promptly
following its discovery of the facts
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or circumstances giving rise thereto (together, with a Third Party Claim Notice,
a "Claim Notice"); PROVIDED, THAT no such notice need be provided to an
Indemnifying Party if the Deductible has not been exceeded and will not be
exceeded by such claim or demand; and PROVIDED, FURTHER, that the failure to
notify on the part of the Indemnified Party in the manner set forth herein shall
not foreclose any rights otherwise available to such Indemnified Party
hereunder, except to the extent that the Indemnifying Party is prejudiced by
such failure to notify. The Indemnifying Party shall have 30 days from the
personal delivery or mailing of the Third Party Claim Notice (except that such a
period shall be decreased to a time 10 days before a scheduled appearance date
in a litigated matter) (the "Notice Period") to notify the Indemnified Party (i)
whether or not the Indemnifying Party disputes the liability of the Indemnifying
Party to the Indemnified Party hereunder with respect to such claim or demand
and (ii) whether or not it desires to defend the Indemnified Party against such
claim or demand, which it shall not be entitled to do until the Deductible is
exceeded. All costs and expenses incurred by the Indemnifying Party in defending
such claim or demand shall be a liability of, and shall be paid by, the
Indemnifying Party; PROVIDED, HOWEVER, that the amount of such expenses shall be
a liability of the Indemnifying Party hereunder, subject to the limitations set
forth in Section 9.1 hereof. In the event that the Indemnifying Party notifies
the Indemnified Party within the Notice Period that it
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desires to defend the Indemnified Party against such claim or demand, which it
shall not be entitled to do until the Deductible is exceeded and except as
hereinafter provided, the Indemnifying Party shall have the right to defend the
Indemnified Party by appropriate proceedings and by counsel reasonably
acceptable to the Indemnified Party. If any Indemnified Party desires to
participate in, but not control, any such defense or settlement it may do so at
its sole cost and expense. The Indemnified Party shall not settle a claim or
demand without the consent of the Indemnifying Party. The Indemnifying Party
shall not, without the prior written consent of the Indemnified Party, settle,
compromise or offer to settle or compromise any such claim or demand on a basis
which would result in the imposition of a consent order, injunction or decree
which would restrict the future activity or conduct of, or which would otherwise
have a material adverse effect on, the Indemnified Party or any subsidiary or
Affiliate thereof. If the Indemnifying Party elects not to defend the
Indemnified Party against such claim or demand, whether by not giving the
Indemnified Party timely notice as provided above or otherwise, then the
Indemnified Party shall have the right to assume the defense of such claim and
the amount of any such claim or demand, or, if the same be contested by the
Indemnified Party, then that portion of any such claim or demand as to which
such defense is unsuccessful (and all reasonable costs and expenses pertaining
to such defense) shall be the liability of the Indemnifying Party hereunder,
subject to the
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limitations set forth in Section 9.1 hereof. In such event, the Indemnified
Party may defend against any such claim in any manner it deems appropriate and
may settle any such claim or consent to the entry of any judgment with respect
thereto; PROVIDED THAT it shall (i) act reasonably and in good faith, (ii)
notify the Indemnifying Party of its intent to settle such claim or consent to
such judgment and (iii) receive the consent of the Indemnifying Party for such
settlement or consent to judgment (which consent shall not be unreasonably
withheld and shall be deemed to have been received if the Indemnifying Party
shall not have objected within five Business Days after the receipt of the
notification referred to in (ii) above). To the extent the Indemnifying Party
shall control or participate in the defense or settlement of any third party
claim or demand, the Indemnified Party will give to the Indemnifying Party and
its counsel reasonable access to all business records and other documents
relevant to such defense or settlement, and shall permit them to consult with
the employees and counsel of the Indemnified Party. The Indemnifying Party will
keep such business records and other documents strictly confidential and will
use them only for the purposes of defense or settlement pursuant hereto. The
Indemnified Party shall use its reasonable best efforts in the defense of all
such claims, and in connection therewith shall be entitled to reimbursement by
the Indemnifying Party of expenses directly related to efforts undertaken at the
specific request of the Indemnifying Party.
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ARTICLE X
---------
MISCELLANEOUS
-------------
Section 10.1 AMENDMENT AND MODIFICATION; WAIVER. This
Agreement may only be amended or modified in writing, signed by Seller and
Buyer, at any time prior to the Closing with respect to any of the terms
contained herein. At any time prior to the Closing either Seller or Buyer may
(i) extend the time for the performance of any of the obligations or other acts
of the other party hereto, (ii) waive any inaccuracies in the representations
and warranties of the other party contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements or
conditions of the other party contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party granting such extension or waiver.
Section 10.2 RETURN OF INFORMATION. If for any reason
whatsoever the sale and purchase of the PSC Shares and the Pearle Shares
pursuant to this Agreement is not consummated, Buyer shall promptly return to
Seller or Pearle all books, records and documents of Seller, Pearle or any
Subsidiary (including all copies, if any, thereof) furnished by Seller, Pearle,
or any of their respective agents, employees, or representatives, and shall not
use or disclose the information contained in such books, records or documents
for any purpose or make such information available to any other entity or
person.
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Section 10.3 EXPENSES. Except as otherwise expressly provided
in this Agreement, whether or not the transactions contemplated by this
Agreement are consummated, the parties shall bear their own respective expenses
(including, but not limited to, all compensation and expenses of counsel,
financial advisors, consultants, actuaries and independent accountants) incurred
in connection with this Agreement and the transactions contemplated hereby.
Section 10.4 PUBLIC DISCLOSURE. Each of the parties to this
Agreement hereby agrees with the other parties hereto that, except as may be
required to comply with the requirements of applicable law or the rules and
regulations of each stock exchange upon which the securities of either of the
parties or its Affiliates is listed, no press release or similar public
announcement or communication will be made or caused to be made concerning the
execution or performance of this Agreement unless specifically approved in
advance by all parties hereto; PROVIDED, HOWEVER, that to the extent that either
party to this Agreement is required by law or the rules and regulations of any
stock exchange upon which the securities of either of the parties or its
Affiliates is listed to make such a public disclosure, such public disclosure
shall only be made after prior consultation with the other party to this
Agreement.
Section 10.5 ASSIGNMENT. No party to this Agreement
may assign any of its rights or obligations under this Agreement
without the prior written consent of the other party hereto;
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PROVIDED, THAT Buyer may assign this Agreement to a wholly owned subsidiary;
PROVIDED, HOWEVER, that such assignment shall not be permitted if it would
subject Seller or any Continuing Affiliate to any additional obligations and
shall not, in any case, relieve Buyer of any of its obligations under this
Agreement.
Section 10.6 ENTIRE AGREEMENT. This Agreement (including all
Schedules hereto) contains the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, oral or written, with respect to such matters, except for the
Confidentiality Agreement which will remain in full force and effect for the
term provided for therein.
Section 10.7 FULFILLMENT OF OBLIGATIONS. Any obligation of any
party to any other party under this Agreement, which obligation is performed,
satisfied or fulfilled by an Affiliate of such party, shall be deemed to have
been performed, satisfied or fulfilled by such party.
Section 10.8 PARTIES IN INTEREST; NO THIRD PARTY
BENEFICIARIES. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to confer upon any
Person other than Buyer, Seller, or their successors or permitted assigns, any
rights or remedies under or by reason of this Agreement.
Section 10.9 SCHEDULES. The inclusion of any matter
in any schedule to this Agreement shall be deemed to be an
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inclusion for all purposes of this Agreement, including each representation and
warranty to which it may relate (PROVIDED that the relevance of such inclusion
is reasonably apparent in the context), but inclusion therein shall expressly
not be deemed to constitute an admission by Seller, or otherwise imply, that any
such matter is material or creates a measure for materiality for the purposes of
this Agreement.
Section 10.10 COUNTERPARTS. This Agreement and any amendments
hereto may be executed in one or more counterparts, each of which shall be
deemed to be an original by the parties executing such counterpart, but all of
which shall be considered one and the same instrument.
Section 10.11 SECTION HEADINGS. The section and paragraph
headings and table of contents contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
Section 10.12 NOTICES. All notices hereunder shall be deemed
given if in writing and delivered personally or sent by telecopy, telex or
telegram or by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other addresses as shall be
specified by like notice):
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(a) if to Seller, to:
The Pillsbury Company
Pillsbury Center
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxx
Senior Vice President,
General Counsel and
Secretary
fax: (000) 000-0000
With a copy to:
Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
fax: (000) 000-0000
(b) if to the Company, to:
Pearle, Inc.
0000 Xxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx XxXxxxxx
General Counsel
fax: (000) 000-0000
With a copy to:
Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
fax: (000) 000-0000
(c) if to Buyer, to:
Xxxx National Corporation
0000 Xxxxxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxx 00000
Attention: Treasurer
fax: (000) 000-0000
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With a copy to:
Xxxxx, Day, Xxxxxx & Xxxxx
North Point
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
fax: (000) 000-0000
Any notice given by mail or telegram shall be effective when received. Any
notice given by telex shall be effective when the appropriate telex or telecopy
answerback is received.
Section 10.13 MEDIATION. All disputes arising under this
Agreement shall be submitted to a mediation panel prior to the filing of any
lawsuit; PROVIDED, HOWEVER, that either party may seek a preliminary injunction
or other preliminary judicial relief regardless of the provisions of this
Section, if, in its judgment, such action is necessary to avoid irreparable
damage. The mediation panel shall consist of three persons. One shall be an
internationally recognized firm of independent public accountants as to which
Seller and Buyer mutually agree. The panel shall have one former judge from the
Southern District of New York who regularly is employed as a mediator for
disputes. The third member of the panel shall be an investment banker from a
firm of recognized national standing, but not from Xxxxxx Xxxxxxx or Xxxxxxxx
Xxxxx Xxxxxx & Xxxxx or Xxxxx Xxxxxx Inc. The party desiring to submit any
matter to mediation shall do so by written notice to the other party, which
notice shall set forth the items to be mediated and the party's choice of the
three panel members along with a written statement of their
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credentials. The party receiving the notice shall within fifteen (15) days after
receipt of the notice either approve the proposed mediation panel choices, or
designate other individuals by written notice to the first party. The first
party shall within fifteen (15) days after receipt of such notice either approve
such choices or disapprove the same. If both parties shall have approved three
persons then such persons shall be the mediation panel for the purposes of
working with the parties to resolve the dispute; otherwise, the dispute shall be
referred to the National Association for Dispute Resolution, Inc., which shall
select a panel of persons with the qualifications set forth above. The mediation
panel shall be required to conduct a mediation session within fifteen (15) days
after being notified of their selection. All parties shall send high level
representatives with the ability to resolve the dispute but no outside lawyers
shall participate. The parties shall work with the mediation panel in good faith
for at least a period of three (3) days if necessary to resolve the dispute. If
the parties are unable to resolve the dispute, litigation may then be filed. The
fees and expenses of the mediation panel will be paid equally by Buyer and
Seller.
SECTION 10.14 GOVERNING LAW; SUBMISSION TO JURISDICTION;
SELECTION OF FORUM. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE
CHOICE OF LAW PRINCIPLES THEREOF. EACH PARTY HERETO AGREES THAT IT SHALL BRING
ANY ACTION OR PROCEEDING IN RESPECT OF ANY CLAIM ARISING OUT OF OR RELATED TO
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THIS AGREEMENT OR THE TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY THIS
AGREEMENT, WHETHER IN TORT OR CONTRACT OR AT LAW OR IN EQUITY, EXCLUSIVELY IN
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE
SUPREME COURT OF THE STATE OF NEW YORK FOR THE COUNTY OF NEW YORK (THE "CHOSEN
COURTS") AND (I) IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE CHOSEN
COURTS, (II) WAIVES ANY OBJECTION TO LAYING VENUE IN ANY SUCH ACTION OR
PROCEEDING IN THE CHOSEN COURTS, (III) WAIVES ANY OBJECTION THAT THE CHOSEN
COURTS ARE AN INCONVENIENT FORUM OR DO NOT HAVE JURISDICTION OVER ANY PARTY
HERETO AND (IV) AGREES THAT SERVICE OF PROCESS UPON SUCH PARTY IN ANY SUCH
ACTION OR PROCEEDING SHALL BE EFFECTIVE IF NOTICE IS GIVEN IN ACCORDANCE WITH
SECTION 10.12 OF THIS AGREEMENT. BUYER IRREVOCABLY DESIGNATES CT CORPORATION
SYSTEM AS ITS AGENT AND ATTORNEY-IN-FACT FOR THE ACCEPTANCE OF SERVICE OF
PROCESS AND MAKING AN APPEARANCE ON ITS BEHALF IN ANY SUCH CLAIM OR PROCEEDING
AND TAKING ALL SUCH ACTS AS MAY BE NECESSARY OR APPROPRIATE IN ORDER TO CONFER
JURISDICTION OVER IT UPON THE CHOSEN COURTS AND BUYER STIPULATES THAT SUCH
CONSENT AND APPOINTMENT IS IRREVOCABLE AND COUPLED WITH AN INTEREST.
Section 10.15 SEVERABILITY. The provisions of this Agreement
shall be deemed severable and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of the other
provisions hereof. If any provision of this Agreement, or the application
thereof to any person or entity or any circumstance, is invalid or
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unenforceable, (a) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of such provision to other
persons, entities or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
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IN WITNESS WHEREOF, this Agreement has been signed on
behalf of each of the parties hereto as of the date first written
above.
THE PILLSBURY COMPANY
By /S/ XXXXXX X. XXXXX
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President
PEARLE, INC.
By /S/ XXXXXX X. XXXXX
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President
XXXX NATIONAL CORPORATION
By /S/ XXXXXXX X. XXXX
--------------------------------
Name: Xxxxxxx X. Xxxx
Title: Chairman and Chief
Executive Officer
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