STOCK AND ASSET PURCHASE AGREEMENT between
S.A. LOUIS DREYFUS ET CIE and
POLO RALPH LAUREN CORPORATION
Dated as of November 23, 1999
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TABLE OF CONTENTS Page ARTICLE I
SALE AND TRANSFER OF TRANSFERRED
SUBSIDIARY STOCK AND ASSETS . . . . . . . . . . 2
1.1 Sale and Transfer of Transferred Subsidiary Stock . . . 2
1.2 Sale of Assets . . . . . . . . . . . . . . . . . . . . . 2
1.3 Designated Purchasers . . . . . . . . . . . . . . . . . 2
1.4 Transfer of the Transferred Subsidiary Stock and the
Purchased Assets . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
PURCHASE PRICE AND ADJUSTMENTS . . . . . . . . . 3
2.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . 3
2.2 Payment of Purchase Price . . . . . . . . . . . . . . . 4
2.3 Currency Conversion . . . . . . . . . . . . . . . . . . 4
2.4 Settlement of Purchase Price . . . . . . . . . . . . . . 4
2.5 Allocation of Purchase Price . . . . . . . . . . . . . . 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SALD . . . . . . . 6
3.1 Corporate Existence . . . . . . . . . . . . . . . . . . 6
3.2 Corporate Authority . . . . . . . . . . . . . . . . . . 7
3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . 8
3.4 Governmental Approvals and Consents . . . . . . . . . . 9
3.5 Financial Statements . . . . . . . . . . . . . . . . . . 10
3.6 Absence of Certain Changes . . . . . . . . . . . . . . . 10
3.7 Contracts; Affiliate Transactions . . . . . . . . . . . 10
3.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . 11
3.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . 12
3.10 Intellectual Property Rights . . . . . . . . . . . . . . 12
3.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . 13
3.12 Employee Benefits . . . . . . . . . . . . . . . . . . . 16
3.13 Labor Matters . . . . . . . . . . . . . . . . . . . . . 17
3.14 Environmental Matters . . . . . . . . . . . . . . . . . 18
3.15 Transferred Assets and the Business; Dissolved and
Dormant Subsidiaries . . . . . . . . . . . . . . . . . 18
3.16 Undisclosed Liabilities . . . . . . . . . . . . . . . . 19
3.17 Receivables. . . . . . . . . . . . . . . . . . . . . . . 19 -i-
3.18 Inventories . . . . . . . . . . . . . . . . . . . . . . 19
3.19 Finders; Brokers . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV
REPRESENTATIONS OF PURCHASER . . . . . . . . . 20
4.1 Corporate Existence . . . . . . . . . . . . . . . . . . 20
4.2 Corporate Authority . . . . . . . . . . . . . . . . . . 20
4.3 Governmental Approvals and Consents . . . . . . . . . . 21
4.4 Finders; Brokers . . . . . . . . . . . . . . . . . . . . 22 ARTICLE V
AGREEMENTS OF PURCHASER AND SALD . . . . . . . . 22
5.1 Operation of the Business . . . . . . . . . . . . . . . 22
5.2 Investigation of Business . . . . . . . . . . . . . . . 23
5.3 Best Efforts; No Inconsistent Action . . . . . . . . . . 23
5.4 Intercompany Transactions . . . . . . . . . . . . . . . 24
5.5 Non-Solicitation of Employees; Confidentiality . . . . . 25
5.6 Tax Matters . . . . . . . . . . . . . . . . . . . . . . 26
5.7 Reserved . . . . . . . . . . . . . . . . . . . . . . . . 29
5.8 Working Capital Facility . . . . . . . . . . . . . . . . 29
5.9 Transition Services Agreement. . . . . . . . . . . . . . 30
5.10 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . 31
5.11 Working Capital Surplus . . . . . . . . . . . . . . . . 31
5.12 Certain Corporate Matters . . . . . . . . . . . . . . . 32
5.13 Future Investments in the Jeans Business or Vertical
Retail Program . . . . . . . . . . . . . . . . . . . . 33
5.14 Further Obligations of Purchaser and SALD . . . . . . . 33
ARTICLE VI
CONDITIONS TO CLOSING . . . . . . . . . . . 34
6.1 Conditions Precedent to Obligations of Purchaser and
SALD. . . . . . . . . . . . . . . . . . . . . . . . . 34
6.2 Conditions Precedent to Obligation of SALD . . . . . . . 35
6.3 Conditions Precedent to Obligation of Purchaser . . . . 36
6.4 Exception to the Conditions Precedent to Obligation
of Purchaser . . . . . . . . . . . . . . . . . . . . . 37 -ii-
ARTICLE VII
CLOSING . . . . . . . . . . . . . . . 37
7.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . 37
7.2 Purchaser Obligations . . . . . . . . . . . . . . . . . 39
7.3 SALD Obligations . . . . . . . . . . . . . . . . . . . . 39
7.4 Termination of Certain Obligations on Closing . . . . . 40
ARTICLE VIII
INDEMNIFICATION . . . . . . . . . . . . . 40
8.1 Indemnification . . . . . . . . . . . . . . . . . . . . 40
8.2 Certain Limitations . . . . . . . . . . . . . . . . . . 42
8.3 Procedures for Third-Party Claims . . . . . . . . . . . 44
8.4 Tax Indemnification . . . . . . . . . . . . . . . . . . 45
8.5 Certain Claims Procedures . . . . . . . . . . . . . . . 47
ARTICLE IX
TERMINATION . . . . . . . . . . . . . . 47
9.1 Termination Events . . . . . . . . . . . . . . . . . . . 47
9.2 Effect of Termination . . . . . . . . . . . . . . . . . 48 ARTICLE X
MISCELLANEOUS AGREEMENTS OF THE PARTIES . . . . . . . 49
10.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . 49
10.2 Severability . . . . . . . . . . . . . . . . . . . . . . 49
10.3 Further Assurances; Further Cooperation . . . . . . . . 50
10.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . 50
10.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 50
10.6 Non-Assignability . . . . . . . . . . . . . . . . . . . 50
10.7 Amendment; Waiver . . . . . . . . . . . . . . . . . . . 50
10.8 Third Parties; Holders of Qualifying Shares . . . . . . 51
10.9 Governing Law . . . . . . . . . . . . . . . . . . . . . 51
10.10 Consent to Jurisdiction; Waiver of Jury Trial . . . . . 51
10.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . 52
10.12 Section Headings; Table of Contents . . . . . . . . . . 52
10.13 Specific Performance . . . . . . . . . . . . . . . . . . 52 -iii- EXHIBITS
Annex A Definitions
EXHIBIT A Entity Sellers
EXHIBIT B Lower Tier Subsidiaries
EXHIBIT C Asset Sellers
EXHIBIT D Certain Purchased Assets
EXHIBIT E Legal Opinion of Purchaser's Counsel
EXHIBIT F Legal Opinion of SALD's Counsel SCHEDULES
Schedule 2.1(a) 1998 Balance Sheet as Adjusted
Schedule 2.1(b) Model of the Hypothetical Closing Date Balance Sheet
as Adjusted
Schedule 2.1(c) Description of Required Adjustments to Financial
Statements for Purchase Price Calculation
Schedule 2.1(d) Illustration of the Purchase Price Computation
Schedule 2.5 Allocation of Purchase Price
Schedule 3.2 Corporate Authority
Schedule 3.3(a) Capitalization/Qualifying Shares
Schedule 3.4 Governmental Approvals and Consents
Schedule 3.5 Financial Statements
Schedule 3.6 Absence of Certain Changes
Schedule 3.7(a)(1) Contracts/Commitments with Non-Affiliates; Addendum
A: Warehouse Agreements; Addendum B: Copy Equipment
Leasing and Maintenance Agreements
Schedule 3.7(a)(2) Bank Guarantees/Deposits/Letters of Intent
Schedule 3.7(b)(1) Contracts/Commitments with Affiliates
Schedule 3.7(b)(2)(a) Poloco S.A. Foreign Exchange Contracts USD
Schedule 3.7(b)(2)(b) Poloco S.A. Foreign Exchange Contracts GBP
Schedule 3.7(b)(2)(c) Polo Jeans Company (Europe) Ltd Foreign Exchange
Contracts USD
Schedule 3.7(c)(1) Real Property Leases
Schedule 3.7(c)(2) Retail Store Locations
Schedule 3.8 Litigation
Schedule 3.10(a) Intellectual Property Rights
Schedule 3.10(b) Intellectual Property Licenses
Schedule 3.11 Tax Matters
Schedule 3.12 Employee Benefits
Schedule 3.13 Labor Matters
Schedule 3.14 Environmental Matters
Schedule 4.3 Governmental Approvals and Consents
Schedule 5.5(a) Non-Solicitation of Certain Employees -iv-
STOCK AND ASSET PURCHASE AGREEMENT
This Stock and Asset Purchase Agreement, dated as of November 23, 1999
(hereinafter, the "Agreement"), between S.A. Louis Dreyfus et Cie, a
corporation organized under the laws of France ("SALD"), and Polo Ralph
Lauren Corporation, a Delaware corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, certain of SALD's Subsidiaries (the "Licensees") together
conduct a business for the manufacture and wholesale marketing and
distribution of certain apparel and related products in Europe, North Africa
and the Middle East pursuant to licenses from Purchaser and Purchaser's
subsidiary, The Polo/Lauren Company, L.P. (the "Business");
WHEREAS, Purchaser desires to purchase from SALD and SALD's Subsidiaries
listed under "Entity Seller" on Exhibit A (collectively with SALD, the
"Entity Sellers") and SALD desires to sell and cause those SALD's
Subsidiaries to sell to Purchaser all of the equity ownership (whether in the
form of shares or otherwise, the "Transferred Subsidiary Stock") of those of
SALD's Subsidiaries listed under "Company Being Sold" on Exhibit A;
WHEREAS, some of the Licensees, listed under "Lower Tier Subsidiaries"
on Exhibit B, are Subsidiaries of SALD's Subsidiaries listed under
"Subsidiary" on Exhibit B (together with SALD's Subsidiaries listed under
"Company Being Sold" on Exhibit A, the "Transferred Subsidiaries");
WHEREAS, Purchaser desires to purchase from SALD and SALD desires to
sell to Purchaser certain of the assets (the "Purchased Assets") of the
Licensees listed on Exhibit C (the "Asset Sellers");
WHEREAS, capitalized terms used and not defined in the body of this
Agreement shall have the meaning set forth in Annex A hereto; and
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, the parties hereby agree as follows:
-1- ARTICLE I
SALE AND TRANSFER OF TRANSFERRED
SUBSIDIARY STOCK AND ASSETS
1.1 Sale and Transfer of Transferred Subsidiary Stock.
On the Closing Date, SALD shall or shall cause the Entity Sellers
and any holders of Qualifying Shares to sell, transfer and deliver to
Purchaser, and Purchaser shall purchase and acquire, all of the Transferred
Subsidiary Stock owned by the Entity Sellers and any Other Shareholders.
1.2 Sale of Assets.
On the Closing Date, SALD shall or shall cause the Asset Sellers to
sell, assign, transfer, convey and deliver to Purchaser, and Purchaser shall
purchase and acquire, all of the Asset Sellers' right, title and interest in
the Purchased Assets. Purchaser or the respective Designated Asset Purchaser
shall not assume, and the Asset Sellers shall remain fully responsible for,
any liabilities or obligations of the Asset Sellers (other than obligations
of the Asset Sellers set forth in the Purchased Licenses), including, but not
limited to the May 11, 1998 promissory note of Louis Dreyfus Fashions Corp.,
payable to L.D. Fashions Holdings Corp. in the principal amount of
$85,000,000 (the "Promissory Note") (such liabilities and obligations
hereinafter collectively, "Retained Liabilities").
1.3 Designated Purchasers.
By notice to SALD given not later than 10 Business Days prior to
the Closing Date, Purchaser may designate persons other than Purchaser (a) to
which any of the respective Entity Sellers shall transfer and deliver those
of the shares of the Transferred Subsidiary Stock owned by it (collectively,
the "Designated Share Purchasers") and (b) to which any of the Asset Sellers
shall transfer and deliver those of the assets owned by it to be transferred
in accordance with the terms hereof (collectively, the "Designated Asset
Purchasers" and together with Designated Share Purchasers, "Designated
Purchasers") and such transfers of the Transferred Subsidiary Stock and such
Purchased Assets shall be made at the Closing as so designated.
1.4 Transfer of the Transferred Subsidiary Stock and the Purchased Assets.
The Transferred Subsidiary Stock and the Purchased Assets shall be
transferred by such assignments, deeds, bills of sale, notarial deeds, stock
certificates, stock powers and other instruments of transfer, each executed,
as required by the Entity Sellers, the Asset Sellers, Purchaser and each
Designated Purchaser, in each case, as appropriate and as required under the -2-
law applicable thereto, to transfer to Purchaser or the applicable Designated
Purchaser, as the case may be, all of the ownership, free of Liens, in the
Transferred Subsidiary Stock and the Purchased Assets, in each case in such
form as is reasonably acceptable to Purchaser (the "Transfer Documents").
ARTICLE II
PURCHASE PRICE AND ADJUSTMENTS
2.1 Purchase Price.
The aggregate purchase price for the Transferred Subsidiary Stock
and the Purchased Assets shall be an amount (the "Purchase Price") equal to
(A) the "Base Purchase Price," which is the sum of (i) US$195 million for
that portion of the Business other than the Jeans Business and (ii) (Pound
Sterling)9 million for the Jeans Business (the "Jeans Investment") minus (B)
the "Purchase Price Adjustment Amount", calculated in a manner consistent
with the illustration under Caption 5 on Schedule 2.1(d) and which is the sum
of the following three amounts:
(i) Funded Debt reflected on the balance sheet contained in
the Closing Date Financial Statements, calculated in a manner consistent
with the illustration under Caption 2 on Schedule 2.1(d);
(ii) the "Working Capital Shortfall", if any, which is the
amount by which the Current Assets are less than the sum of (1) 100% of
all declared but unpaid dividends shown as a liability on the Closing
Date Financial Statements (collectively, the "Dividends Liability") and
(2) 110% of all Current Liabilities other than the Dividends Liability,
determined based upon information reflected in the Closing Date
Financial Statements and calculated in a manner consistent with the
illustration under Caption 3 on Schedule 2.1(d); and
(iii) the excess, if any, of
(a) the "Net Worth Decrease", which is the excess,
if any, of (1) US$5,238,000, which is the "1998 Net Worth
of the Business" as shown under Caption 4 on Schedule
2.1(d) over (2) the "Closing Date Net Worth of the
Business", as that Closing Date Net Worth of the Business
is determined based upon information reflected in the
Closing Date Financial Statements and calculated in a
manner consistent with the illustration under Caption 4
on Schedule 2.1(d), over
(b) the Working Capital Shortfall, if any. -3-
2.2 Payment of Purchase Price.
On the Closing Date, Purchaser shall pay to SALD on account of the
Purchase Price US$175.5 million and (Pound Sterling)8.1 million, which is 90%
of the amount of the Base Purchase Price. Such amount shall be payable in
United States dollars in immediately available federal funds to such bank
account or accounts as are designated by SALD not less than three Business
Days prior to the Closing.
2.3 Currency Conversion.
For purposes of calculating the Purchase Price Adjustment Amount,
all calculations shall be made in U.S. dollars, and shall be based on the
dollar amounts reflected in the 1998 Financial Statements and the Closing
Date Financial Statements under the column headed U.S. Dollars; and the
amount of the Jeans Investment shall be converted to U.S. dollars at the
exchange rate announced by the Federal Reserve Bank of New York and printed
on Reuters Page "1FED" on the Business Day immediately preceding the ClosingDate.
2.4 Settlement of Purchase Price.
(a) Purchaser shall prepare (with the full participation of SALD
and its advisors) and deliver to SALD, no later than 90 days after the
Closing Date, the Closing Date Financial Statements and a statement setting
forth Purchaser's calculation of the Purchase Price Adjustment Amount (the
"Post-Closing Statement"), and in connection with the preparation of the
Closing Date Financial Statements and the Post-Closing Statement, Purchaser
will, or will cause the Transferred Subsidiaries (or the successors, if any,
to such entities) to, provide SALD and its authorized agents and
representatives, including its independent accountants, with reasonable
access, at reasonable hours, to all of the properties, books and records of
the Transferred Subsidiaries relating to the preparation of the Closing Date
Financial Statements and the Post-Closing Statement. The Business shall bear
the expense of the preparation of the Closing Date Financial Statements. The
Closing Date Financial Statements and the Purchase Price Adjustment Amount
(collectively, the "Post-Closing Calculations") shall be binding on the
Parties if SALD has not delivered to Purchaser a written notice of its
disagreement with such Post-Closing Calculations including any of the
calculations contained therein or in any of the financial statements and
other material used by Purchaser to prepare such Post-Closing Calculations (a
"Post-Closing Notice of Disagreement") within 30 days after receipt by
Purchaser of such Post-Closing Calculations (the "Objection Period"). Any
such Post-Closing Notice of Disagreement shall specify in reasonable detail
the nature of any disagreement so asserted. Within 30 days after the
delivery of a Post-Closing Notice of Disagreement all matters as specified in
such Post-Closing Notice of Disagreement that have not been resolved by the -4-
Parties (the "Post-Closing Disputed Matters") shall be submitted to and
reviewed by an arbitrator (the "Post-Closing Arbitrator"), which shall be the
New York office of any one of the so-called "Big Five" accounting firms
selected by the Parties. If within five Business Days following the
expiration of such 30-day period the Parties have failed to agree upon the
selection of the Post-Closing Arbitrator or any Post-Closing Arbitrator
selected by them has not agreed to perform the services called for hereunder,
the Post-Closing Arbitrator shall thereupon be selected by the American
Arbitration Association, with preference being given in making such selection
to any one of the "Big Five" accounting firms willing to perform such
services. The Post-Closing Arbitrator shall consider only the Post-Closing
Disputed Matters. The Post-Closing Arbitrator shall act promptly to resolve
all Post-Closing Disputed Matters and its decision with respect to all Post-
Closing Disputed Matters shall be final and binding upon the Parties. Upon
resolution by the Post-Closing Arbitrator of all Post-Closing Disputed
Matters, the Post-Closing Arbitrator shall cause to be prepared and shall
deliver to the Parties a definitive post-closing calculation statement (the
"Definitive Post-Closing Statement"), which shall (i) reflect the
determination of the Post-Closing Arbitrator with respect to any Post-Closing
Disputed Matters including its determination of the Purchase Price and (ii)
be final and binding upon the Parties. Each Party shall pay its own legal
and consultant fees incurred in connection with the arbitration and the costs
of the arbitration shall be charged to the Business.
(b) Within five Business Days after the earliest of (A) the
expiration of the Objection Period without objection, (B) the date the Post-
Closing Disputed Matters are resolved pursuant to Section 2.4(a) and (C) the
date on which SALD notifies Purchaser that SALD agrees with the Post-Closing
Calculation, either: (i) Purchaser shall pay in cash by wire transfer in
United States dollars in immediately available Federal funds to SALD to the
account designated under Section 2.2 the amount, if any, by which the
Purchase Price exceeds 90% of the Base Purchase Price; or (ii) SALD shall pay
in cash by wire transfer in United States dollars in immediately available
Federal funds to Purchaser to the bank account or accounts designated by
Purchaser, not less than three Business Days prior to the date payment is due
the amount, if any, by which the Purchase Price is less than 90% of the Base
Purchase Price. Purchaser shall pay to SALD (in the case of clause (i) of
this Section 2.4(b)) or SALD shall pay to Purchaser (in the case of clause
(ii) of this Section 2.4(b)) interest on any payment pursuant to this Section
2.4(b) for the period from the Closing Date to the date of payment at the
London Inter-Bank Offer Rate ("LIBOR") for six month deposits in U.S. dollars
as quoted on Telerate Page 3750 on the Closing Date plus 25 basis points. -5-
2.5 Allocation of Purchase Price.
The Purchase Price allocations among the Purchased Assets and
Transferred Subsidiaries is set forth on Schedule 2.5. For the purposes of
all Taxes, Purchaser and SALD agree to report the transactions contemplated
by this Agreement in a manner consistent with the allocations under this
Section 2.5, and that neither of them will take any position inconsistent
with such allocations on any Tax Return, in any refund claim, in any
litigation, or otherwise, without the consent of the other party except as
required by a final "determination" within the meaning of Section 1313 of the
Code or similar concepts under non-U.S. Tax law.
Purchaser shall prepare an allocation schedule of Purchase Price
among the classes of Purchased Assets, along with the first draft of Internal
Revenue Service Form 8594, and any similar form required by any foreign
jurisdiction which is necessitated by the transactions contemplated by this
Agreement with respect to the Purchased Assets, which shall be sent to SALD
within 60 days following agreement between the Parties as to the balance
sheet contained in the Closing Date Financial Statements. Within 30 days
after the receipt of such allocation schedule and Form 8594, SALD shall
propose any changes to such allocation schedule and Form 8594 or shall
indicate its concurrence therewith, which concurrence will not be
unreasonably withheld.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SALD
SALD represents and warrants to Purchaser as follows:
3.1 Corporate Existence.
Each of the Sellers and the Licensees (a) is duly organized and
validly existing and, where applicable, in good standing under the laws of
the jurisdiction of its organization, (b) has the requisite corporate or
similar power and authority to own, lease and operate its properties and
assets, including in the case of the Asset Sellers the properties and assets
included in the Purchased Assets, and to carry on the Business as the same is
now being conducted, and (c) is duly authorized, qualified or licensed to do
business and is in good standing in every jurisdiction wherein, by reason of
the nature of the Business, the same is required, except, in the case of
clause (c), where the failure of the foregoing to be true and correct would
not, individually or in the aggregate, have a material adverse effect on the
results of operations, financial condition, assets, liabilities or business
of the Business, taken as a whole (a "Business Material Adverse Effect").
SALD has previously provided Purchaser true and complete copies, as in effect
on the date of this Agreement, of the certificate of incorporation, bylaws or -6-
similar organizational documents (each of which are in full force and effect)
of each Licensee.
3.2 Corporate Authority.
This Agreement and the Transfer Documents to be executed, delivered
and/or filed in connection herewith (collectively with this Agreement and any
agreements entered into pursuant to Section 5.9, the "Transaction Documents")
by the Sellers and the Licensees and the consummation of the transactions
contemplated hereby and thereby involving such persons have been duly
authorized by the Sellers and the Licensees by all requisite corporate,
shareholder or other action prior to the Closing. SALD has full and complete
right, power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, and each of the Sellers and Licensees has
or will have at, or prior to the Closing, full power and authority to
execute, deliver and/or file the Transaction Documents to which it is a party
and to perform its obligations hereunder or thereunder. This Agreement has
been duly executed and delivered by SALD, and the other Transaction Documents
will be duly executed (assuming due authorization by the Purchaser or the
applicable Designated Purchaser), delivered and/or filed by each of the
Sellers and Licensees party thereto and this Agreement constitutes, and each
of the other Transaction Documents when so executed (assuming due
authorization by the Purchaser or the applicable Designated Purchaser),
delivered and/or filed will constitute, a valid and legally binding
obligation of SALD and/or the applicable Seller or Licensee party thereto,
enforceable against it in accordance with its terms except as enforceability
may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law). Except (a) for required
filings under the HSR Act, European Union merger control and any other
applicable laws or regulations relating to antitrust or competition
(collectively, "Antitrust Regulations") and (b) as set forth in Schedule 3.2,
the execution, delivery and/or filing of this Agreement and the other
Transaction Documents by SALD and each of the Sellers or Licensees party
thereto and the consummation by SALD and each of the Sellers or Licensees of
the transactions contemplated hereby and thereby will not (i) violate or
conflict with any provision of the respective certificate of incorporation or
by-laws or similar organizational documents of any of the Sellers or any
Licensee, (ii) result in any breach or constitute any default (with or
without notice or lapse of time, or both) under, or require any consent or
give rise to a right of termination, cancellation, acceleration or amendment
of any obligation or a loss of a benefit under, or result in the creation of
any restriction, pledge, lien, claim, charge, security interest, option or
other encumbrance of any nature whatsoever (collectively, "Liens") under, any
Contract or any license (other than under any license granted by Purchaser or
its subsidiary, The Polo/Lauren Company, L.P. or by one of the Licensees -7-
pursuant to a license granted by Purchaser or its subsidiary, The Polo/Lauren
Company, L.P.) or permit to which SALD, any of the Sellers, or any Licensee
or any of their respective properties or assets in respect of the Business is
subject or is a party, or (iii) violate, conflict with or result in any
breach under any provision of any judgment, order, decree, statute, law,
ordinance, rule or regulation of any Governmental Authority applicable to
SALD, any of the Sellers, or any Licensee or any of their respective
properties or assets, except, in the case of clauses (ii) and (iii), to the
extent that any such breach, default, termination, cancellation,
acceleration, amendment, loss, Lien, violation, conflict, breach or loss
would not have or would not be reasonably likely to have, individually or in
the aggregate, a Business Material Adverse Effect, or a material adverse
effect on the ability of each of the Sellers, taken as a whole, to consummate
the transactions contemplated hereby (a "Seller Material Adverse Effect"). 3.3 Capitalization.
(a) All of the shares of the Transferred Subsidiary Stock and
shares of the capital stock of the other Transferred Subsidiaries have been
validly issued and, to the extent applicable, as of the Closing Date will
have been fully paid and nonassessable and are owned by SALD and/or one or
more of the Sellers or Licensees free and clear of all Liens (except that
certain of those shares are owned by other Persons for the purpose of
compliance with applicable law as set forth on Schedule 3.3(a) (such shares
collectively, the "Qualifying Shares"). The Transferred Subsidiary Stock
represents all the issued and outstanding capital stock of the Transferred
Subsidiaries listed under "Company Being Sold" on Exhibit A (except for the
Qualifying Shares). Schedule 3.3(a) sets forth as of the date of this
Agreement and as of the Closing Date, for each of the Transferred
Subsidiaries the authorized capital stock, the number of shares of
outstanding capital stock or the nominal amount of the shares, the number of
shares of such outstanding capital stock owned by SALD and its Subsidiaries
and the name of each such owner, including the Qualifying Shares. None of
the shares of Transferred Subsidiary Stock and shares of the capital stock of
the other Transferred Subsidiaries was issued in violation of any preemptive
rights. There are no outstanding options, warrants, calls or other rights of
any kind relating to the sale, transfer, registration, issuance or voting of
any Transferred Subsidiary Stock or shares of the capital stock of the other
Transferred Subsidiaries or any securities convertible into or exercisable or
exchangeable for shares of Transferred Subsidiary Stock or shares of the
capital stock of the other Transferred Subsidiaries and all of the options on
Equity Interests of any of the Transferred Subsidiaries have been terminated.
Upon consummation of the transactions contemplated by this Agreement,
Purchaser or the applicable Designated Purchaser, assuming it shall have
purchased the shares of Transferred Subsidiary Stock in good faith and
without notice of any adverse claim, will own the shares of Transferred
Subsidiary Stock free and clear of all Liens. Louis Dreyfus Investment Co. -8-
Limited and Louis Dreyfus &Co. Limited are not insolvent and will not be
insolvent at the time of or as a result (whether directly or indirectly) of
(i) performing their obligations under this Agreement or (ii) entering into
any other agreement or arrangement, which causes all or any of the
transactions contemplated by this Agreement to be set aside or subject to aLien.
(b) None of the Transferred Subsidiaries has issued any preferred
equity securities to any of the Sellers.
3.4 Governmental Approvals and Consents.
None of SALD, the Sellers or any Licensee is subject to any order,
judgment or decree which would prevent the consummation of the Purchase. No
claim, legal action, suit, arbitration, governmental investigation, action or
other legal or administrative proceeding is pending or, to the knowledge of
SALD, threatened against SALD, any of the Sellers or any Licensee which would
enjoin or delay the consummation of the Purchase. Except as set forth in any
of Schedules 3.4, 3.8 and 3.11, and except for any consents required under
any Antitrust Regulations, no material consent, approval, order or
authorization of, license or permit from, notice to or registration,
declaration or filing with, any United States or foreign, federal, state,
provincial, municipal or local government, court of competent jurisdiction,
administrative agency or commission or other governmental or regulatory
authority or instrumentality ("Governmental Authority"), is required on the
part of SALD or any of the Sellers or any Licensee in connection with the
execution, delivery and/or filing of this Agreement or any of the other
Transaction Documents or the consummation of the transactions contemplated
hereby and thereby, except for such consents, approvals, orders or
authorizations, licenses or permits, filings or notices which have been
obtained and remain in full force and effect. Notwithstanding any provision
in this Agreement to the contrary, the inclusion of Schedule 3.4 shall not be
deemed to constitute (i) any acknowledgment by SALD that it is the sole
obligation of SALD to obtain or undertake to obtain or make all or any of the
government approvals, consents, orders, authorizations, filings or notices
which may be required in connection with the transactions contemplated by
this Agreement (including, without limitation, those identified on Schedule
3.4) and (ii) a waiver by SALD of Purchaser's obligation under Section 4.3
also to obtain or undertake all or any of the government approvals, consents,
orders, authorizations, filings or notices which may be required in
connection with the transactions contemplated by this Agreement and under
Sections 5.3 and 10.3 to cooperate with SALD in procuring all of the
Governmental Authority Consents. -9-
3.5 Financial Statements.
(a) Schedule 3.5 contains a copy of the audited combined balance
sheet of the Business as of December 31, 1998 and the related combined
statement of income for the year then ended, together with the accompanying
footnotes (the "1998 Financial Statements"). The 1998 Financial Statements
(i) were prepared in accordance with the books of account and other financial
records of the Business and (ii) present fairly in all material respects the
combined financial position and the combined results of operations of the
Business as of such dates and for such periods in accordance with GAAP as set
forth in the auditor's opinion and as described in the notes to the 1998
Financial Statements.
(b) Schedule 3.5 also contains a copy of the unaudited combined
balance sheet of the Business as of June 30, 1999 and the related combined
statement of income for the six months ended June 30, 1999 (such date
hereinafter, the "Balance Sheet Date" and such financial statements
hereinafter, the "June Financial Statements"). The June Financial Statements
(i) were prepared in accordance with the books of account and other financial
records of the Business, (ii) present fairly in all material respects the
combined financial position and the combined results of operations of the
Business as of such dates and for such interim periods in accordance with
GAAP and prepared on a basis consistent with the 1998 Financial Statements
and (iii) have been prepared in accordance with GAAP, except that (i) normal
and recurring adjustments that were not or are not expected to be in the
aggregate material in amount have not been made and (ii) the information
required to be included in the footnotes required by GAAP is not included.
3.6 Absence of Certain Changes.
Except as set forth in Schedule 3.6 or as otherwise permitted
pursuant to this Agreement, since the Balance Sheet Date, (i) the Business
has been conducted in all material respects in the ordinary course and in
substantially the same manner as previously conducted and (ii) there has been
no Seller Material Adverse Effect. Except as set forth in Schedule 3.6,
since the Balance Sheet Date, none of the Licensees in respect of the
Business has taken any of the actions referred to in Section 5.1.
3.7 Contracts; Affiliate Transactions.
(a) Except as arise under contracts which Purchaser or any of its
Affiliates is a party to or has countersigned its acceptance and approval and
except as otherwise disclosed in Schedules 3.7(c) (Leased Real Property),
3.10(a) (Intellectual Property Rights), 3.10(b) (Licenses) (the "Covered
Schedules") and Schedules 3.7(a)(1), (a)(2) and (b), there are no
commitments, contracts or groups of related contracts, indentures or
agreements to which any Licensee in respect of the Business is a party or by -10-
which any Licensee is bound that relates to the Business (hereinafter
"Contracts") that (i) involve commitments by any Licensee for terms of 12
months or longer and that involve, or are reasonably likely to involve,
payment by any Licensee or Asset Seller or to any Licensee in each case of
more than US$200,000 in the aggregate in the case of any individual Contract
or group of related Contracts, (ii) involve obligations of any Licensee for
borrowed money or to maintain deposits or advances of any kind or evidenced
by bonds, debentures, notes or similar instruments or guarantees or capital
lease obligations or any other obligations upon which interest charges are
customarily paid, other than those entered into in the ordinary course of
business or those that involve commitments to lend not in excess of
US$200,000, (iii) involve any non-compete agreement that will be applicable
to any Licensee following the Closing, (iv) constitute material joint venture
or partnership agreements or (v) constitute equipment or machinery financial
leases in respect of equipment or machinery with an original asset value in
excess of US$200,000. Each of the Contracts (including each of the Contracts
listed on the Covered Schedules) is valid and binding on the respective
Licensee that is a party thereto and, to the best of SALD's knowledge and
belief, on each other party thereto, and is in full force and effect
according to its terms, except where the failure to be in full force and
effect would not, individually or in the aggregate, have a Business Material
Adverse Effect, and the Licensees that are parties thereto are not in default
or breach under any such Contract, except where such default or breach would
not, individually or in the aggregate, have a Business Material Adverse
Effect. The consummation of the transactions contemplated by this Agreement
shall not, by itself, cause any Contract to fail to continue in full force
and effect without penalty or other adverse consequence.
(b) Except as disclosed in Schedule 3.7(b), there are no material
contracts, commitments, agreements, arrangements or other transactions to
which any Licensee is a party or by which any Licensee is bound which relate
to the Business with any current or former officer, director, shareholder,
employee, consultant, agent, other representative or any other Affiliate of
any Licensee.
(c) The Licensees do not own any real property or interests (other
than as lessees) in real property in respect of the Business. Schedule
3.7(c)(1) sets forth a list of all material leases for any real property or
interests in real property leased by any Licensee in respect of the Business.
Schedule 3.7(c)(2) identifies the location of all retail stores operated by
the Licensees in the Business. 3.8 Litigation.
Except as set forth in any of Schedules 3.4, 3.8 and 3.11, there
are no actions, suits, proceedings or investigations pending or, to the
knowledge of SALD, threatened in law or in equity, or before any Governmental -11-
Authority, against any Licensee. None of the matters set forth in any of
Schedules 3.4, 3.8 and 3.11 is reasonably likely to affect the legality,
validity or enforceability of this Agreement or the consummation of the
transactions contemplated hereby in any material respect. 3.9 Insurance.
The Licensees maintain with insurers that SALD believes, reasonably
and in good faith after due investigation, are financially sound and
reputable insurance with respect to the Business and properties against loss
or damage of the kinds that SALD believes, reasonably and in good faith after
due investigation, is customarily carried or maintained under similar
circumstances by entities of established reputation engaged in similar
businesses in the jurisdictions where the respective Licensees conduct their
business. To the best of SALD's knowledge and belief, such policies are
legal, valid, binding, enforceable in accordance with their terms and in full
force and effect; no Licensee is in breach or default thereunder; and no
event has occurred which, with notice or the lapse of time, would constitute
such a breach or default or permit termination or modification under any such
policy other than to the extent any such policy is due to expire in
accordance with its terms. Some of the insurance carried by the Licensees is
either provided (i) under group policies that cover SALD and its Subsidiaries
or (ii) under policies whose terms and conditions (including, but not limited
to, the premiums and deductibles) are a result of the Licensees' affiliation
with SALD and its Subsidiaries. Accordingly, effective as of the Closing
Date the insurance coverage described above in clause (i) will terminate and
the coverage described above in clause (ii) may change, terminate, or not be
replaceable and SALD will have no obligation to obtain insurance coverage
that continues after the Closing.
3.10 Intellectual Property Rights.
(a) Except with respect to Section 3.10(a)(i) and (ii), for the
Intellectual Property rights granted by Purchaser or Purchaser's subsidiary,
The Polo/Lauren Company, L.P., and with respect to Section 3.10(a)(iii), for
contracts which Purchaser or any of its Affiliates is a party to or has
countersigned its acceptance and approval, Schedule 3.10(a) contains (i) a
list of all the patents, copyright registrations, mask work registrations and
applications therefor included in the Purchased Assets, (ii) a list of all of
the trademark and service mark registrations and applications therefor owned
by the Licensees and (iii) a list of all Contracts involving licenses granted
by the Sellers or any of their Subsidiaries to any third party with respect
to any item of Intellectual Property included in the Purchased Assets or
owned by a Licensee, all as of the date of this Agreement.
(b) Schedule 3.10(b) contains a list of all Contracts that grant a
license for the use of Intellectual Property (other than for the use of -12-
software) granted to any Licensee in respect of the Business, all as of the
date of this Agreement.
(c) Except for the licensed use of computer software, the
Intellectual Property owned by the Licensees in respect of the Business or
included in the Purchased Assets or the Contracts listed in Schedule 3.10(b)
comprise all of the Intellectual Property rights owned by or licensed to
SALD, the Licensees or their Subsidiaries necessary for the conduct and
operation of the Business in all material respects as of the date hereof.
(d) All computer software and, as applicable, machinery and
equipment material to the Business, to the best knowledge and belief of SALD,
is either: (i) Year 2000 Compliant or (ii) timely expected to be Year 2000
Compliant, as commercially required.
3.11 Tax Matters.
Except as set forth in Schedule 3.11:
(a) Each of the Licensees in respect of the Business and each of
the Transferred Subsidiaries has duly and timely filed (after giving effect
to any valid extension of time in which to make such filings) or been
included in all Tax Returns that it, or the relevant Entity Seller or
Affiliate, as the case may be, is required to have filed and all such Tax
Returns are true, correct and complete in all material respects.
(b) All amounts required to be shown on such Tax Returns as due
and Taxes otherwise due from the Licensees or Transferred Subsidiaries either
directly, or as part of the consolidated tax return of another taxpayer, have
been fully and timely paid.
(c) No waivers of statute of limitations have been given or
requested with respect to the Tax Returns covering any Licensee or
Transferred Subsidiary with respect to any Taxes payable by it.
(d) There are no liens for Taxes upon any assets of any of the
Licensees, the Transferred Subsidiaries or the Purchased Assets other than
with respect to Taxes not yet due and payable.
(e) Each of the Licensees and Transferred Subsidiaries has, or has
caused to be, duly and timely reported and withheld from or on behalf of its
respective employees, all income, social security, unemployment insurance and
other employment taxes or obligations of any kind whatsoever (including,
without limitation, U.K. national insurance contributions and PAYE
obligations) and has either paid over to the appropriate taxing authority, or
set aside, all material amounts required to be collected or withheld. No
Transferred Subsidiary or Licensee has received any notice that it is or has -13-
been in violation (or with notice will be in violation) of any applicable law
relating to the payment or withholding of Taxes.
(f) No deficiency for any Tax has been assessed with respect to
any of the Licensees or the Transferred Subsidiaries which has not been paid
in full. No adjustment relating to any Tax Return described in Section
3.11(a) hereof has been proposed formally by any taxing authority. There are
no requests for information currently outstanding that could affect the Taxes
of any Licensee or Transferred Subsidiary. There are no pending audits,
actions or proceedings with respect to Taxes of any of the Licensees nor have
any of the Licensees or the Transferred Subsidiaries, received any notice
from any taxing authority that it intends to conduct such an audit, action or
proceeding. There are no proposed reassessments of any real property owned
by any Licensee. No power of attorney that is currently in force has been
granted with respect to any matter relating to Taxes that could affect any
Licensee or Transferred Subsidiary.
(g) No consent under Section 341(f) of the Code has been filed
with respect to any of the Transferred Subsidiaries.
(h) No closing agreement pursuant to Section 7121 of the Code (or
any predecessor provision) or any similar provision of any state, local or
non-U.S. law that could affect the Taxes of any of the Transferred
Subsidiaries or Licensees for periods ending after the Closing Date has been
entered into by or with respect to the Transferred Subsidiaries or Licensees.
(i) No Transferred Subsidiary or Licensee has either agreed to or
is required to make any adjustment with respect to taxable periods ending
after the Closing Date pursuant to Section 481(a) of the Code (or any
predecessor provision) by reason of any change in any accounting method of
such Transferred Subsidiary or Licensee, there is no application pending with
any taxing authority requesting permission for any such change in any
accounting method of such Transferred Subsidiary or Licensee and the Internal
Revenue Service ("IRS") has not proposed any such adjustment or change in
accounting method.
(j) There is no contract, agreement, plan or arrangement covering
any person that, individually or collectively, could give rise to the payment
by any Transferred Subsidiary or Licensee of any amount that would not be
deductible by such Transferred Subsidiary or Licensee during any period
commencing on or after the Closing Date by reason of Section 280G of the Code
or any similar or analogous provision of state, local or non-U.S. law.
(k) Each Licensee has timely filed or caused to be filed all Tax
Returns required to be filed with respect to it and has paid or provided for
all deficiencies or other assessments of Tax owed by it for all tax periods
ending on or prior to the Closing Date which if unpaid would result in a Lien -14-
upon or in respect of any of the Purchased Assets. No state of facts exists
or has existed with respect to any of the Sellers that would constitute
grounds for the assessment against the Designated Purchasers, whether by
reason of transferee liability or otherwise, of any liability for any Tax,
whether or not measured in whole or in part by net income, attributable to
any period ending on or before the Closing Date relating to the Sellers'
income, assets and operations, including the Purchased Assets, or arising out
of the transactions contemplated pursuant to this Agreement.
(l) No Transferred Subsidiary or Licensee is a "real estate
company" under Article 726 2 degrees of the French tax code.
(m) Each Licensee or Transferred Subsidiary has maintained
sufficient records to enable it to calculate any present or, to the extent
reasonably possible, future Tax liability, including any entitlement toRelief.
(n) The representations set forth in this Section 3.11(n) apply
only with respect to the Transferred Subsidiaries and Licensees located in
the United Kingdom (each a "U.K. Company").
(i) To the extent that any U.K. Company has acquired any
asset other than from an unrelated third party, such acquisition was
effected through an arm's length transaction.
(ii) No U.K. Company has incurred or will incur any Tax
liability as a result of any other person's unsatisfied liability for
U.K. capital gains tax or corporation tax on chargeable gains.
(iii) Each U.K. Company has at all times since its formation
been a resident of the United Kingdom and has not at any time been a
resident of any non-U.K. jurisdiction.
(iv) Each U.K. Company: (x) is a registered and taxable person
for purposes of the VATA and (y) is entitled under the VATA to credit
for all of its input tax.
(v) Each U.K. Company has all of the documentation necessary
to the establishment or enforcement of title to any asset which, in the
United Kingdom or in any other jurisdiction, attracts stamp duty, and as
of the Closing all such documentation will have been stamped with a
particular stamp denoting that no duty is chargeable or has been stamped
by the relevant Taxing Authority. No documentation located outside the
United Kingdom would attract stamp duty if such document was brought
into the United Kingdom. -15-
(o) If Poloco Limited, Polo Factory Outlet (UK) Limited or Polo
Jeans Company (Europe) Ltd. is transferred to an Entity Seller that is a U.S.
entity, then prior to the Closing Date, a "check the box" election pursuant
to Treas. Reg. Section 301.7701-3 shall be made to classify Poloco Limited,
Polo Factory Outlet (UK) Limited or Polo Jeans Company (Europe) Ltd., as
applicable, as a single owner entity that is disregarded for U.S. federal
income tax purposes.
3.12 Employee Benefits. (a) Definitions.
(i) "Labor Code" shall mean the French Labor Code.
(ii) "Professional Employees' Collective Agreement" shall mean
an agreement governed by Article L.132-11 et seq. of the Labor Code.
(iii) "Company Employees' Collective Agreement" shall mean an
agreement governed by Article L.132-18 et seq. of the Labor Code.
(iv) "Employee Benefit Plan" shall mean any oral or written
express or implied employee benefit or welfare plan or policy
including, without limitation, medical, disability, life
insurance, pension, retirement, profit-sharing, stock option,
savings, compensation policy, bonus plan, golden parachute,
severance or redundancy policy, vacation, sick leave, or other
perquisite under which any Transferred Subsidiary has current
or contingent liability with respect to any of its current or
former directors, officers, employees, agents or consultants
or which is otherwise maintained or contributed to for the
benefit of current or former directors, officers, employees,
agents or consultants in respect of services provided to any
company being sold or with respect to the Business for which
any Transferred Subsidiary would have any liability.
(b) Schedule 3.12 contains a complete list of all Employee Benefit Plans.
(c) Each Employee Benefit Plan set forth on Schedule 3.12 has been
administered in accordance with its terms and each Transferred Subsidiary and
its respective Affiliates has met its obligations with respect to such
Employee Benefit Plan and has made all required contributions or payments
thereto. Each Transferred Subsidiary and all Employee Benefit Plans are in
compliance with (i) all applicable provisions of the Labor Code and other
applicable law, the regulations, directives and orders thereunder (including -16-
any special provisions relating to qualified plans where such Employee
Benefit Plan was intended to so qualify) and has been maintained in good
standing with any regulatory authorities, (ii) all Professional Employees'
Collective Agreements applicable to any employees of any Transferred
Subsidiary and (iii) all Company Employees' Collective Agreements applicable
to any employees of any Transferred Subsidiary.
(d) The Transferred Subsidiaries have furnished to Purchaser
copies of each written Employee Benefit Plan set forth on Schedule 3.12 and
disclosed the contents of any oral or implied Employee Benefits Plan set
forth on Schedule 3.12 to the Purchaser. There has been no amendment to,
written interpretation of or announcement (whether or not written) by a
Transferred Subsidiary or any of its Affiliates relating to, or changing
employee participation or coverage under, any Employee Benefit Plan that
would increase materially the expense of maintaining such Employee Benefit
Plan above the level of expense incurred in respect thereof for the most
recent fiscal year ended prior to the date hereof. According to the
actuarial assumptions and valuations most recently used for the purpose of
funding each Employee Benefit Plan (or, if the same has no such assumptions
and valuations or is unfunded, according to the actuarial assumptions and
valuations in use by the Pension Benefit Guaranty Corporation ("PBGC") on
the date hereof), as of the date hereof the total amount or value of the
funds available under such Employee Benefit Plan to pay benefits accrued
thereunder or segregated in respect of such accrued benefits, together with
any reserve or accrual with respect thereto, exceeded the present value of
all benefits (actual or contingent) accrued as of the date hereof for all
participants and past participants therein in respect of which a Transferred
Subsidiary or any of its Affiliates has or would have any obligation after
the Closing. From and after the Closing Date, Purchaser and its Affiliates
will get the full benefit of any such funds, accruals or reserves.
(e) No current or former director, officer, employee, agent or
consultant of any Licensee will become entitled to any bonus, retirement,
severance, job security or other benefit or enhanced benefit (including
acceleration of vesting or exercise of an incentive award) from any
Transferred Subsidiary as a result of the transactions contemplated hereby.
(f) No Employee Benefit Plan set forth on Schedule 3.12 is subject
to the Employee Retirement Income Security Act of 1974, as amended, or the
Internal Revenue Code of 1986, as amended.
3.13 Labor Matters.
Except as set forth on Schedule 3.13, no Licensee is presently a
party to any collective bargaining agreement, subject to a legal duty to
bargain with any labor organization on behalf of employees or the object of
any attempt to organize employees for collective bargaining or similar -17-
purposes or presently operating under an expired collective bargaining
agreement. As of the date of this Agreement, no Licensee is or has been a
party to or subject to any pending strike, work stoppage, organizing attempt,
picketing, boycott or similar activity. The compliance by Poloco S.A. with
French laws relating to employment is being audited by the French workauthorities.
3.14 Environmental Matters.
Except (a) as disclosed in Schedule 3.14 or (b) as would not,
individually or in the aggregate, be reasonably likely to have a Business
Material Adverse Effect, to the best of SALD's knowledge and belief: (i) the
Licensees are in compliance in all material respects with all applicable
Environmental Laws and (ii) the Licensees are in material compliance with and
possess all applicable Environmental Permits required under such
Environmental Laws to operate the Business as it is currently operated, and
as of the date of this Agreement there are no proceedings pending or, to the
knowledge of SALD, threatened to revoke, rescind or alter any such
Environmental Permits. Notwithstanding the generality of any other
representations and warranties in this Agreement, this Section 3.14 shall be
deemed to contain the only representations and warranties in this Agreement
with respect to matters relating to Environmental Laws.
3.15 Transferred Assets and the Business; Dissolved and Dormant Subsidiaries.
(a) The transfer of the Transferred Subsidiary Stock and the
Purchased Assets will constitute a conveyance of all the assets, properties
and rights used by the Licensees to conduct the Business in all material
respects as currently conducted. The Licensees are the only direct and
indirect subsidiaries of the Entity Sellers which conduct the Business.
(b) As of the Closing Date, each of LD Retail Management Greece
S.A., a corporation organized under the laws of Greece, LDRM Ireland Ltd., a
corporation organized under the laws of Ireland, and Netherlands PRL Retail
Management B.V., a corporation organized under the laws of the Netherlands,
will have been dissolved, except to the extent that certain ministerial
actions required to complete the dissolution of LD Retail Management Greece
S.A. have not been obtained due to a delay caused by factors that are
reasonably beyond the control of the Sellers and the Transferred
Subsidiaries; and the Licensees will have no outstanding liabilities or
obligations of any nature or kind whatsoever as a result of such dissolution.
(c) Silvestro Inc. is a corporation organized under the laws of
the Virgin Islands, the exclusive management of which has been under the
control of an affiliate of Purchaser, and accordingly Seller makes no -18-
representations or warranties regarding the status of Silvestro Inc. or the
existence of any outstanding liabilities or obligations.
3.16 Undisclosed Liabilities.
To the best of SALD's knowledge and belief, the Licensees do not
have any liabilities or obligations of any nature or kind whatsoever (whether
absolute, accrued, contingent or otherwise), other than (i) liabilities that
are reserved against or reflected in the balance sheet included in the
Financial Statements (or described in the notes thereto) in a manner
consistent with prior practices, (ii) liabilities incurred in the ordinary
course of business since the Balance Sheet Date or (iii) other liabilities
that would not, in the aggregate, be material.
3.17 Receivables.
All accounts and notes receivable reflected on the 1998 Financial
Statements, and all accounts and notes receivable arising subsequent to the
1998 Financial Statements, (i) have arisen in the ordinary course of business
of the Licensees and (ii) subject only to a reserve for bad debts computed in
a manner consistent with past practice and reasonably estimated to reflect
the probable results of collection, have been collected, are collectible or
will be collectible, assuming performance by Purchaser in accordance with
Section 5.14(c), in the ordinary course of business of the Licensees in the
aggregate recorded amounts thereof in accordance with their terms.
3.18 Inventories.
As of the Closing Date, the inventory of the Licensees is in good
and merchantable condition, and suitable and usable or salable in the
ordinary course of business for the purposes for which intended. Neither the
Licensees nor any of the Sellers knows of any adverse condition affecting the
supply of materials available to any of the Licensees.
3.19 Finders; Brokers.
None of the Sellers or any of the Licensees has employed any finder
or broker in connection with the Purchase who would have a valid claim for a
fee or commission from Purchaser or any of the Licensees in connection with
the sale and purchase provided for in this Agreement. -19-
ARTICLE IV
REPRESENTATIONS OF PURCHASER
Purchaser represents and warrants to SALD as follows:
4.1 Corporate Existence.
Purchaser and each of the Designated Purchasers is duly organized
and validly existing and, where applicable, in good standing, under the laws
of the jurisdiction of its organization and has the requisite power and
authority to execute and deliver this Agreement (in the case of Purchaser)
and the other Transaction Documents to which it is a party and to perform its
obligations hereunder and thereunder.
4.2 Corporate Authority.
This Agreement and the Transfer Documents to which Purchaser and/or
any Designated Purchaser is a party and the consummation of the transactions
contemplated hereby and thereby involving such persons have been or, in the
case of the other Transaction Documents, prior to the Closing, will be duly
authorized by the Purchaser and such Designated Purchaser, by all requisite
corporate, shareholder, partnership or other action prior to the Closing, and
Purchaser and each Designated Purchaser has or at or prior to the Closing
will have full and complete right, power and authority to execute, deliver
and/or file the Transaction Documents to which it is a party and to perform
its obligations hereunder or thereunder. This Agreement has been duly
executed and delivered by Purchaser, and the other Transaction Documents will
be duly executed, delivered and/or filed by Purchaser and any Designated
Purchaser party thereto, and (assuming due authorization by the applicable
Seller) this
