EXHIBIT 2.1
-----------
SHARE PURCHASE AND TRANSFER OF ASSETS AND LIABILITIES
AGREEMENT
dated as of December 22, 2003
by and between
SOFIDIV SAS, a company duly incorporated
under French law with its registered
office at 65, Avenue Edouard Vaillant,
92100 Boulogne, France, duly represented
for the purpose of this Agreement by Mr.
Patrick Houel,
acting both in its own name and for its own
account as well as on behalf and for
the account of Seller's Affiliates (as
defined below),
(hereinafter referred to as "SELLER")
on the one hand,
and
CONCORD WATCH COMPANY SA, a company duly
incorporated under Swiss law with its
registered office at 35, Nidaugasse, 2502
Bienne, Switzerland, duly represented
for the purpose of this Agreement by
Richard Cote and Kurt Burki,
acting both in its own name and for its own
account as well as on behalf and for
the account of Purchaser's Affiliates (as
defined below),
(hereinafter referred to as
"PURCHASER")
on the other hand,
(hereinafter referred to collectively as
the "PARTIES" and individually as a
"PARTY")
<PAGE>
PREAMBLE
WHEREAS, Seller holds, inter alia, the
entire share-capital of Ebel SA, a Swiss
company duly registered in La
Chaux-de-Fonds, Switzerland (the "COMPANY")
engaged in the development, the
manufacturing, the marketing and the sale of
watches and other products under the brand
name EBEL (the "BRAND");
WHEREAS, the Company holds, among others,
(i) minority participations in the
companies indicated in Schedule 0.2/1 (the
"PARTICIPATIONS") and (ii) the entire
share capital of certain legal entities
listed in Schedule 0.2/2 (THE
"SUBSIDIARIES");
WHEREAS, Seller intends to sell and
transfer and Purchaser intends to purchase
and acquire the Shares (as defined below),
subject to the terms set forth
hereinafter;
WHEREAS, legal entities owned directly or
indirectly by, or under common control
of or with, Seller as listed in Schedule
0.4 ("SELLER'S AFFILIATES") carry out
all marketing, selling and after sale
activities and all ancillary activities
thereto relating to the Brand in the USA,
the United Kingdom, Spain, France,
Germany, Singapore, Japan, Hong Kong,
Malaysia, Taiwan (such activities being
referred to as the "BUSINESS"), it being
specified that Seller's Affiliates also
conduct activities relating to other brands
and businesses which are not covered
by this Agreement;
WHEREAS, Seller's Affiliates own
inventories and fixed assets, hold trade
receivables and assume trade payables and
other liabilities directly connected
to the Business;
WHEREAS, in addition and together with the
sale and transfer of the Shares,
Seller intends to cause Seller's Affiliates
to sell and transfer, and Purchaser
intends to purchase and assume, and cause
Purchaser's Affiliates to assume,
certain inventories, fixed assets, trade
receivables and trade payables and
other liabilities directly relating to the
Business on a going-concern basis,
subject to the terms set forth
hereinafter;
WHEREAS, all other assets and liabilities,
inventories, fixed assets, trade
receivables and trade payables of Seller's
Affiliates not exclusively relating
to the Business, are not intended to be
transferred and shall not be transferred
to Purchaser nor to Purchaser's Affiliates
hereunder;
WHEREAS, in connection with such sale and
transfer, Purchaser and/or, as the
case may be, Purchaser's Affiliates will
either by operation of law or on a
voluntary basis hire certain employees
previously involved in the Business;
2 / 54
<PAGE>
NOW, THEREFORE, THE PARTIES AGREE AS
FOLLOWS:
ARTICLE 1
DEFINITIONS
The terms defined in this Article shall
have the following meaning for all
purposes of this Agreement:
"ACCOUNTING POLICIES" shall have the
meaning set forth in the definition of
Accounting Principles;
"ACCOUNTING PRINCIPLES" shall mean French
GAAP and the accounting policies and
methods, in all material respects in
accordance with French GAAP, currently and
from and after the year ended December 31,
2002 consistently applied on an
ongoing concern basis for the preparation
of the consolidated accounts of the
Company and of the accounts of Seller's
Affiliates, such accounting policies and
methods being attached as Schedule 1.3
hereto (the "ACCOUNTING POLICIES"); for
the purposes of this Agreement, in case of
discrepancies, the Accounting
Policies shall prevail over French GAAP and
both shall prevail over consistency;
"ADEQUATELY DISCLOSED", "ADEQUATE
DISCLOSURE" shall, in the given context, mean
that all relevant information and/or, as
the case may be, all relevant documents
disclosed by the Seller sufficiently set
forth the relevant facts in a way that
a diligent and knowledgeable third party,
acting in good faith and reading the
information and/or document in the same
context and for the same purpose as the
Purchaser, would be able to discern and
understand the essential facts;
"ADDITIONAL PERIOD" shall have the meaning
set forth in Article 14.2 (III);
"ADJUSTMENT" shall have the meaning set
forth in Article 4.1;
"AFFILIATE" shall mean with respect to any
Person any other Person, directly or
indirectly controlling, controlled by, or
under common control with, such
Person;
"AGREEMENT" shall mean this Share Purchase
and Transfer of Assets and
Liabilities Agreement with all its
Schedules;
"AUDITED STATUTORY ACCOUNTS" shall mean the
audited balance sheets and the
profit and loss statements of each of the
Group Companies as of December 31,
2002 as attached in Schedule 1.9
hereto;
3 / 54
<PAGE>
"BRAND" shall have the meaning set forth in
the Preamble;
"BRAND SPECIFIC FIXED ASSETS" shall mean
the transferable fixed assets relating
exclusively to, and used exclusively in,
the Business;
"BUSINESS" shall have the meaning set forth
in the Preamble;
"BUSINESS ASSETS" shall have the meaning
set forth in Article 3.1 provided,
however, that as for the Business Assets
situated in Spain and Malaysia this
term shall include only Business
Inventory;
"BUSINESS CONTRACTS" shall mean all
agreements, options, contracts, distributor
agreements, sale representative agreements,
leases, instruments, purchase
orders, sale orders and commitments
(including outstanding bids) relating
exclusively to, and used exclusively in,
the Business provided, however, that as
for the Business in Spain and Malaysia,
this term shall not include any Business
Contracts;
"BUSINESS DAY" shall mean any day on which
banks are open for business in
Geneva, Switzerland, in New York, USA and
in Paris, France;
"BUSINESS LIABILITIES" shall have the
meaning set forth under Article 3.2
provided, however, that as for the Business
in Spain and Malaysia, this term
shall not include any Business
Liabilities;
"BUSINESS INVENTORY" shall mean all of the
watches, semi-finished watches,
components for watches, packaging,
advertising and promotion materials and all
other products relating to the sale of
watches, including without limitation,
gold and precious stones, relating
exclusively to, and used exclusively in, or
for, the Business and all Ebel watches and
component parts for Ebel watches in
the possession of any retail store owned or
operated by any Seller's Affiliate;
"BUSINESS OTHER OPERATING ASSETS" shall
mean all of the transferable operating
assets relating exclusively to, and used
exclusively in, or for, the Business
provided, however, that as for the Business
in Spain and Malaysia, this term
shall not include any Business Other
Operating Assets;
"BUSINESS OTHER OPERATING LIABILITIES"
shall mean all of the transferable
operating liabilities relating exclusively
to the Business, excluding any third
party debt for borrowed money provided,
however, that as for the Business in
Spain and Malaysia, this term shall not
include any Business Other Operating
Liabilities;
4 / 54
<PAGE>
"BUSINESS TRADE RECEIVABLES" shall mean all
rights and claims vis-a-vis any
debtor relating exclusively to, and used
exclusively in or for, the Business
provided, however, that as for the Business
in Spain and Malaysia, this term
shall not include any Business Trade
Receivables;
"CAP" shall have the meaning set forth in
Article 14.8 (II);
"CAPTION" shall mean any accounting line
contained in Schedule 1.68;
"CARVED OUT ENTITIES" shall have the
meaning set forth in Article 6.1;
"CLOSING" shall mean the consummation of
the transactions described in Articles
2 and 3 below in accordance with Article 7
below;
"CLOSING DATE" shall mean March 1, 2004 or
any other date as may be agreed upon
between the Parties;
"CLOSING TRANSFERRED BUSINESS ACCOUNT"
shall mean the document showing the
Transferred Business Net Assets of the
Transferred Business as at February 29,
2004 midnight, as agreed upon by the
Parties or, as the case may be, as
determined by the Referee according to the
terms and conditions set forth in
Article 9;
"COMPANIES TRADE INVENTORY" shall mean all
of the watches, semi-finished
watches, components for watches, packaging,
advertising and promotion materials
and all other products relating to the sale
of watches, including without
limitation, gold and precious stones owned
by any of the Group Companies;
"COMPANIES TRADE RECEIVABLES" shall mean
all rights to receive trade payments
from any debtor, including, but not limited
to, credits, accounts receivable,
claims in relation to principal, accrued
and unpaid interest (including default
interest, if any) and related guarantees as
well as any other amount due by any
debtor to any of the Group Companies;
"COMPANY" shall have the meaning set forth
in the Preamble;
"CONFIDENTIAL INFORMATION" shall have the
meaning set forth in Article 18.1;
"CONTROLLING", "CONTROLLED" and under
"COMMON CONTROL" means the ownership,
directly or indirectly, of more than 50 %
(fifty percent) of the voting shares
of such entity or the power to direct the
management or policies of such entity,
whether by operation of law, by contract or
otherwise;
5 / 54
<PAGE>
"DEDICATED EMPLOYEES" shall have the
meaning set forth in Article 16.1;
"DISCLOSED DOCUMENTS" shall mean all the
documents Adequately Disclosed to
Purchaser in the context of the due
diligence carried on by Purchaser prior to
the date of this Agreement as listed in
Schedule 1.29;
"EXPIRATION DATE" shall have the meaning
set forth in Article 14.1;
"FINAL PURCHASE PRICE" shall have the
meaning set forth in Article 10.3 below;
"GERMAN BUSINESS" shall mean that part of
the Business situated in Germany and
to be spun off to German Newco;
"GERMAN CLOSING" shall mean a closing to
take place at the earliest possible,
but not later than on March 31, 2004 or, if
not practicable, such other date as
may be agreed to by the Parties, with
respect to the German Newco in accordance
with a closing memorandum to be agreed upon
by the Parties;
"GERMAN NEWCO" shall mean a company (i) to
be established or alternatively to be
purchased as an off the shelf company
(Vorratsgesellschaft) by Seller into which
the German Business will be transferred by
way of restructuring under the German
Act on the Transformation of Companies, and
(ii) to be sold to Purchaser at the
German Closing;
"GLOBAL BUSINESS" shall mean the entirety
of (i) the Group Companies, and (ii)
the Carved Out Entities, and (iii) the
Business;
"GLOBAL FIXED ASSETS" shall mean the net
book value determined according to the
Accounting Principles of (i) all assets
referred to under the Accounting
Principles as properties, plants and
equipments of all the Group Companies, plus
(ii) the Brand Specific Fixed Assets;
"GROUP COMPANIES" shall mean the Company
and the Subsidiaries and "GROUP
COMPANY" shall mean any one of them
individually;
"INFORMATION TECHNOLOGY" shall mean
technology that is used in carrying out
information activities, covering any form
of information, either by the Group
Companies or by the Business inasmuch as it
relates exclusively to it. It
includes, but is not limited to, software,
firmware and applications;
6 / 54
<PAGE>
"INTELLECTUAL PROPERTY RIGHTS" shall mean
all trade or service marks, trade or
service mark registrations and
applications, trade names, logos, domain names,
designs and design applications, patents
and patent applications, utility models
and utility model applications copyrights,
copyright registrations, rights in
databases, licenses, know-how, trade
secrets, product formulae, product
formulations, manufacturing processes and
procedures, products, records of
inventions, test information, drawings,
diagrams, research and development files
and operating manuals, provided that this
term shall not include any Information
Technology;
"LA PAIX" shall mean SA de l'Immeuble rue
de la Paix 101, La Chaux-de-Fonds,
Switzerland;
"LIEN" shall mean any lien, charge,
encumbrance, claim or other security
interest and any adverse claim whatsoever,
including but not limited to
interests arising through options,
mortgages, indentures, pledges, security
agreements or other agreements or
obligations, whether written or oral;
"LOSS" shall mean all damages, losses,
liabilities, costs and expenses
(including reasonable attorney fees) which
a Party may suffer or incur in
connection with any of the representations
and warranties set forth in Articles
12 and 13;
"LVMH" shall mean LVMH Moet Hennessy Louis
Vuitton, 22 avenue Montaigne, 75008
Paris, France;
"LVMH SINGAPORE" shall mean LVMH Watch and
Jewellery Singapore PTE LTD;
"MAIFOS SA" shall mean Maifos, 53 rue
Sainte Anne, 75002 Paris, France, a French
societe anonyme registered with the Paris
Registry of Commerce and Companies
under number B348638933;
"MORTGAGE" shall mean any and all of the
mortgages on the property Hardhof,
Hardstrasse 52, 4052 Basel, owned by the
Company;
"MUROS HOLDING" shall mean Muros Holding
BV, Teleportboulevard 140, 1043 EJ
Amsterdam, The Netherlands;
"PARTICIPATIONS" shall have the meaning set
forth in the Preamble;
"PERSON" shall mean any individual,
corporation, partnership, limited liability
company, joint venture, trust or
unincorporated organization;
7 / 54
<PAGE>
"PROFORMA CLOSING TRANSFERRED BUSINESS
ACCOUNT" shall mean the Proposed Closing
Transferred Business Account, for
illustration purposes calculated as of
December 31, 2003;
"PROPOSED CLOSING TRANSFERRED BUSINESS
ACCOUNT" shall mean the document showing
the Transferred Business Net Assets as at
February 29, 2004 to be prepared by
Seller and submitted to Purchaser in
compliance with the provisions of Article
9;
"PURCHASE PRICE" shall have the meaning set
forth in Article 4.1;
"PURCHASER'S AFFILIATES" shall mean those
Affiliates of Purchaser listed in
Schedule 1.56 and any other Affiliate of
Purchaser formed prior to Closing for
the purpose of acquiring any part or all of
the Business;
"PURCHASER'S KNOWLEDGE" shall mean actual
knowledge by any of Messrs. Efraim
Grinberg, Richard Cote, Kurt Burki or
Timothy Michno;
"REFEREE" shall have the meaning set forth
in Article 9.6 (C);
"SCHEDULES" shall be the schedules attached
to this Agreement;
"SELLER'S AFFILIATES" shall have the
meaning set forth in the Preamble;
"SELLER'S KNOWLEDGE" shall mean actual
knowledge by any of Messrs. Philippe
Pascal, Michel Mousselon or Nicolas
Calemard or knowledge that Persons acting in
the same capacities as these individuals
should reasonably have under the same
circumstances;
"SHARES" shall mean the 20,000 (twenty
thousand) registered shares with a face
value of CHF 1,000 (one thousand Swiss
francs) each, it being the entire
share-capital of the Company;
"SI RUE DU PARC" shall mean Societe
Immobiliere rue du Parc 153-155 SA, La
Chaux-de-Fonds, Switzerland;
"SUBSIDIARIES" shall have the meaning set
forth in the Preamble and "SUBSIDIARY"
shall mean each and any of these
subsidiaries individually;
"SWISSWAVE" shall mean Swisswave Europe SA,
25130 Villiers le Lac, France;
"TAIWAN BUSINESS" shall have the meaning
set forth in Article 17.5.
8 / 54
<PAGE>
"TAXES" shall mean any net income, gross
income, gross receipts, sales, use, ad
valorem, franchise, profits, license,
withholding, payroll, employment, excise,
severance, stamp, occupation, premium,
property, property transfer, property
transfer gain, value added or windfall
profit tax, custom duty or other tax of
any kind whatsoever, together with any
interest and any penalty, addition to tax
or additional amount imposed by any taxing
authority (domestic or foreign);
"THRESHOLD" shall have the meaning set
forth in Article 14.8;
"TRANSFERRED BUSINESS" shall mean the
entirety of the Group Companies and the
Business;
"TRANSFERRED BUSINESS NET ASSETS" shall
mean, net of provisions, the amount
determined in applying the Accounting
Principles and reflecting the adjustments
set forth in this Agreement, corresponding
to the sum of the following:
(i) FOR THE
BUSINESS:
o
the amount of the Brand Specific Fixed Assets,
PLUS
o
the amount of the Business Trade Receivables,
PLUS
o
the amount of the Business Other Operating Assets,
PLUS
o
the amount of the Business Inventory,
MINUS
o
the amount of the payables due by Seller's Affiliates to any
of the Group Companies,
MINUS
o
the amount of Business Other Operating Liabilities,
(ii) FOR THE GROUP
COMPANIES, based on the consolidated accounts of the
Company as prepared for the reporting to Seller, showing the
same
accounting lines as the consolidated accounts attached hereto
in
Schedule 1.68:
o
the amount of the total assets,
MINUS
o
the amount of the intangible assets,
MINUS
o
the amount of the current and long term liabilities.
In calculating the above (i) and (ii), the
following shall apply:
9 / 54
<PAGE>
o
the calculation shall properly take into account the
elimination entries required to reflect the Transferred
Business Net Assets on a consolidated basis; and
o
the calculation shall reflect only those assets and
liabilities relating and transferable to the Group Companies
and the Business, and all other assets and liabilities,
including non transferable assets and liabilities, shall
remain with the Seller;
all as illustrated in Schedule 1.68 hereto
calculated as at September 30, 2003;
"TRANSFERRED EMPLOYEES" shall have the
meaning set forth in Article 16.1;
"2003 GLOBAL ACCOUNT" shall mean the
document showing the consolidated balance
sheet of the Global Business as per
December 31, 2003.
ARTICLE 2
SALE AND PURCHASE OF THE SHARES - ASSUMPTION OF LIABILITIES
2.1 Subject to
the terms set forth in this Agreement, Seller shall sell and
transfer to Purchaser, and Purchaser shall purchase and acquire
from
Seller, all of the Shares with effect as of the Closing Date.
2.2 Seller
shall sell the Shares free and clear of any Lien and together
with all rights attaching thereto.
2.3 Property
and risks in the Shares shall be vested in the Purchaser as of
the Closing Date.
2.4 It is
expressly agreed that Seller shall assume any and all
liabilities
of, or relating to (i) the Carved Out Entities, whether past,
present
or future, known or unknown, absolute, accrued, contingent or
otherwise
and whether due or to become due, and (ii) payments made or to be
made
by any of the Group Companies to Muros Holding in connection
with
Maifos SA, whether past, present or future, known or unknown,
absolute,
accrued, contingent or otherwise and whether due or to become
due.
10 / 54
<PAGE>
ARTICLE 3
SALE AND PURCHASE OF THE ASSETS - ASSUMPTION OF LIABILITIES
3.1 With
effect as at the Closing Date, in the manner provided for
herein
and subject to the terms and conditions set forth in this
Agreement,
Seller shall cause each of Seller's Affiliates to, and each of
Seller's
Affiliates
shall, sell, transfer, convey, assign and deliver to each of
the relevant Purchaser's Affiliates, and each of the relevant
Purchaser's Affiliates shall purchase and accept from each of
the
relevant Seller's Affiliates, all rights, title, and interest of
the
relevant Seller's Affiliates in, and to, the following rights
and
properties, as they may exist as at the Closing Date (collectively
the
"BUSINESS ASSETS"):
(i) the
Business Inventory;
(ii)
the Brand Specific Fixed Assets;
(iii) the
Business Trade Receivables;
(iv)
the Business Other Operating Assets;
(v) all sales
order files, purchase order files, customer lists,
manufacturing records, advertising and promotional materials
and business files, including books of account, general,
financial and accounting records and other data owned by
Seller or Seller's Affiliates relating exclusively to, and
used exclusively in, or for, the Business, provided, however,
that Seller and Seller's Affiliates shall be permitted to
retain copies thereof and provided further that only copies
will be delivered in the event that Seller and/or Seller's
Affiliates are required by law to keep originals;
(vi)
to the extent that the requisite consents have been obtained
and the necessary notices given with respect thereto, the
Business Contracts;
(vii) the
Intellectual Property Rights relating to, and used in, or
for, the Business provided, however, that if an Intellectual
Property Right (other than a trademark, design, design patent
or copyright pertaining to the design of the products) is
presently or has been recently jointly used together with, or
will be used for products under development at the date of
this Agreement for, another brand of any of the Affiliates of
Seller not being a Group Company, only a non-exclusive
worldwide royalty free license will be granted to Purchaser or
the relevant Purchaser's Affiliate, as the case may be, to use
such Intellectual Property Right for as long as Pur-
11 / 54
<PAGE>
chaser, or Purchaser's Affiliate determines is reasonably
necessary to conduct the Business.
3.2 As from
the Closing Date, Purchaser's Affiliates shall assume all the
liabilities of Seller's Affiliates (except as otherwise provided
for in
this Agreement) relating exclusively to, or arising exclusively out
of,
the operation of the Business existing at, or arising before, on
or
after, the Closing Date, whether known or unknown, absolute,
accrued,
contingent or otherwise and whether due or to become due
(collectively
the "BUSINESS LIABILITIES").
3.3 If any
property, right or contract included in the Business Assets is
not assignable or transferable under applicable law without the
prior
consent of one or more third Persons, Seller shall use
commercially
reasonable efforts to obtain such consent after the execution of
this
Agreement, but prior to the Closing Date, and Purchaser shall
use
commercially reasonable efforts to assist in that endeavor.
If and to the extent any such consent cannot be obtained prior to
the
Closing Date and the Closing occurs, such property, right or
contract
shall, except as otherwise expressly provided in this
Agreement,
continue to be held and performed by Seller or Seller's Affiliate
in
accordance with the provisions of Article 17.1 below.
3.4 Property
and risks in the Business Assets shall be vested in Purchaser
and Purchaser's Affiliates as the case may be as from the Closing
Date.
3.5 For the
sake of clarity, the Parties acknowledge that the Transferred
Business does not include any activities of LVMH Watch &
Jewellery
Australia Pty Ltd relating to the Brand. Accordingly, save for
the
inventories of watches, semi-finished watches, components for
watches,
packaging, advertising and promotion materials and all other
products
relating to the sale of watches, including without limitation gold
and
precious stones, relating exclusively to the Brand owned by any
LVMH
Watch & Jewellery Australia Pty Ltd, which shall be transferred
to the
Company prior to Closing, no assets and no liability relating to
such
activities will be transferred to Purchaser hereunder.
12 / 54
<PAGE>
ARTICLE 4
PURCHASE PRICE
4.1 The price
to be paid by Purchaser (acting, for the purpose of paying
the Purchase Price, both in its own name and for its own account
as
well as for the account and on behalf of all the relevant
Purchaser's
Affiliates) to Seller (acting, for the purpose of receiving the
Purchase Price, both in its own name and for its own account as
well as
for the account and on behalf of all the relevant Seller's
Affiliates),
in consideration for the purchase of the Shares, the shares of
German
Newco and the Business Assets and for the transfer of the
Business
Liabilities, shall be of CHF 61,500,000 (sixty-one million five
hundred
thousand Swiss francs) (the "PURCHASE PRICE") subject to
adjustment
after Closing as provided for in Article 10 (the "ADJUSTMENT").
The
Purchase Price and, as the case may be, the Adjustment shall be
exclusive of any amounts due in respect of value added tax ("VAT")
or
other similar Taxes.
4.2 Seller
shall add the appropriate amount of VAT to that portion of the
Purchase Price and, as the case may be, to the Adjustment, that
reflects the Business Assets transferred by the relevant
Seller's
Affiliates to the relevant Purchaser's Affiliates, and the
relevant
Seller's Affiliates shall provide the relevant Purchaser's
Affiliates
with an invoice reflecting such VAT amounts.
4.3 Seller and
Purchaser shall bear in equal share any and all costs and
expenses and Taxes deriving from or connected with the transfer of
the
Shares, the shares of German Newco and the Business Assets except
for
(i) VAT which shall be borne exclusively by Purchaser and/or
Purchaser's Affiliates and (ii) capital gains taxes, if any, on
the
sale or deemed sale of real estate properties which shall be
borne
exclusively by Seller and/or Seller's Affiliates to the extent they
can
not be offset against the Company's net operating loss carry
forward
remaining at the time such taxes are due.
ARTICLE 5
PRE-CLOSING COVENANTS OF SELLER AND PURCHASER
5.1 The
Parties undertake to negotiate, on an arm's length basis, within
30
(thirty) days after determination of the Final Purchase Price,
a
mutually acceptable allocation of the Final Purchase Price among
Seller
and Seller's Affiliates, on one side, and Purchaser and
Purchaser's
Affiliates, on the other side, with regard to the Shares, the
shares of
German Newco, the Business Assets and the Business
13 / 54
<PAGE>
Liabilities. In case of disagreement between the Parties, the net
asset
value of the relevant items to be transferred shall be the
governing
and deciding factor.
5.2 Purchaser
shall, and shall cause each of Purchaser's Affiliates, and
Seller shall, and shall cause each of Seller's Affiliates, to
execute
all such documents, and do all such acts and things (in particular
all
necessary notifications) and take all necessary corporate actions
as
required to fulfill their respective obligations under this
Agreement.
Unless otherwise provided in this Agreement, each Party will bear
its
own costs and expenses.
5.3 Seller and
Purchaser shall cooperate to identify, and enter into (or
cause Seller's Affiliates as far as Seller is concerned and
Purchaser's
Affiliates as far as Purchaser is concerned to enter into),
such
additional ancillary agreements as may be necessary or
appropriate
under the local laws of the jurisdictions where the Business is
conducted to cause the transfer of the Business Assets and of
the
Business Liabilities, from the relevant Seller's Affiliate to
the
relevant Purchaser's Affiliate in accordance with local laws
and
regulations and in a manner convenient to both Parties. Such
agreements
will be entered into only on terms parallel to those set forth
herein
(and without representations or indemnities, which shall remain
herein).
5.4 Seller and
Purchaser shall use commercially reasonable efforts to
obtain all necessary consents and approvals to the performance of
their
respective obligations under this Agreement. Seller and Purchaser
shall
promptly make all filings, applications, statements and reports to
all
governmental entities, which are required to be made prior to
the
Closing Date pursuant to any applicable statute, rule or regulation
in
connection with this Agreement.
5.5 Seller
shall provide Purchaser as soon as possible but in any event no
later than January 23, 2004 with the worldwide consolidated
turnover of
the Transferred Business together with the determination of the
specific turnover for the main countries.
5.6 Seller
will permit, and will cause each of Seller's Affiliates to
permit representatives of Purchaser from and after the date hereof
up
to the Closing Date, to have access at all reasonable times to
the
books, accounts, records, customer lists, properties, operations
and
facilities of every kind pertaining to, and to employees of,
Transferred Business, and will furnish Purchaser with such
financial
and operating data concerning the Transferred Business as Purchaser
may
from time to time reasonably request, subject to any
confidentiality
agreements to which Seller or the relevant Seller's Affiliate or
any
Group Company may be a party
14 / 54
<PAGE>
provided, however, that the foregoing shall be on reasonably
advance
notice to Seller and shall not disrupt the operations of Seller,
the
Group Companies and Seller's Affiliates.
5.7 Seller has
permitted representatives of Purchaser to attend the
physical counting of the Business Inventory and the Companies
Trade
Inventory, which has taken place (i) for the Company on December
19,
2003 and which will take place (ii) for the respective Seller's
Affiliates and Subsidiaries at the dates and places set forth
in
Schedule 5.7.
5.8 Any and
all agreements between Seller or any of its Affiliates and any
of the Group Companies and, inasmuch as it relates to the Business,
any
of Seller's Affiliates, with respect to hedging operations,
cash
pooling, service, marketing, management arrangements and the like
as
listed in Schedule 5.8, shall be terminated at or prior to the
Closing
Date and with regard to the hedging operations of the Company,
the
losses and profits, as the case may be, resulting from the
termination
thereof shall be for the account of the Company and the
corresponding
amounts shall be either added to, or subtracted from, the amount of
the
intercompany loans referred to in Article 6.3 and provided further
that
no effect, positive or negative, resulting from the termination of
the
hedging operations shall be taken into consideration for the
purpose of
the establishment of the Proposed Closing Transferred Business
Account
and of the Closing Transferred Business Account.
5.9 Seller
shall cause the Company to renew the trademarks registrations
listed in Schedule 5.9.
5.10 As from the
Closing Date, subject to Article 11.3, Purchaser shall, and
shall cause each of Purchaser's Affiliates to take over full
and
exclusive responsibility for operating the Business and the
Group
Companies.
5.11 As from the
Closing Date, Purchaser shall be exclusively responsible
for establishing all necessary insurance coverage for operating
the
Transferred Business. All such insurance coverage provided for
by
Seller or its parent company shall terminate on the Closing Date
or,
with respect to the German Business, at the German Closing
unless
Purchaser has requested Seller to terminate a particular
insurance
coverage before the German Closing as set forth in Article 11.3
below,
it being specified that Seller shall, and shall cause the
appropriate
Seller's Affiliate to notify in a timely manner before Closing its
and
their respective insurers of any and all insurable claims relating
to
the Transferred Business of which any of Seller or Seller's
Affiliates
have knowledge or received notice
15 / 54
<PAGE>
prior to the Closing Date. Seller shall, and shall cause each
of
Seller's Affiliates, to assign to Purchaser all insurance benefits
paid
or payable by any such insurer in respect of any and all such
claims.
5.12 Seller shall
make its best efforts to assign to the Company on the
Closing Date a fully executed contract between LVMH Singapore and
Zoe
Tay or to directly conclude such an agreement between Zoe Tay and
the
Company on terms identical with and replacing the agreement between
Zoe
Tay and LVMH Singapore, it being specified that if it is not
possible
to transfer such contract or to conclude a new agreement on
identical
terms, such contract shall be excluded from the Transferred
Business
and shall not continue to be performed by LVMH Singapore for
the
account of Purchaser or Purchaser's Affiliates.
5.13 Seller shall
make its best efforts to fully reimburse the loan relating
to the Mortgage. In case Seller should not be able to reimburse
the
amounts outstanding relating to the Mortgage, such outstanding
amounts
shall be deducted from the Purchase Price provided that for the
purpose
of establishing the Closing Transferred Business Accounts all
such
outstanding amounts shall be ignored.
ARTICLE 6
CARVE OUT OBLIGATIONS OF SELLER PRIOR TO CLOSING
Between the date of this Agreement and
Closing, Seller shall, and shall cause
Seller's Affiliates and the Company to,
undertake all of the following acts:
6.1 transfer
to Seller or Affiliates of Seller other than the Group
Companies, at no cost or liability to the Company, all the
companies
owned by the Company other than the Subsidiaries and all
participations
owned by the Company other than the Participations (the
transferred
companies and the transferred participations are hereinafter
collectively referred to as the "CARVED OUT ENTITIES"); and
6.2 transfer
to the Company valid and exclusive title to all Intellectual
Property Rights exclusively used for the conduct of the Business
and
not already owned exclusively by the Company, free and clear of
any
Lien; in case of any Intellectual Property Right (other than a
trademark, design, design patent or copyright pertaining to the
design
of the products) which (i) is presently or has been recently
jointly
used together with, or (ii) will be used for products under
development
at the date of this Agreement for, another brand of any of the
Affiliates of Seller not being a Group Company, grant to the
Company a
non-exclusive
16 / 54
<PAGE>
worldwide royalty free license to use such Intellectual Property
Right
for as long as the Company determines is reasonably necessary
to
conduct the Business; and
6.3 after
application of the provisions of Article 5.8 relating to
hedging
operations, eliminate the net amount of the intercompany
credit/debit
positions of any Group Company vis-a-vis Seller or any of its
Affiliates except Seller's Affiliates; and
6.4 sell the
Business Inventory located in Malaysia to Seller's Affiliate
located in Singapore; and
6.5 sell the
inventories referred to under Article 3.5 owned by LVMH Watch
& Jewellery Australia Pty Ltd to the Company; and
6.6 sell the
Business Inventory located in Spain to the Company or
Swisswave.
ARTICLE 7
CLOSING
7.1
Purchaser's obligations hereto to effect the transactions and to
cause
Purchaser's Affiliates to effect the transactions contemplated by
this
Agreement shall be subject to satisfaction or waiver by the
Purchaser,
on or prior the Closing Date, of the following conditions:
(i) Seller,
Seller's Affiliates and/or the Company having fully
complied with the carve out obligations set forth in Article 6
above; and
(ii)
Receipt of any necessary prior consents and/or approvals in
accordance with Article 5.4 above; and
(iii)
Seller, Seller's Affiliates and/or the Group Companies having
fully complied with their obligations under Article 11.2
below.
7.2 Subject to
the satisfaction of the conditions set forth in Article 7.1
above, the transactions contemplated in Articles 2 and 3 above
shall be
consummated at the offices of TAVERNIER TSCHANZ, 11bis, rue
Toepffer,
1206 Geneva, Switzerland, on the Closing Date.
7.3 On the
Closing Date,
17 / 54
<PAGE>
(i) each Party
shall restate and confirm those of its
representations and warranties made under Articles 12 and 13
at the date of this Agreement which, pursuant to such Articles
12 and 13, have to be restated and confirmed at Closing;
(ii)
Seller shall:
(a) transfer
to Purchaser all the Shares duly endorsed in
a manner legally sufficient to transfer to Purchaser
the full ownership of, and title to, the Shares;
(b) cause each
of the relevant Seller's Affiliates to
transfer or to convey any and all Business Assets and
any and all Business Liabilities, other than those
relating to the German Business, to the relevant
Purchaser's Affiliate and cause each of the relevant
Seller's Affiliates to deliver to the relevant
Purchaser's Affiliate (as Purchaser shall inform)
sufficient instruments of transfer, as shall be
necessary under the applicable laws to vest in the
relevant Purchaser's Affiliate title to any and all
the Business Assets other than the German Business
and to assume all the Business Liabilities;
(c) deliver to
Purchaser the resolution of the Company's
board of directors confirming that (i) Purchaser has
been approved as sole shareholder of the Company with
sole voting rights, and that (ii) Purchaser is
registered as a shareholder with voting rights in the
Company's share register;
(d) deliver to Purchaser
the share register showing
Purchaser as sole shareholder of the Company with
sole voting rights;
(e) deliver to
Purchaser the resignation letter submitted
by each of the members of the Company's board of
directors and by each of the members of the board of
directors of each of the Subsidiaries, as well as
resignation letters provided by the auditors of the
Company and of any of the Subsidiaries, each such
resignation to be effective as at Closing;
(f) convene
shareholders meeting for each of the Group
Companies (except for German Newco) to be held on the
Closing Date for the purpose of appointing new
directors and auditors as the case may be;
18 / 54
<PAGE>
(g) deliver
all of the mortgage certificates listed in
Schedule 7.3 (II) (G)/1 together with excerpts from
the land registries for all of the real estate
parcels listed in Schedule 7.3 (II) (G)/2 obtained
not more than 5 (five) Business Days prior to
Closing;
(iii)
Purchaser shall pay to Seller CHF 54,500,000 (fifty-four
million five hundred thousand Swiss francs) in full and
unconditionally and, notwithstanding the provisions of Article
17.10 below, without right of set off, by means of wire
transfer of immediately available funds to the bank account,
which shall be communicated to Purchaser to that effect at
least 5 (five) Business Days before the Closing Date; the
remainder of the Purchase Price being CHF 7,000,000 (seven
million Swiss francs) shall be paid at the German Closing.
ARTICLE 8
2003 GLOBAL ACCOUNT
8.1 Seller
shall deliver to Purchaser on or before January 23, 2004 a
draft
of the 2003 Global Account prepared in accordance with the
Accounting
Principles.
8.2 On or
before January 30, 2004, Seller shall deliver to Purchaser the
Proforma Closing Transferred Business Account prepared in
accordance
with the Accounting Principles and with the provisions of this
Agreement.
8.3 The 2003
Global Account shall be prepared by Seller and audited by
Seller's independent accountants, both applying the Accounting
Principles. Seller shall deliver to Purchaser the 2003 Global
Account
no later than on February 3, 2004.
ARTICLE 9
CLOSING TRANSFERRED BUSINESS ACCOUNT
9.1 The
Parties agree that the Closing Transferred Business Account
shall
only be prepared and used for the purpose of calculating and
adjusting
the Purchase Price as per Article 10 below, without restricting
Purchaser in any manner whatsoever from claiming under Seller's
representations and warranties and indemnities as set forth
herein
except to the extent that:
19 / 54
<PAGE>
(i)
Purchaser's
claim is that the Closing Transferred Business
Account does not contain or accurately REFLECT the amounts set
forth in Article 9.5.1,
(ii)
Purchaser's claim relates to the physical counting as set
forth in Article 9.5.3.
9.2 For the
purpose of this Article 9, the Parties agree that the Proposed
Closing Transferred Business Account and the Closing
Transferred
Business Account shall be prepared so that there be no impact in
the
relevant accounts for events which materially and negatively impact
the
Transferred Business and which result from the announcement or
execution of this Agreement.
9.3 No later
than March 16, 2004, Purchaser shall deliver to Seller the
Company's consolidated balance sheet as per February 29, 2004,
reflecting the physical counting as per Article 9.5.3 and
prepared
applying the Accounting Principles, so as to enable Seller to
prepare
the Proposed Closing Transferred Business Account. No later than
March
16, 2004, Seller shall prepare a consolidated balance sheet as
per
February 29, 2004, for the Business applying the Accounting
Principles.
9.4 No later
than April 5, 2004, Seller shall deliver to Purchaser the
Proposed Closing Transferred Business Account prepared in
accordance
with the terms and conditions set forth below. Seller's
independent
auditors shall provide a special purpose opinion on the
Proposed
Closing Transferred Business Account substantially in the
format
attached as Schedule 9.4 hereto by April 30, 2004, at the
latest.
9.5 Seller
shall prepare the Proposed Closing Transferred Business Account
and Seller's independent auditors shall provide a special
purpose
opinion thereon, applying the Accounting Principles and the
provisions
of this Agreement, it being specified that for the purpose of
the
Proposed Closing Transferred Business Account,
9.5.1 the
following shall apply:
(i) the amount
of the allowance for doubtful accounts
receivables shall be equal to (x) the amount shown in
the 2003 Global Account after deduction of the
allowance for doubtful accounts pertaining to (a) the
receivables that shall not be transferred as mutually
agreed between Seller and Purchaser and (a) the
receivables of the Carved Out Entities plus, (y) as
the case may be, any addi-
20 / 54
<PAGE>
tional provision as necessary to fully cover the
failure to pay on the part of a customer who has
filed a petition in bankruptcy, has been declared
bankrupt or has applied for a debt moratorium or
against whom has been filed or who has filed any
similar proceedings between December 31, 2003 and
February 29, 2004, and
(ii) the amount of the
inventory reserve shall be equal to
the higher of (a) the amount of the inventory reserve
shown in the 2003 Global Account after deduction of
the inventory reserve of the Carved Out Entities,
plus as the case may be any additional provision as
necessary to fully cover the value of watches
(finished products and watch-heads) in active product
lines, defective or to be refurbished, existing as at
February 29, 2004, over and above the value of such
watches as at December 31, 2003, to the extent that,
and only to that extent, the value of such watches as
at February 29, 2004 exceeds the amount of the
reserve for excess finished goods inventory for
active product lines as at February 29, 2004 and (b)
CHF 60,700,000 (sixty million seven hundred thousand
Swiss francs); an illustration of this mechanism is
set forth in Schedule 9.5.1 (II), and
(iii) the
amount of the warranty reserve shall be equal to
CHF 2,550,000 (two million five hundred and fifty
thousand Swiss francs), and
(iv)
the amount of the loyalty bonus reserve shall be
equal to CHF 350,000 (three hundred and fifty
thousand Swiss francs);
and
9.5.2 the
amount of the Global Fixed Assets shall:
(i) not be
taken into account for more than the lower of
(i) the Global Fixed Assets as at February 29, 2004
and (ii) CHF 14,500,000 (fourteen million five
hundred thousand Swiss francs), should the Proposed
Closing Transferred Business Account, before
adjusting Global Fixed Assets as per this Article
9.5.2, show a value of CHF 76,500,000 (seventy six
million five hundred thousand Swiss francs) or less,
and
21 / 54
<PAGE>
(ii)
not be taken into account for more than the lower of
(i) the Global Fixed Assets as at February 29, 2004
and (ii) CHF 14,000,000 (fourteen million Swiss
francs), should the Proposed Closing Transferred
Business Account, before adjusting Global Fixed
Assets as per this Article 9.5.2, show a value of
more than CHF 76,500,000 (seventy six million five
hundred
thousand Swiss francs);
and
9.5.3 any
physical counting of the Business Inventory and of the
Companies Trade Inventory as necessary for the preparation by
Seller of the Proposed Closing Transferred Business Account
shall be made jointly by representatives of both Parties and
shall take place at the times and places set forth in Schedule
9.5.3;
9.6 In the
event Purchaser has any disagreement with regard to the
Proposed
Closing Transferred Business Account or with regard to any item
included therein, and provided that:
(i) such
disagreement may not concern any of the counting of the
Business Inventory or
the Companies Trade Inventory, and
(ii)
Purchaser shall only be authorized to dispute the Proposed
Closing Transferred Business Account if it has not been
prepared in applying the Accounting Principles and the
provisions of this Agreement,
then such disagreement shall be resolved in the following
manner:
(a) within 20
(twenty) Business Days from the date of receipt of
the Proposed Closing Transferred Business Account, Purchaser
shall notify Seller in writing of its disagreement, which
notice shall specify in reasonable details the nature and the
amount of the disagreement, provided that any notification by
the Purchaser of any disagreement will have to be the subject
of a prior consultation with its auditors;
(b) during a
10-Business Day period following Seller's receipt of
such notice, Seller and Purchaser shall attempt to resolve
such disagreement;
(c) if Seller
and Purchaser fail to reach a written agreement
resolving such disagreement, Purchaser shall, within, and no
later than, 20 (twenty)
22 / 54
<PAGE>
Busines
