Bolle Inc.
555 Theodore Fremd Avenue
Suite B-302
Rye, New York 10580
Tel: (914) 967-9400
Fax: (914) 967-9405/7
January 6, 1998
Mr. Roger Gibbons
Mr. Eric Collicoat
Bill Bass Optical Party Ltd.
37 Thistlethwaite Street,
P.O. Box 21
South Melbourne, Victoria 3205
Australia
Dear Roger & Eric:
We are pleased to present our proposal for Bolle Inc. or one of its affiliates
("Bolle Inc.") to acquire 75% of the shares of Bill Bass Optical Pty Ltd,
("Bill Bass") and Parkhurst Oaks Ltd ("Parkhurst"), 100% of the shares of Bolle
Asia Ltd ("Bolle Asia") and 49% of the shares of Bolle Sunglass Ltd (UK)
("Bolle Sunglass") (collectively, "Bolle Australia") (the "Acquisition").
1. Purchase Price. The purchase consideration will be A$9.375 million
consisting of: (i) A$5.875 million in cash and (ii) a A$3.5 in registered
shares of Bolle Inc. common stock.
2. Structure. The Acquisition will be structured so as to provide the Sellers
with the most advantageous Australian tax treatment for the sale of their
shares in Bill Bass and Parkhurst. The shares in Bolle Asia and Bolle Sunglass
will be purchased directly by Bolle Inc. or one of its subsidiaries and not as
subsidiaries or investments of Bill Bass.
3. Due Diligence. Upon signing of a definitive agreement, Bolle Inc. will have
access at reasonable times, so as not to disrupt Bolle Australia operations, in
order to undertake a due diligence investigation of the business. In the
meantime, Bolle Australia will supply the most
Mr. Roger Gibbons
Mr. Eric Collicoat
January 6, 1998
Page 2
recent monthly management financial statements as they become available.
4. Timing. The parties will proceed diligently and in good faith to use their
best efforts to negotiate and execute a definitive purchase agreement (the
"Agreement") within forty-five (45) days of the date of this letter. The
Agreement shall contain customary representations, warranties and other terms
and conditions found in agreements of this nature. The transaction will be
consummated following the creation of Bolle Inc. as a separate public company,
scheduled for January 1998.
5. Ongoing investment in Bill Bass and Parkhurst. You will collectively
continue to own 25% of Bill Bass and Parkhurst and will benefit from 25% of the
profits of Bill Bass and Parkhurst and maintain an economic interest in 25% of
the Company. You will be entitled to receive your pro rata share of any
distributions from Bill Bass and Parkhurst which will not be less than 20% of
annual profits. The companies will continue to be operated in a manner
consistent with past practice and any accounting changes that would impact
profitability (e.g. intercompany charges) will be eliminated for purposes of
calculating stand alone profitability. At any time Bolle Inc. will have the
right to buy your shares at fair market value as mutually agreed or as
determined by a mutually agreed accounting firm, but you will only be required
to sell if the valuation is at least A$3.125 million.
You will have the right to "put" your remaining shares under the following
circumstances.
(i) Neither Martin Franklin, Gary Kiedaisch or Ian Ashken are on the board
of Bolle Inc. In this case you would have the right to put at any time
during the six months after their departure providing our "exit" from
Bolle Inc. was above the average price for the first five days trading
of Bolle Inc. common stock. The six month period is designed to enable
Roger Gibbons and Eric Collicoat to reach their own arrangement with
"new management" failing which they can exit their shares. The
employment agreements would continue.
(ii) Five years has elapsed from the initial transaction date and the Bolle
Inc. share price has either doubled during this period or there has
been a
Mr. Roger Gibbons
Mr. Eric Collicoat
January 6, 1998
Page 3
1 3/4x increase over the deemed equity value as per the warrant
strike price agreed with the Bolle family of $66 million. This value
will translate into a price per share at the time of the IPO. This
provision would continue after five years, to activate when Bolle
Inc.'s share price has met one of these requirements.
In either case the minimum price would be A$3.125. In addition, we would agree
to include language in the agreement that in valuing the business on the
exercise of the option we would be looking to value the company at a 4X
multiple of future maintainable operating profits. Obviously one of the key
factors in evaluating the ongoing business will be the strength of the
management team Eric Collicoat and Roger Gibbons have built up to succeed them.
6. (i) Bolle Inc. and Bolle America hereby acknowledge that the
assets of Bill Bass to be purchased by Bolle Inc. at closing
shall not include:
(a) The Sydney property at 21-27 Mitchell Road, Brookvale and 27
Sydenham Road, Brookvale being the whole of the land in
volume 7396 Folio 36 and Register Folio 1/733384.
(b) William Bass & Co Pty Ltd.
(c) The monthly dividend of $25,000 paid for each of July, August
and September 1997.
(d) A dividend of up to A$700,000 payable to Bill Bass Optical
shareholders prior to the closing, provided that the
additional profit after taxes shown in the Adjusted Balance
Sheet of A$690,00 has been generated by Bill Bass Optical and
the Net Tangible Assets at Closing are higher than those
shown in the Adjusted Balance Sheet.
The above have been or will be paid to shareholders and
associates of Bill Bass firstly by way of clearance of loan
accounts
Mr. Roger Gibbons
Mr. Eric Collicoat
January 6, 1998
Page 4
Sunnyco ($2,160)
Roger Gibbons $2,375
Tickworth Pty Ltd $388,921
Second Pasdenom $95,340
Bill Bass Trust $724,102
and if any balance by way of fully franked dividend.
(ii) Bolle Inc. and Bolle Australia acknowledge the Adjusted
Balance Sheet - 31/12/97 of Bill Bass attached hereto
reflects the adjusted Balance Sheet of Bill Bass which
confirm the agreed assets of Bill Bass at closing as
represented by Bill Bass and acknowledged by Bolle Inc. in
the course of negotiations. Attached hereto and marked with
the letter "A" is the said Adjusted Balance Sheet which shall
form part of the Letter of Intent.
7. Conditions to the Closing. The obligations of Bolle Inc. and Bolle Australia
to close the Acquisition is subject to the following conditions:
(i) Completion of due diligence by Bolle Inc. to its satisfaction on or
before the date of entering into the Agreement.
(ii) Receipt of clean audited June 30, 1997 and 1996 financial statements
of Bolle Australia.
(iii) The parties shall have entered into the Agreement and all attendant
documents thereto in a form satisfactory to both parties.
(iv) Approvals, if any, of all applicable governmental regulatory agencies
and all other appropriate parties, with respect to the transactions
contemplated by the Acquisition, shall have been obtained.
(v) Entering into mutually acceptable employment agreements with Mr. Roger
Gibbons and Mr. Eric Collicoat including five-year non-competition
Mr. Roger Gibbons
Mr. Eric Collicoat
January 6, 1998
Page 5
agreements from the date the employment agreements expire.
(vi) Entering into a mutually acceptable 3 year lease agreement, with a 3
year renewal provision and option to buy (at fair market value at the
date of exercise), on the Melbourne property.
(vii) Net Tangible Assets at December 31, 1997 to be A$2.55 million or
higher.
(viii) Bolle Inc.'s registration statement having been declared ineffective.
Bolle Australia will have operated its business only in the ordinary course
consistent with past practice since June 30, 1997 and there will have been no
distributions or other out of the ordinary cash payments to the shareholders
since that date except for the A$25,000 per month distributed between July 1,
1997 and September 30, 1997. At Closing, Bill Bass will change its year end to
December 31st and its name to an appropriate "Bolle" name.
8. Miscellaneous.
(a) Bolle Inc. and the shareholders of Bolle Australia will each be
responsible for their own costs and expenses relating to this
transaction incurred since December 31, 1996.
(b) No public announcement or other publicity regarding this letter, the
Agreement or the transactions contemplated hereby or thereby, shall be
made by any party prior to or after the date hereof without the prior
consent of both Bolle Inc. and Bolle Australia as form, content,
timing, and manner of distribution. Notwithstanding the foregoing,
nothing in this Agreement shall preclude Bolle Inc. and Bolle
Australia or its affiliates from making any public announcement or
filing required by federal or state securities laws or stock exchange
rules.
(c) This Letter of Intent shall be interpreted and enforced in accordance
with the laws of the State of Victoria, Australia.
Mr. Roger Gibbons
Mr. Eric Collicoat
January 6, 1998
Page 6
(d) This Letter of Intent may be signed in counterparts, each of which
shall be deemed to be an original and both of which shall constitute
one account.
(e) The Sellers will have no economic interest, direct or indirect, in the
business of William Bass & Co. after April 30, 1998.
Neither Bolle Inc. or Bolle Australia intend that this letter, or any actions
of the parties with respect hereto, be, or be deemed to constitute, a legally
binding obligation. A binding commitment with respect to the transactions
contemplated hereby will result only from the execution of the Agreement
relating to such transactions, subject to the conditions expressed therein.
Notwith-standing the foregoing, the terms of this paragraph 8 shall be binding
upon the parties hereto.
If the foregoing accurately sets forth mutual intention with respect to the
principal terms of the proposed transaction, please execute and return the
enclosed copy of this letter to the undersigned.
Bolle Inc.
By:/s/ Martin E. Franklin
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Martin E. Franklin
Chairman
AGREED TO AND ACCEPTED ON
15 January, 1998
By:/s/ Roger Gibbons By:/s/ Eric Collicoat
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Roger Gibbons Eric Collicoat