ENGLISH TRANSLATION FOR INFORMATION PURPOSES ONLY Essilor International (Compagnie Générale d Optique) French société anonyme (joint stock company) with a share capital of 39,331,386.18 Registered office: 147, rue de Paris, 94220 Charenton-le-Pont, France Registered with the Trade and Companies Registry of Créteil under no. 712 049 618 («Essilor») GENERAL SHAREHOLDER S MEETING TO BE HELD ON MAY 11, 2017 REPORT OF THE BOARD OF DIRECTORS ON THE CONTRIBUTION BY ESSILOR OF ITS ACTIVITIES AND EQUITY INTERESTS TO ITS SUBSIDIARY DELAMARE SOVRA (Resolution 24) The purpose of this report, prepared pursuant to Articles L. 236-9, paragraph 4, and R. 236-5 of the French Commercial Code, is to describe the terms and conditions of the proposed contribution, subject to the apport-scission regime, by which Essilor (the Company or the Contributing Company ) would contribute to Delamare Sovra, a French société par actions simplifiée (simplified joint stock company) and wholly owned subsidiary, with a share capital of 302,650, whose registered office is located at 4 and 6, rue Costes et Bellonte, ZAC Sully, 78200 Mantes-la-Jolie, France, registered with the Trade and Companies Registry (Registre du Commerce et des Sociétés) of Versailles under number 439 769 654 (the Beneficiary Company or Delamare Sovra, together with Essilor, the Parties ), its assets and liabilities, rights and obligations, except for those expressly excluded in Article 2.1.2 of the Contribution Agreement, as defined hereafter (the Contribution ), pursuant to the provisions of a contribution agreement subject to the apportscission regime entered into between Essilor and Delamare Sovra on March 27, 2017 (the Contribution Agreement ). This report is made available to shareholders on the website of the Company (https://www.essilor.com/en/investors/annual-shareholders-meeting/) and at its registered office as provided for by applicable laws and regulations.
PROPOSED CONTRIBUTION SUBJECT TO THE APPORT-SCISSION REGIME Introduction In the context of a contemplated combination, Essilor and Delfin S.à r.l (a Luxemburgish company) ( Delfin ) entered into an agreement on January 15, 2017 to define the terms and conditions of a combination between Essilor and Luxottica Group S.p.A. ( Luxottica ) of which Delfin holds approximately 62.5% of its share capital (as amended on March 6 and March 27, 2017, the Combination Agreement ). Luxottica is an Italian company, listed on the Borsa Italiana and the New York Stock Exchange, in the sector of design, manufacture and distribution of fashion, luxury, sports and performance eyewear. The purpose of this contemplated strategic combination between the activities of the Company and Luxottica is the creation of a global group in the eyewear industry which will benefit in particular from (i) a well-balanced worldwide portfolio of businesses based on the Company s and Luxottica s complementary global geographical footprint, (ii) best-in-class employee relations, (iii) strong R&D and innovative products, solutions and services, (iv) an emphasis on customer focus and customer benefits, (v) operational and financial synergies, thus enhancing sustainable value creation for customers and shareholders and (vi) a robust financial profile and a solid investment grade rating. Pursuant to the provisions of the Combination Agreement, Delfin shall contribute all of the ordinary shares issued by Luxottica that it holds to the Company in exchange for newly issued ordinary shares of the Company, pursuant to an exchange ratio of 0.461 new Essilor share for any Luxottica share contributed (subject to an adjustment mechanism of the exchange ratio as described in the corresponding contribution agreement). The contribution of the Luxottica shares by Delfin to the Company is submitted for approval to your General Meeting (Resolution 22). The Company shall subsequently launch a mandatory exchange offer, in accordance with the provisions of Italian law, and if applicable, of US law, in order to acquire all of the remaining issued and outstanding Luxottica shares pursuant to the same exchange ratio applied in the above-mentioned contribution. In the context of these transactions, the Combination Agreement also provides for the completion of the Contribution as described in page 1 of this report, so that Essilor would become a holding company. In this context, by Resolution 24, we propose that you approve this report and the Contribution Agreement which provisions have been adopted by the Board of Directors at its meeting of March 22, 2017, and that was signed on March 27, 2017 by Mr Paul du Saillant, Chief Operating Officer (Directeur général adjoint) of the Company. The Contribution Agreement has been filed with the Commercial Court of Créteil on March 28, 2017 for Essilor and with the Commercial Court of Versailles on March 28, 2017 for Delamare Sovra. This report explains and justifies the Contribution, from a legal and economic standpoint, in particular regarding the consideration for the Contribution and the valuation methods used. The terms and conditions of the Contribution are further described in the Contribution Agreement. 2
1. Reasons for and objectives of the transaction Main features of the Contribution The Contribution is part of the combination transactions which are presented in the introduction of this report. In particular, the Contribution would allow the hive-down of Essilor s activities which would then become a holding company at the head of the EssilorLuxottica combined group, in accordance with the provisions of the Combination Agreement. 2. Links between companies Essilor holds all of the share capital of Delamare Sovra, which amounts to 302,650 divided into 30,265 ordinary shares of a par value of 10 each. Essilor and Delamare have no common executives or directors. 3. Preliminary transactions In the context of the combination, a certain number of preliminary transactions would be contemplated, including the change of the corporate name of Delamare Sovra (which would be renamed Essilor International, while Essilor would be renamed EssilorLuxottica ), the modification of the registered office in order to transfer it to Charenton-le-Pont, current registered office of Essilor, and the adjustment of its by-laws (update of the corporate purpose and of the statutory provisions relating to the management, administration and shareholder s meetings of Delamare Sovra) in order to adapt them to the contributed activities. 4. Accounts of the companies used to establish the terms and conditions of the proposed Contribution a. For the Company The terms and conditions of the Contribution have been established on the basis of Essilor s financial statements for the fiscal year ended December 31, 2016, approved by Essilor s Board of Directors on February 16, 2017 and certified by the statutory auditors. b. For Delamare Sovra The terms and conditions of the Contribution have been established on the basis of Delamare Sovra s financial statements for the fiscal year ended December 31, 2016, adopted by Delamare Sovra s Chief Executive Officer (Président) on March 10, 2017 and certified by the statutory auditors. 5. Contribution appraiser (Commissaire à la scission) Pursuant to an order dated February 1, 2017, the President of the Commercial Court of Créteil appointed Mr Jean-Charles de Lasteyrie (Ricol Lasteyrie Corporate Finance), as contribution appraiser in order to prepare the reports referred to in Articles L. 236-10 and L. 225-147 (applicable by reference) of the French Commercial Code. The report on the valuation of the contribution established by the contribution appraiser will be filed with the relevant commercial court in accordance with applicable rules. 6. Legal regime of the transactions and objection rights The Parties have agreed to submit the Contribution to the provisions of Articles L. 236-1 to L. 236-6 and L. 236-16 to L. 236-21 of the French Commercial Code (apport-scission regime), in accordance with the provisions set forth in Articles L. 236-6-1 and L. 236-22 of the French Commercial Code. 3
The Parties have expressly agreed to waive any joint and several liability between them, the Beneficiary Company would therefore be held solely liable for the liabilities borne in the context of the Contribution as from the Completion Date (as defined below). Given the absence of joint and several liability, and pursuant to the provisions of Articles L. 236-14 and L. 236-21 of the French Commercial Code, creditors (other than bondholders) of the Contributing Company and the Beneficiary Company would be entitled to raise objection (opposition) to the Contribution under legal and regulatory applicable time limits and conditions. Moreover, pursuant to Articles L. 228-65, I, 3 and L. 236-18 of the French Commercial Code, the Contribution will be submitted to the relevant Essilor bondholders general meetings. 7. Favorable tax regime In application of Article 210 B of the French Tax Code, the Contributing Company and the Beneficiary Company intend to submit the Contribution under the favorable tax regime set forth by Article 210 A of the French Tax Code. 8. Legal completion date and effective date of the Contribution The final completion date of the Contribution would be, subject to the satisfaction or waiver of the conditions precedent set forth in Article 7 of the Contribution Agreement, the date of the general meeting of the shareholders of Delamare Sovra called to approve the Contribution (the Completion Date ). In accordance with Article L. 236-4 of the French Commercial Code, it is specified that this Contribution would have a retroactive effect as of January 1, 2017. 9. Identification of the Contribution The Contribution would comprise all the assets and liabilities, rights and obligations of Essilor, except for those expressly excluded from the Contribution by Article 2.1.2 of the Contribution Agreement (the Contributed Activities ), as such items are described in further detail in Article 2 of the Contribution Agreement, in their existing condition at the Completion Date. Among the elements expressly excluded from the scope of the Contributed Activities and that would thus be maintained at Essilor s level, there are in particular: - treasury shares held by Essilor; - shares held by Essilor in the share capital of Delamare Sovra; - direct equity interests held by Essilor into entities of the group located in India and South- Korea; - Essilor s long-term debt (i.e. debt issued under the Euro Medium-Term Notes program of Essilor and private placements as well as credit facilities benefiting to Essilor); - all of the obligations related to the stock options or free allotment of shares plans of Essilor; - certain agreements which are designed to apply at the group s level (such as the agreement related to the Group Works Council or the agreement for the implementation of the European Works Council); and - certain intellectual property rights related to the future combined group. 4
10. Valuation of the Contribution In application of Regulation ANC n 2014-03 dated June 5, 2014 of the French Accounting Standards Authority and given that the Contribution involves a partial transfer of assets constituting a branch of activity (branche d activité) between companies under common control, the contributed assets and liabilities pursuant to the Contribution would be valued at their net book value. On the basis of Essilor s financial statements for the fiscal year ended December 31, 2016 and given that the Contribution is carried out on the basis of the net book value, the book value of the assets contributed (except for the assets excluded listed in Article 2.1.2 of the Contribution Agreement) amounts to 7,856,813,591.81, and the book value of the liabilities contributed (except for the liabilities excluded listed in Article 2.1.2 of the Contribution Agreement) amounts to 2,372,386,876.24, i.e. a net book value of the contributed assets of 5,484,426,715.56. 11. Consideration for the Contribution, capital increase, Contribution premium a. Method retained for the consideration for the Contribution In accordance with tax tolerance (BOI-IS-FUS-30-20-20120912, n 40, whose conditions of application are in this case satisfied), the consideration for the Contribution has been determined based on the comparison of the net book value of the contributed assets (i.e. 5,484,426,715.56) and of the net book asset of the Beneficiary Company as it appears in the Delamare Sovra s financial statements for the fiscal year ended December 31, 2016 (i.e. 5,980,569), which would result in the issuance of 27,754,245 shares of the Beneficiary Company in consideration for the Contribution. The share capital of Delamare Sovra, which currently amounts to 302,650, would thus be increased from the nominal amount of 277,542,450 to 277,845,100, divided into 27,784,510 shares, fully paid-up and all of the same class. The new shares would be entirely fungible with the existing shares, would enjoy the same rights and would be subject to all of the provisions of the by-laws of Delamare Sovra. They would be issued with current dividend eligibility and would give rights to all of the distributions paid as of their date of issuance. b. Contribution premium The difference between the amount of the net book value of the contributed assets (i.e. 5,484,426,715.56) and the nominal amount of the share capital increase of the Beneficiary Company (i.e. 277,542,450), i.e., 5,206,884,265.56, would be accounted for as a contribution premium, it being specified that the Beneficiary Company would be entitled to proceed with any withholding from the contribution premium to reconstitute any regulated provisions and for allocation to the legal reserve as well as to any costs associated with the Contribution, as the case may be. 12. Conditions precedent to the completion of the Contribution The conditions precedent to the completion of the Contribution are described in Article 7 of the Contribution Agreement and are summarized below: i. the satisfaction or the waiver of the conditions precedent set forth in the Combination Agreement (as amended), in accordance with the provisions of the Combination Agreement (as amended), except for the one relating to the completion of the Contribution which is the subject of this report, namely: 1. Approval by the Essilor shareholders meeting of the resolutions related to the contemplated combination (Resolutions 20 to 24 and 26 to 39 submitted for approval to this General Meeting); 5
ii. iii. iv. 2. Approval by the special meeting of the holders of Essilor shares with double voting rights attached of a resolution providing for the cancellation of double voting rights; 3. Waiver from the French Autorité des marchés financiers confirming that the crossing by Delfin of the 30% threshold both in the share capital and voting rights of Essilor following the contribution of Luxottica shares by Delfin shall not result in any obligation by Delfin to launch a mandatory tender offer; 4. Approval for listing on Euronext Paris; 5. Clearances from the relevant competition authorities; the approval of the Minister of Economy and Finance (or other form of confirmation from the tax administration) granting (i) the benefit of the favorable tax regime under Article 210 A of the French Tax Code to the Contribution, and (ii) the transfer to the Beneficiary Company of the benefit of the applications for approval described in Article 6.8 of the Contribution Agreement; the agreement (or other form of comfort) from the French and American competent authorities for the purpose of transferring to the Beneficiary Company the benefit of the prior agreement between the French and American competent authorities on transfer pricing regarding industrial property royalties for the fiscal years 2011 to 2021, notified to the Contributing Company on January 5, 2017; the approval of Delamare Sovra s shareholder(s) of all the provisions of the Contribution Agreement, the Contribution that is thereby agreed and the capital increase in consideration for the Contribution, it being specified that Essilor has undertaken in the Contribution Agreement to vote in favor of these resolutions at the general meeting of Delamare Sovra. If any of the conditions precedent set forth above was not fulfilled by June 30, 2018 at the latest, the provisions of the Contribution Agreement would be considered null and void, unless this period is extended by mutual agreement of the Parties. *** For further information, please refer to the Contribution Agreement as well as the reports on the value of, and on the consideration for the Contribution prepared by the contribution appraiser, which are made available to shareholders on the website of the Company (https://www.essilor.com/en/investors/annual-shareholders-meeting/) and at its registered office as provided for by applicable laws and regulations. 6