SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K/A
Amendment Number 3
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported) April 30, 1997
Commission file number 1-12271
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CARSON, INC.
================================================================================
(Exact name of registrant as specified in its charter)
DELAWARE 06-1428605
(State or other jurisdiction of incorporation
or organization) (I.R.S. Employer Identification
Number)
64 Ross Road, Savannah Industrial Park
Savannah, Georgia 31405
(Address, including zip code, of principal executive offices)
Registrant's telephone number, including area code: (912) 651-3400
<PAGE>
Item 2. Acquisition or Disposition of Assets
During March 1997, the Company entered into an Asset Purchase Agreement
with Conopco, Inc. d/b/a Chesebrough-Pond's USA Co. in order to acquire the
rights to manufacture and market Cutex in the United States (the "Cutex
acquisition"). Cutex is the leading brand of nail polish remover and is also a
line of nail enamels. The purchase price approximated $41.4 million including
amounts paid to Chesebrough-Pond's of $37.5 million, inventory acquired from
Chesebrough-Pond's of $600,000 and inventory acquired from Jean Phillipe of $3.3
million. In addition, the Company incurred debt related acquisition costs of
$2.6 million and other direct aquisition fees and expenses of $1.4 million
including an allowance for returned goods and a reserve for obsolete Jean
Phillipe inventory. This acquisition is accounted for under the purchase method
of accounting. Funds were provided by additional long-term debt and the
transaction was completed on April 30, 1997.
During March 1997, the Company entered into an Asset Repurchase Agreement
with Jean Philippe Fragrances, Inc. Immediately upon execution of the Jean
Philippe Repurchase agreement on April 30, 1997, the license agreement with Jean
Philippe Fragrances, Inc. was terminated. On April 30, 1997 in connection with
the termination of the license agreement between Conopco, Inc. and Jean Philippe
Fragrances, Inc. by Carson as successor in interest to Conopco, Inc., Carson
acquired certain assets of Jean Philippe Fragrances, Inc. used in the packaging,
distributing and selling of nail enamel and nail care treatment products, nail
care implements and lipstick under the trademark Cutex in the United States and
Puerto Rico.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired - The Cutex Brands of
Chesebrough-Ponds USA Co. -
(1) The Cutex Brands of Chesebrough-Pond's USA Co. Financial
Statements as of December 31, 1996 and 1995
a) Report of Independent Accountants
b) Statement of Net Assets Sold as of December 31, 1996 and
1995.
c) Statements of Net Sales, Cost of Sales and Direct
Operating Expenses for the years ended December 31, 1996
and 1995.
d) Notes to Financial Statements
(2) The Cutex Brands of Chesebrough-Pond's USA Co. Financial
Statements as of March 31, 1997 and 1996 (Unaudited)
a) Report of Independent Accountants
b) Statement of Net Assets Sold as of March 31, 1997 and 1996.
c) Statements of Net Sales, Cost of Sales and Direct
Operating Expenses for the three-month period ended
March 31, 1997 and 1996.
d) Notes to Financial Statements
(b) Pro Forma Financial Information -
Carson, Inc. Pro Forma Consolidated Balance Sheet
(unaudited) March 31, 1997.
Carson, Inc. Pro Forma Consolidated Statement of Operations
(unaudited) for the Nine-Month Period Ended December 31, 1996.
Carson, Inc. Pro Forma Consolidated Statement of
Operations (unaudited) for the quarter ended March 31, 1997.
Notes to Pro Forma Consolidated Financial Statements (Unaudited)
(c) Exhibits
10.1 Asset Purchase Agreement dated as of March 27, 1997 between Conopco,
Inc. d/b/a Chesebrough-Pond's USA Co. and Carson.
10.2 Asset Repurchase Agreement dated as of March 27, 1997 between Jean
Philippe Fragrances, Inc. and Carson.
10.3 Service Agreement dated as of April 30, 1997 between Conopco, Inc.
d/b/a Chesebrough-Pond's USA Co., a New York corporation ("Chesebrough") and
Carson Products Company, a Delaware corporation ("Carson").
10.4 Brokerage Agreement dated as of September 19, 1997 between AM
Cosmetics, Inc. and Carson Products Company.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CARSON, INC.
By: /s/ Robert W. Pierce
---------------------------
Executive Vice President
and Chief Financial Officer
Date: October 9, 1997
-------------------------
<PAGE>
(a) Financial Statements of Business Acquired - The Cutex Brands of
Chesebrough-Ponds USA Co. -
(1) The Cutex Brands of Chesebrough-Pond's USA Co. Financial
Statements as of December 31, 1996 and 1995
THE CUTEX BRANDS of
CHESEBROUGH-POND'S USA CO.
FINANCIAL STATEMENTS
As of December 31, 1996 and 1995
<PAGE>
Report of Independent Accountants
To the Board of Directors of
Chesebrough-Pond's USA Co.
We have audited the accompanying statement of net assets sold of the Cutex
brands of Chesebrough-Pond's USA Co. as of December 31, 1996 and 1995, and the
statement of net sales, cost of sales and direct operating expenses for each of
the two years in the period ended December 31, 1996. These financial statements
are the responsibility of Chesebrough-Pond's USA Co.'s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying financial statements were prepared to present the net
assets sold of the Cutex brands, pursuant to the purchase agreement described in
Note 1, and the net sales, cost of sales and direct operating expenses of the
Cutex brands and are not intended to be a complete presentation of the Cutex
brands' financial position, results of operations and cash flows.
In our opinion, the financial statements referred to above, present fairly,
in all material respects, the net assets sold of the Cutex brands, pursuant to
the purchase agreement referred to in Note 1, as of December 31, 1996 and 1995,
and the net sales, cost of sales and direct operating expenses for each of the
two years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Stamford, Connecticut
July 14, 1997
<PAGE>
The Cutex Brands of CHESEBROUGH-POND'S USA CO.
Statement of Net Assets Sold (Note 1)
As of December 31, 1996 and 1995
(Dollars in thousands)
ASSETS: 1996 1995
---------------- ----------------
Inventory $ 722 $ 641
--------------- ----------------
LIABILITIES:
Sales returns reserve 145 162
Commitments and contingencies
---------------- -----------------
Total net assets sold $ 577 $ 479
================ =================
The accompanying notes are an integral part of these financial statements.
<PAGE>
The Cutex Brands of CHESEBROUGH-POND'S USA CO.
Statements of Net Sales, Cost of Sales and Direct Operating
Expenses (Note 1)
For the years ended December 31, 1996 and 1995
(Dollars in thousands)
1996 1995
----------------- -----------------
Net product sales $ 18,216 $ 15,703
Net royalty revenues 638 1,255
----------------- -----------------
Net sales 18,854 16,958
Cost of sales 9,950 8,423
----------------- -----------------
Gross profit 8,904 8,535
Direct operating expenses 870 861
----------------- -----------------
Excess of net sales over cost of
sales and direct operating
expenses $ 8,034 $ 7,674
================= =================
The accompanying notes are an integral part of these financial statements.
<PAGE>
The Cutex Brands of Chesebrough-Pond's USA Co.
Notes to Financial Statements
(Dollars in thousands)
1. Background and Basis of Presentation
Chesebrough-Pond's USA Co. ("CPUSA" or the "Company") is a division of
Conopco, Inc., a wholly owned subsidiary of Unilever United States Inc., which
is a wholly owned subsidiary of Unilever N.V.
The accompanying financial statements have been prepared for the purpose of
presenting the net assets sold of the Cutex brands of CPUSA, pursuant to the
Asset Purchase Agreement (the "Agreement") dated as of March 27, 1997 between
CPUSA and Carson, Inc. (the "Buyer") and its net sales, cost of sales and direct
operating expenses for each of the two years in the period ended December 31,
1996. The transaction was consummated on April 30, 1997 ("Closing Date").
Pursuant to the Agreement, CPUSA sold to the Buyer certain assets used with
respect to the Cutex brands, including all inventories of finished nail polish
remover products, a license agreement (see Note 6) dated as of May 31, 1994
between CPUSA and Jean Philippe Fragrances, Inc. ("Jean Philippe"), as amended,
intangible rights and other assets directly related to the Cutex brands, in
exchange for consideration totaling approximately $37.5 million plus the book
value of the inventory transferred. The Buyer has assumed all liabilities
related to refunds or exchanges for products returned or charged back without
being returned, after the Closing Date, for all Cutex brand products, except for
claims with respect to damaged or deficient nail polish remover products.
The Cutex brands consisting of nail polish remover, nail enamel and nail
care treatment products, nail care implements and lipstick are sold and
distributed principally in the United States. As a result of the Agreement, the
Buyer is acquiring the Cutex brands in the United States and Puerto Rico.
Foreign affiliates of Unilever N.V. and Unilever P.L.C. outside the United
States and Puerto Rico will continue to sell Cutex brand products polish remover
in countries outside the United States and Puerto Rico.
Historically, financial statements have not been prepared for the Cutex
brands. The accompanying financial statements are derived from the historical
accounting records of CPUSA and present the net assets sold of the Cutex brands,
in accordance with the Agreement, as of December 31, 1996 and 1995, and the
statement of net sales, cost of sales and direct operating expenses for each of
the years then ended, and are not intended to be a complete presentation of the
Cutex brands' financial position, results of operations and cash flows. The
historical operating results may not be indicative of the results after the
acquisition by the Buyer.
Continued
<PAGE>
The Cutex Brands of Chesebrough-Pond's USA Co.
Notes to Financial Statements
(Dollars in thousands)
The statement of net sales, cost of sales and direct operating expenses
includes all revenues and expenses directly attributable to the Cutex brands of
the Company. Direct operating expenses consist principally of selling, marketing
and advertising expenses. The statement does not include general and
administrative, research and development, interest, income tax and amortization
of intangible expenses.
CPUSA did not maintain the Cutex brands as a separate business unit and had
never segregated indirect operating cost information relative to these brands.
Accordingly, it is not practical to isolate or allocate indirect operating costs
applicable to the Cutex brands.
2. Summary of Significant Accounting Policies
Revenue Recognition:
Sales of nail polish remover goods are included in income when goods are
shipped to the customer, net of a provision for estimated returns. Royalty
revenues resulting from the Jean Philippe license agreement, which represent
fixed minimum royalty guarantees, are recognized on a straight-line basis over
the period to which they relate. Provisions have been made for amounts not
considered collectible.
Inventories:
Inventories consisting of finished nail polish remover goods are stated at
the lower of cost or market. Cost is determined using the first-in, first-out
method. According to the purchase agreement, the Buyer is not acquiring any raw
materials or work-in-process inventory and therefore, these components of
inventory have been excluded from these financial statements.
Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and contingent
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Significant estimates relate
to sales returns and royalty revenues. Actual results could differ from those
estimates.
Advertising and Promotional Expenses:
Advertising and promotional expenses are charged to expense during the
periods in which they are incurred. Total advertising and promotional expense
was approximately $122 and $182 for the years ended December 31, 1996 and 1995,
respectively.
<PAGE>
The Cutex Brands of Chesebrough-Pond's USA Co.
Notes to Financial Statements
(Dollars in thousands)
3. Commitments and Contingencies
CPUSA has various purchase commitments for materials, supplies and other
items incidental to the ordinary course of business. In the aggregate, such
commitments are not at prices in excess of current market price. In addition,
CPUSA has commitments, in the normal course of business, with various
distributors relating to Cutex nail polish remover products.
Pursuant to the Agreement, the Buyer did not assume any product or other
liability in connection with any service performed or product manufactured by
CPUSA prior to the Closing Date except for liabilities related to returns or
exchanges of Cutex brand products as further described in Note 1.
4. Concentration of Net Sales
One customer accounted for approximately 17% and 13% of net sales for the
years ended December 31, 1996 and 1995, respectively.
5. Manufacturing Agreement
On April 30, 1997, CPUSA and the Buyer, entered into a manufacturing agreement
whereby CPUSA agreed to manufacture, sell and deliver to the Buyer, and the
Buyer agreed to purchase from CPUSA all of its requirements for nail polish
remover products for an agreed-upon amount. The manufacturing agreement is in
effect for five years from the consummation date of the Asset Purchase
Agreement. Thereafter, the manufacturing agreement will be extended for an
additional one-year term, unless terminated in accordance with the manufacturing
agreement.
<PAGE>
The Cutex Brands of Chesebrough-Pond's USA Co.
Notes to Financial Statements
(Dollars in thousands)
6. Agreement with Jean Philippe
On May 31, 1994, CPUSA and Jean Philippe entered into asset and license
agreements whereby Jean Philippe acquired certain assets used in the packaging,
distributing and selling of nail enamel and nail care treatment products, nail
care implements and lipstick under the Cutex trademark in the United States and
Puerto Rico. Under the asset agreement, Jean Philippe acquired the exclusive
right to use certain tools, dies, molds, inventories, intangible assets and
assumed certain liabilities.
Under the license agreement, effective as of August 1, 1994 and amended
March 28, 1996, Jean Philippe agreed unconditionally to guarantee and pay CPUSA
royalties based on a percentage of its sales, including an amount representing a
minimum guarantee. This agreement can be terminated under certain conditions,
including the failure by Jean Philippe to achieve certain sales volumes.
<PAGE>
(2) The Cutex Brands of Chesebrough-Pond's USA Co. Financial
Statements as of March 31, 1997 and 1996
THE CUTEX BRANDS of
CHESEBROUGH-POND'S USA CO.
FINANCIAL STATEMENTS
As of March 31, 1997 and 1996
<PAGE>
Report of Independent Accountants
To the Board of Directors of
Chesebrough-Pond's USA Co.
We have reviewed the accompanying statement of net assets sold of the Cutex
brands of Chesebrough-Pond's USA Co. as of March 31, 1997, and the statement of
net sales, cost of sales and direct operating expenses for each of the
three-month periods ended March 31, 1997 and 1996. These financial statements
are the responsibility of Chesebrough-Pond's USA Co.'s management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
The accompanying financial statements were prepared to present the net
assets sold of the Cutex brands, pursuant to the purchase agreement described in
Note 1, and the net sales, cost of sales and direct operating expenses of the
Cutex brands and are not intended to be a complete presentation of the Cutex
brands' financial position, results of operations and cash flows.
Based on our review, we are not aware of any material modification that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Stamford, Connecticut
July 14, 1997
<PAGE>
The Cutex Brands of CHESEBROUGH-POND'S USA CO.
Statement of Net Assets Sold (Note 1)
As of March 31, 1997 and 1996
(Dollars in thousands)
(Unaudited)
ASSETS: 1997 1996
---------------- ----------------
Inventory $ 849 $ 830
---------------- ----------------
LIABILITIES:
Sales returns reserve 105 161
Commitments and contingencies
---------------- ----------------
Total net assets sold $ 744 $ 669
================ =================
The accompanying notes are an integral part of these financial statements.
<PAGE>
The Cutex Brands of CHESEBROUGH-POND'S USA CO.
Statements of Net Sales, Cost of Sales and Direct Operating
Expenses (Note 1)
For the three-month periods ended March 31, 1997 and 1996
(Dollars in thousands)
(Unaudited)
1997 1996
----------------- -----------------
Net product sales $ 4,049 $ 3,373
Net royalty revenues 120 168
----------------- -----------------
Net sales 4,169 3,541
Cost of sales 2,210 2,218
----------------- -----------------
Gross profit 1,959 1,323
Direct operating expenses 175 215
----------------- -----------------
Excess of net sales over cost of
sales and direct operating
expenses $ 1,784 $ 1,108
================= =================
The accompanying notes are an integral part of these financial statements.
<PAGE>
The Cutex Brands of Chesebrough-Pond's USA Co.
Notes to Financial Statements
(Dollars in thousands)
1. Background and Basis of Presentation
Chesebrough-Pond's USA Co. ("CPUSA" or the "Company") is a division of
Conopco, Inc., a wholly owned subsidiary of Unilever United States Inc., which
is a wholly owned subsidiary of Unilever N.V.
The accompanying financial statements have been prepared for the purpose of
presenting the net assets sold of the Cutex brands of CPUSA, pursuant to the
Asset Purchase Agreement (the "Agreement") dated as of March 27, 1997 between
CPUSA and Carson, Inc. (the "Buyer") and its net sales, cost of sales and direct
operating expenses for each of the three-month periods ended March 31, 1997 and
1996. The transaction was consummated on April 30, 1997 ("Closing Date").
Pursuant to the Agreement, CPUSA sold to the Buyer certain assets used with
respect to the Cutex brands, including all inventories of finished nail polish
remover products, a license agreement (see Note 6) dated as of May 31, 1994
between CPUSA and Jean Philippe Fragrances, Inc. ("Jean Philippe"), as amended,
intangible rights and other assets directly related to the Cutex brands, in
exchange for consideration totaling approximately $37.5 million plus the book
value of the inventory transferred. The Buyer has assumed all liabilities
related to refunds or exchanges for products returned or charged back without
being returned, after the Closing Date, for all Cutex brand products, except for
claims with respect to damaged or deficient nail polish remover products.
The Cutex brands consisting of nail polish remover, nail enamel, and nail
care treatment products, nail care implements and lipstick are sold and
distributed principally in the United States. As a result of the Agreement, the
Buyer is acquiring the Cutex brands in the United States and Puerto Rico.
Foreign affiliates of Unilever N.V. and Unilever P.L.C. outside the United
States and Puerto Rico will continue to sell Cutex brand products in countries
outside the United States and Puerto Rico.
Historically, financial statements have not been prepared for the Cutex
brands. The accompanying financial statements are derived from the historical
accounting records of CPUSA and present the net assets sold of the Cutex brands,
in accordance with the Agreement, as of March 31, 1997 and 1996, and the
statement of net sales, cost of sales and direct operating expenses for each of
the three-month periods ended March 31, 1997 and 1996, and are not intended to
be a complete presentation of the Cutex brands' financial position, results of
operations and cash flows. The historical operating results may not be
indicative of the results after the acquisition by the Buyer.
Continued
<PAGE>
The Cutex Brands of Chesebrough-Pond's USA Co.
Notes to Financial Statements
(Dollars in thousands)
The statement of net sales, cost of sales and direct operating expenses
includes all revenues and expenses directly attributable to the Cutex brands of
the Company for the three-month periods. Direct operating expenses consist
principally of selling, marketing and advertising expenses. The statement does
not include general and administrative, research and development, interest,
income tax and amortization of intangible expenses.
CPUSA did not maintain the Cutex brands as a separate business unit and had
never segregated indirect operating cost information relative to these brands.
Accordingly, it is not practical to isolate or allocate indirect operating costs
applicable to Cutex nail polish remover products.
2. Interim Financial Statement Presentation
The statement of net assets as of March 31, 1997 and 1996 and the related
statement of sales, cost of sales and direct marketing expenses for the
three-month periods ended March 31, 1997 and 1996 are unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of such
financial statements have been included. Such adjustments consisted only of
normal recurring items. The basis of presentation for the three-month periods
ended March 31, 1997 and 1996 are consistent with those described for the years
ended December 31, 1996 and 1995. Interim results may not be indicative of
results for a full year. These financial statements and notes do not contain all
disclosures required by generally accepted accounting principles.
3. Commitments and Contingencies
CPUSA has various purchase commitments for materials, supplies and other
items incidental to the ordinary course of business. In the aggregate, such
commitments are not at prices in excess of current market price. In addition,
CPUSA has commitments, in the normal course of business, with various
distributors relating to the Cutex brands.
Pursuant to the Agreement, the Buyer did not assume any product or other
liability in connection with any service performed or product manufactured by
CPUSA prior to the Closing Date except for liabilities related to returns or
exchanges of Cutex brand products as further described in Note 1.
<PAGE>
(b) Pro Forma Financial Information -
The following pro forma summary financial data has been prepared giving
effect to the acquisition of CUTEX as if the transaction had taken place at
March 31, 1997 for the pro forma consolidated balance sheets and at April 1,
1996 for the pro forma consolidated statements of operations.
The acquisition has been accounted for under the purchase method of
accounting. The carrying values of assets and liabilities have been estimated to
approximate fair market value. Accordingly, no pro forma adjustments to these
amounts were made to reflect the allocation and amount of the ultimate purchase
price. Final allocations will be made on the basis of appraisals and valuations
giving effect to economic and market factors. Any purchase price adjustments
will be made within one year from the acquisition date and are not expected to
be material to the pro forma financial information taken as a whole.
The pro forma financial information is not necessarily indicative of the
results of operations or the financial position which would have been obtained
had the acquistions been consummated at April 1, 1996 or which may be attained
in the future. The pro forma financial information should be read in conjunction
with the historical consolidated financial statements of the Company.
This amended Form 8-K/A3 contains certain amendments to the 8-K/A2 filed on
July 16, 1997 as follows:
* A pro forma adjustment has been included to adjust cost of goods sold to
equal the total cost calculated by using the standard cost and manufacturing
overhead rates provided for in Exhibit A to the Manufacturing Agreement.
* A pro forma adjustment has been included to increase selling expense by
7.5% of net sales of Cutex excluding royalty revenue in accordance with an
agreement between the Company and AM Cosmetics, Inc., a leading manufacturer of
cosmetics (as described in Exhibit 10.4).
* Per a transitional service agreement for accounting services, order
processing and similar services (as outlined in Exhibit 10.3, Appendix A) with
Chesebrough-Pond's USA Co., a pro forma adjustment has been included to increase
marketing and selling expenses.
* A pro forma adjustment has been included to record incremental interest
expense at the Company's historical borrowing rates on $44.3 million of total
debt including current maturities used to finance the Cutex Acquisition. This
pro forma adjustment was previously calculated on the entire amount of debt
outstanding and has been restated to included interest expense only on the
incremental amount of debt.
<PAGE>
<TABLE>
Carson, Inc.
Unaudited Pro Forma Consolidated Balance Sheets
<S> <C> <C> <C>
Dollars in 000's except share data Historical Pro forma Pro forma
March 31, Adjustments March 31,
ASSETS 1997 Increase (decrease) 1997
-------- ------- --------
CURRENT ASSETS:
Cash and cash equivalents $3,141 $0 $3,141
Accounts receivable 15,159 0 15,159
Inventories 15,434 1,944 (1)(a) 17,378
Other current assets 697 0 697
-------- ------- --------
Total current assets 34,431 1,944 36,375
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation 16,067 0 16,067
INVESTMENTS 3,283 0 3,283
INTANGIBLE ASSETS, net 45,513 40,859 (5) 86,372
OTHER ASSETS 3,401 2,579 (6) 5,980
-------- ------- --------
TOTAL ASSETS $102,695 $45,382 $148,077
======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $6,613 $0 $6,613
Accrued expenses 4,367 1,043 (1)(a) 5,410
Current maturities of long-term debt 2,600 400 (6) 3,000
-------- ------- --------
Total current liabilities 13,580 1,443 15,023
LONG-TERM DEBT 28,964 43,939 (6) 72,903
OTHER LIABILITIES 1,627 0 1,627
DEFERRED INCOME TAXES 108 - 108
MINORITY INTEREST IN SUBSIDIARY 2,060 0 2,060
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - - -
Common stock 150 0 150
Paid-in capital 62,901 0 62,901
Note receivable, net of discount (1,386) 0 (1,386)
(Accumulated deficit) retained earnings (4,895) 0 (4,895)
Foreign currency translation adjustment (414) 0 (414)
-------- ------- --------
Total stockholders' equity 56,356 0 56,356
-------- ------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $102,695 $45,382 $148,077
======== ======= ========
See accompanying pro forma footnotes.
</TABLE>
<PAGE>
Carson, Inc.
Pro Forma Consolidated Statements of Operations (Unaudited)
April 1, 1996 to December 31, 1996
Dollars in thousands
<TABLE>
COMPANY ACQUIRED Acquisition
CARSON, INC. HISTORICAL Cutex Adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
Net sales $59,938 $15,313 ($470) (1) $74,781
Cost of sales 26,940 7,732 (1,386) (2) 33,286
Gross profit 32,998 7,581 916 41,495
Marketing and selling expenses 15,692 655 1,113 (3) 17,460
498 (4) 498
General and administrative expenses 5,836 0 0 5,836
Incentive compensation 7,123 0 0 7,123
Depreciation and amortization 1,896 0 766 (5) 2,662
276 (6) 276
0 0
Operating income 2,451 6,926 (1,737) 7,640
Interest expense, net (4,545) 0 (2,692) (7) (7,237)
0
Other income, net 565 0 0 565
(Loss) income before income tax (1,529) 6,926 (4,429) 968
Provision for income tax 1,727 949 (8) 2,676
Net (loss) income from continuing operations ($3,256) $6,926 ($5,378) ($1,708)
Earnings (loss) per common share from continuing o ($0.25) ($0.13)
Weighted average common shares outstanding 12,715 12,715
See accompanying pro forma footnotes.
</TABLE>
<PAGE>
Carson, Inc.
Pro Forma Consolidated Statements of Operations (Unaudited)
Quarter Ended March 31, 1997
<TABLE>
Dollars in thousands Restated
Company Acquisition
Carson, Inc. Acquired - Adjustments
Historical Cutex Increase (decrease) Pro forma
<S> <C> <C> <C> <C> <C>
Net sales $17,932 $4,169 ($120) (1) $21,981
Cost of sales 7,880 2,210 (533) (2) 9,557
Gross profit 10,052 1,959 413 12,424
Selling expenses 5,724 175 304 (3) 6,203
100 (4) 100
General and administrative expenses 2,185 0 0 2,185
Incentive compensation 0 0 0 0
Depreciation and amortization 544 0 256 (5) 800
92 (6) 92
Operating income 1,599 1,784 (339) 3,044
Interest expense, net (604) 0 (881) (7) (1,485)
Other income, net 223 0 0 223
(Loss) income before income tax 1,218 1,784 (1,220) 1,782
Provision for income tax 536 0 248 (8) 784
Net (loss) income $682 $1,784 ($1,468) $998
Earnings per common share $0.05 $0.07
Weighted average common shares outstanding 14,984 14,984
See accompanying pro forma footnotes.
</TABLE>
<PAGE>
Carson, Inc.
Notes to Pro Forma Consolidated Financial Data (Unaudited)
1.(a) Background and Basis of Presentation
During March 1997, the Company entered into an Asset Purchase Agreement
with Conopco, Inc. d/b/a Chesebrough-Pond's USA Co. in order to acquire the
rights to manufacture and market Cutex in the United States (the "Cutex
Acquisition"). Cutex is the leading brand of nail polish remover and is also a
line of nail enamels. The purchase price approximated $41.4 million including
amounts paid to Chesebrough-Pond's of $37.5 million, inventory acquired from
Chesebrough-Pond's of $600,000 and inventory acquired from Jean Phillipe of $3.3
million. In addition, the Company incurred debt related acquisition costs of
$2.6 million and other direct acquisition fees and expenses of $1.4 million.
This acquisition is accounted for under the purchase method of accounting. Funds
were provided by additional long-term debt and the transaction was completed on
April 30, 1997.
During March 1997, the Company entered into an Asset Repurchase Agreement
with Jean Philippe Fragrances, Inc. ("Jean Phillipe"), the entity that
previously held the license to package, distribute and sell nail enamel and nail
care treatment products, nail care implements and lipstick under the Cutex
trademark in the United States and Puerto Rico. In connection with the
termination on April 30, 1997 of the license agreement between Conopco, Inc. and
Jean Philippe by Carson as successor in interest to Conopco, Inc., Carson
acquired certain assets of Jean Philippe used in connection with the Cutex
license agreement.
The pro forma data presented excludes all pre-acquisition results of Let's
Jam hair styling products (acquired by the Company during April 1997) due to
immateriality and Jean Phillipe (which produced under license Cutex branded nail
enamel and related products).
<PAGE>
1.(b) As a result of the termination of the Jean Phillipe license agreement,
the Company has recorded a pro forma reduction in net sales equal to the royalty
fee paid to Chesebrough-Pond's USA Co. by Jean Phillipe, in accordance with the
license agreement. Jean Phillipe manufactured and marketed Cutex branded nail
enamel, nail care implements and lipsticks under a licensing agreement with
Chesebrough-Pond's USA Co. All financial results have been excluded from the
Company's pro forma results, including the payment of royalties to
Chesebrough-Pond's. Concurrent with the acquisition, the Company began to
directly market and distribute the Cutex branded nail enamel, nail care
implements and lipsticks previously sold by Jean Phillipe.
2. The Company entered into a manufacturing agreement with
Chesebrough-Pond's USA Co. to manufacture nail polish remover at standard
contractual costs and manufacturing overhead rates provided for in Exhibit A of
the Manufacturing Agreement. As a result, a pro forma adjustment has been
included to lower cost of goods sold to equal the total cost of units sold using
these new contractual rates.
3. The Company entered into an agreement with AM Cosmetics, a related
party, to sell products under the Cutex brand name. As a result, a pro forma
adjustment has been included to increase selling expense by the contractual rate
of 7.5% of net sales of Cutex products (as described in Exhibit 10.4).
4. The Company entered into a transitional service agreement for
accounting services, order processing and similar services (as outlined in
Exhibit 10.3, Appendix A) with Chesebrough-Pond's USA Co. As a result, a pro
forma adjustment has been included to increase selling expense.
5. Goodwill of approximately $40.9 million was recorded as a result of the
Cutex acquisition and is being amortized over a period of 40 years. The Company
is currently performing a valuation of the Cutex assets acquired. As a result,
the amount assigned to goodwill and the amortization of intangibles may change
based upon the results of this valuation.
6. On April 30, 1997, the Company entered into an Amended and Restated
Credit Agreement with Banque Indosuez, New York Branch, as agent, and the
lenders named therein (filed as an Exhibit to the Company's Form 10-Q dated June
30, 1997). The Amended and Restated Credit Agreement replaced the Company's
existing $40 million senior credit facility with a $100 million senior credit
facility consisting of $25 million in Term A loans, $50 million in Term B loans
and $25 million in revolving loan commitments. The proceeds of the new term
loans were used to finance the Cutex acquisition. The term loan A and revolving
credit facility bear interest at the lower of the applicable prime rate plus
0.5% or LIBOR rate plus 2.0%
<PAGE>
and have a final maturity date of April 2002. The term loan B bears
interest at the lower of the applicable prime rate plus 1.0% or LIBOR rate plus
2.5% and has a final maturity date of April 2004. Interest accrued of $313,000
on the former senior credit facility was paid as a part of the refinancing. The
debt issue costs of $2.6 million are being amortized over the life of the debt
of seven years.
7. A pro forma adjustment has been included to record incremental interest
expense at the Company's actual borrowing rates on $44.3 million of debt used to
finance the Cutex Acquisition.
8. The net effect of the Cutex Acquisition and the related pro forma
adjustments has been taxed at the Company's historical marginal tax rate.
<PAGE>
(c) Exhibits
Exhibit 10.1
Execution Copy
ASSET PURCHASE AGREEMENT
between
CONOPCO, INC. d/b/a CHESEBROUGH-POND'S USA CO.
Seller
and
CARSON, INC.
Buyer
dated as of March 27, 1997
<PAGE>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE 1 Transfer of Assets, Assumption of Liabilities
and Purchase Price..........................................1
1.1 Transfer of Assets and Business.............................1
1.2 Excluded Assets.............................................2
1.3 Assumption of Certain Liabilities...........................3
1.4 Consents to Certain Assignments.............................4
1.5 Purchase Price..............................................4
ARTICLE 2 Closing and Post Closing Adjustment.........................4
2.1 Closing.....................................................4
2.2 Payment of Closing Purchase Price...........................5
2.3 Deliveries by the Seller....................................5
2.4 Deliveries by the Buyer.....................................6
2.5 Post Closing Adjustment.....................................6
ARTICLE 3 Representations and Warranties of the Seller................7
3.1 Organization................................................7
3.2 Authorization...............................................7
3.3 No Violations; No Consents or Approvals Required............8
3.4 Financial Statements........................................8
3.5 Title to Transferred Assets.................................8
3.6 Transferred Contracts.......................................8
3.7 Absence of Change...........................................9
3.8 Compliance with Law........................................10
3.9 Litigation.................................................11
3.10 Intellectual Property......................................11
3.11 Taxes......................................................11
3.12 Inventories................................................11
3.13 Customers and Suppliers....................................12
3.14 Brokers and Finders........................................12
3.15 Sales Representatives, Dealers and Distributors............12
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<PAGE>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS (CONTINUED)
Page
ARTICLE 4 Representations and Warranties of the Buyer................12
4.1 Organization...............................................13
4.2 Authorization..............................................13
4.3 Consents or Approvals......................................13
4.4 Resale of Inventories......................................13
4.5 Brokers and Finders........................................13
ARTICLE 5 Covenants; Additional Agreements...........................13
5.1 Conduct of the Business Pending Closing....................13
5.2 Access.....................................................14
5.3 Non-Compete Covenant.......................................15
5.4 Reasonable Efforts; Cooperation............................16
5.5 Regulatory Filings.........................................16
5.6 Public Announcements.......................................16
5.7 Confidentiality............................................16
5.8 Post-Closing Confidentiality...............................17
5.9 Termination of Insurance...................................17
5.10 Manufacturing Agreement....................................17
5.11 Use of Name................................................17
5.12 License to Use Certain Trademarks and Trade Names..........17
5.13 Delivery of Certain Documentation Relating
to Intellectual Property...................................18
5.14 Delivery of Permits........................................18
5.15 Shipment of the Inventories................................18
5.16 Allocation of the Purchase Price...........................18
5.17 Exclusivity................................................18
5.18 Employee Matters...........................................19
ARTICLE 6 Conditions to Closing......................................19
6.1 Conditions to Obligations of Both Parties to Close.........19
6.2 Conditions to Obligation of the Buyer to Close.............19
6.3 Conditions to Obligation of the Seller to Close............20
ARTICLE 7 Termination, Amendment and Waiver..........................21
7.1 Termination................................................21
ii
<PAGE>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS (CONTINUED)
Page
7.2 Amendment..................................................21
7.3 Waiver.....................................................22
ARTICLE 8 Indemnification............................................22
8.1 Agreement to Indemnify.....................................22
8.2 Procedure for Indemnification..............................23
8.3 Limitations on Indemnification.............................24
ARTICLE 9 MISCELLANEOUS..............................................24
9.1 Expenses, Taxes............................................24
9.2 Further Assurances.........................................25
9.3 Notices....................................................25
9.4 Headings...................................................26
9.5 Applicable Law.............................................26
9.6 Assignment; No Third Party Beneficiaries...................26
9.7 Affiliates.................................................26
9.8 Counterparts...............................................26
9.9 Entire Agreement...........................................26
9.10 Severability...............................................26
9.11 Bulk Sales.................................................27
9.12 Refunds and Remittances....................................27
Signatures.......................................................28
List of Schedules and Exhibits...................................29
iii
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT ("Agreement"), dated as of March , 1997, between
Conopco, Inc., d/b/a Chesebrough-Pond's USA Co., a New York corporation (the
"Seller"), and Carson, Inc., a corporation of the State of Delaware (the
"Buyer").
WHEREAS, the Seller wishes to sell, and the Buyer wishes to purchase,
certain assets used in the business of selling, distributing, packaging,
manufacturing (excluding the equipment used by Seller in the manufacture of nail
polish remover) and marketing CUTEX nail care and lip color products including,
without limiting the foregoing, nail polish remover products, nail enamel
products, nail care treatment products, nail care implements and lipstick, in
the United States and Puerto Rico (the "Business", the United States and Puerto
Rico being hereinafter referred to as the "Territory"), as more fully described
in Section 1.1, and the Buyer will assume certain liabilities and obligations
relating to the Business, as more fully described in Section 1.3, all upon the
terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Seller and the Buyer, intending to be legally bound,
hereby agree as follows:
ARTICLE 1
Transfer of Assets, Assumption
of Liabilities and Purchase Price
1.1 Transfer of Assets and Business. At the Closing (as defined in Section
2.1), the Seller shall, and shall cause its affiliates to, sell, transfer,
assign and deliver to the Buyer, and the Buyer shall purchase, acquire and
accept from the Seller the following assets that are used exclusively in
connection with the Business and owned by the Seller or its affiliates, as such
assets and rights shall exist on the Closing Date (as defined in Section 2.1)
subject, however, to the Seller's covenants, representations and warranties
contained in this Agreement including, without limitation, those set forth in
Articles 3 and 5 (collectively, the "Transferred Assets"):
(i) all inventories of finished nail polish remover products of the
Business (the "Inventories");
(ii) subject to Section 1.4, all contracts, binding commitments, purchase
or sales orders, licenses, including the License Agreement dated as of May 31st,
1994 between Chesebrough-Pond's Inc. and Jean Philippe Fragrances, Inc. as
amended wherein Jean Philippe Fragrances, Inc. received the exclusive right to
use the trademarks of the Business in connection with certain nail and lip
products, and other agreements of any kind, oral or written, to which the Seller
or its affiliates are parties or in which they have rights and that relate
exclusively to
1
<PAGE>
the Business, except any contracts for the sale of finished products or the
purchase of supplies or services to the extent all sales or purchases thereunder
have been completed as of the close of business on the Closing Date (the
"Transferred Contracts"),
(iii) all customer lists, sales and pricing information, advertising
and promotional materials, and other marketing information, credit information
and files and other books and records relating exclusively to the Business,
other than records kept for the Seller's financial reporting or tax purposes
(copies of which will be provided to Buyer at Closing) (the "Records");
(iv) all trademarks, registrations and renewals thereof and
applications therefor, trade names and logos (the "Trademarks"), inventions,
patents and patent applications (including renewals, reissues, divisions and
continuations thereof) (the "Patents"), copyrights, manufacturing procedures and
specifications, formulae, processes, quality control procedures, proprietary
knowledge, trade secrets, trade dress know-how, and all other intellectual
property rights in the Territory, used exclusively in connection with the
Business including, without limiting the foregoing, those set forth on Schedule
3.10 (all of the above collectively referred to as the "Intellectual Property");
(v) all goodwill of the Business, including the exclusive right in the
Territory to represent oneself as the successor to the Business;
(vi) to the extent transfer is permitted by law, all governmental
licenses, permits, approvals and applications therefor relating to the
Transferred Assets; and
1.2 Excluded Assets. Notwithstanding anything to the contrary herein; the
parties understand and hereby agree that the Seller and its affiliates shall not
sell, transfer or assign to the Buyer those assets, properties and rights of the
Seller or its affiliates listed below:
(i) any cash, cash equivalents, investments and bank accounts;
(ii) any accounts receivable existing as of the close of business on the
Closing Date;
(iii) any rights to the name "Chesebrough-Pond's" or any variants or
derivatives thereof;
(iv) any assets related to any employee benefit plan in which any
employees of the Seller participate, including without limitation the right to
receive refunds of or credits for any contributions to any such plan made by the
Seller;
(v) any refunds or claims for refunds from Federal, state or local
taxing authorities with respect to taxes paid or to be paid by the Seller or its
affiliates;
2
<PAGE>
(vi) refunds and rebates by insurers in respect of any policies canceled as
of the Closing Date;
(vii) all corporate charter documents, minute books, stockholder
records, stock transfer records, corporate seals and similar corporate records;
(viii) records related to (A) Excluded Assets (as defined in this
Section 1.2), (B) Retained Liabilities (as defined in Section 1.3), and (C) the
negotiation and consummation of the transactions contemplated by this Agreement,
including without limitation confidential communications with legal counsel
representing the Seller and its affiliates;
(ix) all tax and other deposits or prepayments made in respect of any
Retained Liabilities;
(x) any claims against governmental entities or third parties to the extent
relating to periods ending prior to or on the Closing Date;
(xi) the right to assert the attorney-client privilege with respect
to any confidential communications between the Seller and its affiliates and any
legal counsel representing the Seller and its affiliates in connection with the
sale of the Business; and
(xii) any other assets, properties and rights of the Seller or its
affiliates not listed in Section 1.1 unless provided for elsewhere in this
Agreement.
All of the assets, properties and rights of the Seller and its affiliates
referred to in this Section 1.2 are hereinafter collectively referred to as the
"Excluded Assets".
The Buyer acknowledges that the Seller is not conveying, pursuant to this
Agreement, any rights to use the Intellectual Property in any country other than
the United States and Puerto Rico.
1.3 Assumption of Certain Liabilities.
(a) On the Closing Date, the Buyer shall assume and thereafter pay,
perform and discharge as and when due the following obligations and liabilities
of the Seller and its affiliates with respect to the Business:
(i) all liabilities and obligations to the extent accruing with
respect to periods after the Closing Date under the Transferred Contracts
(exclusive, however, of any liabilities or obligations arising thereunder as a
result of any breach, default or failure of the Seller or its affiliates to
perform any covenants or obligations required to be performed by them during any
periods prior to the close of business on the Closing Date); and
3
<PAGE>
(ii) except for claims with respect to damaged or deficient
products, all claims for refunds or exchanges (including but not limited to
invoice adjustments resulting therefrom) with respect to nail polish remover
products of the Business sold by the Seller on or prior to the Closing Date that
are returned (or charged back without being returned) after the Closing Date by
current or former customers of the Business. Seller represents that the costs of
refunds and exchanges for the calendar years 1994, 1995, 1996 and January 1997
are set forth on Schedule 3.4. Seller represents that it made no sales of nail
care products or lip color products, except for nail polish remover, after
August 1, 1994. Accordingly, except for nail polish remover products (as
discussed above), any returns of such products sold after August 1, 1994 are the
obligation of Buyer;
(iii) Subject to Buyer's rights under the Manufacturing Agreement
(referred to in Section 5.10) all liabilities and obligations for breach of
warranty or product liability (a) claims for injuries which occurred on or prior
to the Closing Date if the first written notice of such claims ("Notice") is
received on a date which is no earlier than eighteen (18) months after the
Closing Date ("Claim Date"), provided however, that if any of the Seller, its
affiliates or the Buyer receives or has received such Notice at any time
(whether before, on or after the Closing Date) prior to the Claim Date, then
such claims shall remain as Retained Liabilities (as defined below) of Seller
and its affiliates and (b) claims for injuries which occurred after the Closing
Date
(b) The liabilities and obligations of the Seller and its affiliates to be
assumed by the Buyer pursuant to Section 1.3(a) are hereinafter referred to as
the "Assumed Liabilities". Any and all liabilities and obligations of the Seller
and its affiliates not specifically referred to as being assumed by Buyer in
Section 1.3(a) shall remain the sole responsibility of the Seller and its
affiliates and are hereinafter referred to as the "Retained Liabilities".
1.4 Consents to Certain Assignments. If the Seller is unable to obtain a
consent, which is required, to the assignment of any Transferred Contract
despite the use of commercially reasonable efforts, the Closing shall
nonetheless take place and the Seller shall continue to use all commercially
reasonable efforts to secure such consent after the Closing or otherwise to
transfer or provide to the Buyer the same benefits of such contract as if it had
been assigned to the Buyer, provided, however, that the Buyer shall be
responsible for all costs and expenses with respect to such contracts for all
periods after the close of business on the Closing Date. In no event shall the
use of commercially reasonable efforts require the payment of any consideration
by the Seller. However, if the failure to obtain such consent will materially
adversely affect Buyer or its ability to consummate this Agreement or operate
the Business, it may terminate this Agreement with no further liability to
either party.
1.5 Purchase Price. The purchase price for the Transferred Assets and the
Business, subject to adjustment as provided in Section 2.5, is U.S. $37,500,000
plus the Target Inventory Amount referred to herein prior to adjustments as the
"Closing Purchase Price".
ARTICLE 2
Closing and Post Closing Adjustment
4
<PAGE>
2.1 Closing. Subject to the satisfaction of the conditions set forth in
Article 6, the closing of the transactions contemplated hereby (the "Closing")
shall occur at the offices of Conopco, Inc. at 390 Park Avenue, New York, New
York at 10:00 o'clock a.m. (local time) on the later of i) April 15, 1997 or ii)
the third business day after the expiration or termination of the statutory
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 as
amended (the "HSR Act") or such other time and date as the parties may agree
upon. The date on which the Closing takes place is herein called the "Closing
Date". The Closing shall be effective as of 11:59 p.m. (the "Close of Business")
on the Closing Date.
2.2 Payment of Closing Purchase Price. On the Closing Date, the Buyer
shall pay, by wire transfer of immediately available funds to the Seller's
account at (the name and account number of which Seller will provide to Buyer
three (3) days prior to Closing), an amount equal to the Closing Purchase Price.
2.3 Deliveries by the Seller. At the Closing, the Seller shall execute and
deliver or cause to be executed and delivered to the Buyer the following:
(i) a Bill of Sale, Assignment and Assumption Agreement
substantially in the form of Exhibit A, together with such consents, if
required, to such assignments referred to therein as have been obtained from the
other parties to the Transferred Contracts;
(ii) an Assignment and Assumption Agreement, substantially in the
form of Exhibit B, providing for the assignment to the Buyer of the Seller's and
its affiliates' rights, and the assumption by the Buyer of the Seller's and its
affiliates' obligations, under the Mold Acquisition Agreement with Harbison
Walker, Inc. (the "Assignment and Assumption Agreement"), together with such
consents, if required, to such assignments as have been obtained from the other
parties to such Agreement;
(iii) Assignments for the Patents, Trademarks and other Intellectual
Property including, without limiting the foregoing, those set forth on Schedule
3.10 substantially in the forms set forth in Exhibit C;
(iv) a Copyright Assignment, substantially in the form of Exhibit D, for
the copyrights included in the Intellectual Property;
(v) the certificates and documents required pursuant to Section 6.2;
(vi) a royalty-free non-exclusive License Agreement with a term for the
life of the Patent including any renewals, continuations, revisions or reissues
thereof, under U.S. Patent No. 4,829,092 to permit the Buyer to continue to sell
the CUTEX nail polish remover utilizing the technology claimed in the U.S.
Patent No. 4,829,092, substantially in the form of Exhibit E;
(vii) the Manufacturing Agreement, substantially in the form of Exhibit G;
5
<PAGE>
(viii) an Assignment of Seller's and Licensor's rights and
obligations under the License Agreement between Chesebrough-Pond's, Inc., as
Licensor, and Jean Philippe Fragrances, Inc., as Licensee, as amended, referred
to in Section 1.1(ii), substantially in the form of Exhibit H.
(ix) such other assignments, agreements, documents and instruments
prepared by Buyer at Buyer's expense as reasonably necessary to vest in Buyer
the good and valid title to the Transferred Assets and the Business free and
clear of all Liens.
2.4 Deliveries by the Buyer. At the Closing, the Buyer shall execute and
deliver or cause to be executed and delivered to the Seller the Assignment and
Assumption Agreement, such other instruments of assumption as shall be necessary
to vest in the Buyer, as of the close of business on the Closing Date, the
Assumed Liabilities, the certificates and documents required pursuant to Section
6.3, and a royalty-free non-exclusive license agreement to permit Seller to
manufacture, package and sell CUTEX nail polish remover to Unilever companies
for resale in countries outside of the Territory and to copack CUTEX nail polish
remover for the Buyer, substantially in the form of Exhibit F.
2.5 Post Closing Adjustment.
(a) Within thirty (30) days following the Closing Date, the Seller shall
prepare, at the Seller's expense, and deliver to the Buyer a statement of the
book value of the Inventories as of the close of business on the Closing Date
(the "Closing Date Inventory Statement"), determined in accordance with the
historical accounting principles,practices, methods and policies of the Business
consistently applied. The book value of the Inventories shall reflect a physical
count of the Inventories conducted by the Seller and its representatives at the
opening of business on the first business day after the Closing Date. The Buyer
and its representatives shall have the right to observe the physical count of
the Inventories, review all books, work papers and procedures in connection with
the preparation of the Closing Date Inventory Statement and perform any other
reasonable procedures necessary to verify the accuracy thereof.
(b) Unless the Buyer notifies the Seller in writing within thirty (30)
days after receipt of the Closing Date Inventory Statement that the Buyer
objects to the calculation of the book value of the Inventories and specifies in
reasonable detail the basis for such objection, the Closing Date Inventory
Statement shall become final and binding upon the parties for purposes of the
adjustment to the Closing Purchase Price pursuant to Section 2.5(c). If the
Buyer submits written objections to the Seller within such period, the Buyer and
the Seller shall negotiate in good faith to resolve such objections during the
thirty (30) day period after the Seller's receipt of the Buyer's notice of
objections. During such thirty (30) day period, the Seller and its
representatives shall have the right to review all books and work papers and
procedures related to such notice of objections, the calculation thereof and
basis therefor. If the Buyer and the Seller are unable in good faith to resolve
such objections within such thirty (30) day period, the disputed matters shall
be submitted to a nationally recognized public accounting firm mutually agreed
upon by the Buyer and Seller, to determine the Closing Date Inventory Statement
valuation in accordance with the historical accounting principles, practices,
methods and policies of the Business consistently applied (or, if such firm
declines to act, to another
6
<PAGE>
nationally-recognized public accounting firm mutually agreed upon by the Buyer
and the Seller and, if the Buyer and the Seller are unable to agree upon an
initial or successor firm, within ten (10) days after the end of such thirty
(30) day period, then the Buyer and Seller shall each select a firm and such
firms shall jointly select a third firm to resolve the disputed matters). The
decision of the accounting firm resolving the disputed matters shall be final
and binding on the parties and the Buyer and the Seller shall each bear one-half
of the fees, costs and expenses of such accounting firm. After final
determination of any disputes with respect to the book value of the Inventories
as set forth on the Closing Date Inventory Statement, the parties shall have no
further right to make any claims against each other with respect to any element
of the calculation of the book value of the Inventories. Seller and Buyer
acknowledge that the sole purpose of the determination of the book value of the
Inventories on the Closing Date inventory Statement is to adjust the Closing
Purchase Price so as to reflect the change in the book value of the Inventories
resulting only from the operation of the Business from the Financial Statement
Date (as defined in Section 3.7) to the Closing Date.
(c) Within ten (10) days after the book value of the Inventories has been
finally determined in accordance with Section 2.5(b), the excess or shortfall
over or below the amount of U.S. $600,000 ("Target Inventory Amount"), if any,
shall be paid by the Buyer to the Seller or by the Seller to the Buyer, as the
case may be, plus simple interest at a rate of 6% per annum from the Closing
Date to the date of payment. Such payment shall be made by wire transfer of
immediately available funds.
ARTICLE 3
Representations and Warranties of the Seller
The Seller represents and warrants to the Buyer as follows (all references to
"Seller" below shall be deemed to only include its affiliates to the extent that
any of them own or have an interest in any of the Transferred Assets or the
Business or will be executing any of the documents contemplated hereunder):
3.1 Organization. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York (Delaware
with regard to affiliate, Chesebrough-Ponds, Inc.). The Seller is duly qualified
to do business as a foreign corporation and is in good standing in all
jurisdictions in which the nature of the Business currently conducted requires
such qualification, except where the failure to so qualify would not have a
material adverse effect on the Business.
3.2 Authorization. The Seller has full corporate power and authority to
carry on the Business as now conducted and to own or lease the Transferred
Assets. The Seller has full corporate power and authority to execute and deliver
this Agreement and all other documents contemplated hereby to be executed and
delivered by the Seller and to consummate the transactions contemplated hereby
and thereby. The Seller has taken all corporate action required to authorize the
execution and delivery of this Agreement and all other documents contemplated
hereby to be executed and delivered by the Seller and to authorize the
consummation of the
7
<PAGE>
transactions contemplated hereby and thereby. This Agreement has been, and on
the Closing Date the other documents to be executed by the Seller hereunder will
be, duly executed and delivered by the Seller and this Agreement is, and on the
Closing Date each of such other documents will be, legal, valid and binding
obligations of the Seller, enforceable against the Seller in accordance with
their terms.
3.3 No Violations; No Consents or Approvals Required. Neither the
execution and delivery of this Agreement or the other documents to be executed
on the Closing Date by the Seller nor the consummation of the transactions
contemplated hereby or thereby will: (i) conflict with or violate any provision
of the certificate or articles of incorporation or by-laws of the Seller, (ii)
conflict with or violate any statute, law, rule, regulation, ordinance, order,
writ, injunction, judgment or decree applicable to the Seller, or (iii) conflict
with or result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or result in the
creation of any Lien (as such term is defined in Section 3.5) pursuant to, any
agreement or other instrument to which the Seller is a party with respect to the
Business or to which the Transferred Assets are subject. Except for the consents
of third parties specified in Schedule 3.3 and in connection with the HSR Act,
no notice, declaration, report or other filing or registration with, and no
waiver, consent, approval or authorization of, any governmental or regulatory
authority of instrumentality or any other person is required to be given, made
or obtained by the Seller in connection with the execution, delivery or
performance of this Agreement.
3.4 Financial Statements. Attached hereto as Schedule 3.4 are the
unaudited statements of sales and profit before indirects of the Business for
each of the calendar years 1994, 1995 and 1996 (the "Financial Statements"). The
Financial Statements: (i) were prepared in accordance with the historical
accounting principles, practices, methods, and policies of the Business
consistently applied, and (ii) fairly present in all material respects, in
accordance with such historical accounting principles, practices, methods, and
policies, the sales and profit before indirects of the Business for the periods
indicated.
3.5 Title to Transferred Assets. The Seller or its affiliates, as the case
may be, have good title to the Transferred Assets, free and clear of all claims,
liens, mortgages, pledges, charges, security interests or encumbrances of any
kind or nature ("Liens").
3.6 Transferred Contracts.
(a) Schedule 3.6, together with Schedule 3.10, contains a complete and
correct list of all Transferred Contracts, except: (i) orders for the purchase
of raw materials or supplies used in the manufacture of products of the
Business, (ii) unfilled orders from customers to the Seller in an amount in each
case not in excess of $15,000 for purchases of products of the Business, or
(iii) other contracts or commitments entered into in the ordinary course of
business not exceeding $25,000. The aggregate value and unfilled commitment
under Transferred Contracts not listed on Schedule 3.6 (which are set forth in
(a) (i), (ii) and (iii) above), does not exceed $150,000.
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(b) The Seller has delivered or made available to the Buyer complete and
correct copies of all written Transferred Contracts on Schedules 3.6 and 3.10.
The Transferred Contracts are in full force and effect and enforceable in
accordance with their terms, except that the enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws relating to creditors' rights generally or
general principles of equity (regardless of whether enforcement is considered in
proceedings at law or in equity), and there does not exist thereunder any
material default or event or condition that, after notice or lapse of time or
both, would constitute a material default thereunder by the Seller or its
affiliates or, to the best of the Seller's knowledge, by any other party
thereto. The Seller has not received any written notice that any party to any of
the Transferred Contracts intends to cancel or terminate such agreement.
(c) All Transferred Contracts listed on Schedules 3.6 and 3.10 are
assignable by the Seller or its affiliates to the Buyer without the consent of
any other person or entity.
3.7 Absence of Change. Except as disclosed in Schedule 3.7, since December
31, 1996 (the "Financial Statement Date"), the Business has been operated only
in the ordinary course in a manner consistent with Seller's past practice ("in
the ordinary course of business"), there has been no material adverse change in
the Business or the Transferred Assets and the Seller and its affiliates have
not, with respect to the Business:
(a) incurred any damage, destruction or similar loss, whether or not
covered by insurance, materially adversely affecting the Business or the
Transferred Assets;
(b) sold, assigned, transferred, leased or otherwise disposed of any of
the tangible or intangible assets of the Business (except for Inventory in the
ordinary course of business), including the Intellectual Property;
(c) mortgaged, pledged, granted or suffered to exist any Lien on the
Transferred Assets;
(d) other than in the ordinary course of business, entered into, made any
amendment of or terminated any lease, contract, license or other agreement of
the Business;
(e) effected any material change in the accounting practices, procedures or
methods of the Business;
(f) entered into any other transaction other than in the ordinary course
of business, or changed in any material respects the policies or practices of
the Business; or
(g) written down or written up the value of any inventories or receivables
or revalued any assets of the Seller other than in the ordinary course of
business;
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(h) other than in the ordinary course of business, amended, terminated,
canceled or compromised any claims of the Seller or waived any other rights of
value to the Business or any of the Transferred Assets;
(i) merged with, entered into a consolidation with, or acquired an
interest in any person or entity or acquired a substantial portion of the assets
or business of any person or entity or any division or line of business thereof,
or otherwise acquired any material assets;
(j) except in the ordinary course of business, incurred or assumed any
indebtedness or liability;
(k) made any loan to, guaranteed any indebtedness of, or otherwise incurred
any indebtedness on behalf of any person or entity whether or not an affiliate
of Seller;
(l) except in the ordinary course of business, failed to pay any creditor
any amount owed to such creditor when due;
(m) failed to prosecute any Trademark application or failed to maintain
any registration for a Trademark used by Seller or permitted to lapse any Patent
application or Patent by failing to respond to any Patent Office actions or by
failing to pay any renewal fees respectively, which or under which, Seller has
any right or license;
(n) allowed any permit or license material to the operations of the
Business that was issued or relates to Seller or otherwise relates to the
Business or Transferred Assets to lapse or terminate or failed to renew any
insurance policy, permit or license that is scheduled to terminate or expire
within 45 calendar days of the Closing Date;
(o) other than in the ordinary course of business, amended, modified or
consented to the termination of, or entered into, any Transferred Contract, or
Seller's rights thereunder;
(p) suffered any unusual buildup of its inventories;
(q) entered into any agreement to take any of the types of action
described in subsections (a) through (p) above.
3.8 Compliance with Law. The Business and Transferred Assets are in
compliance with all applicable statutes, laws, rules, regulations, orders,
ordinances, judgments and decrees of all governmental authorities, including
without limitation those relating to health and safety, toxic substances, the
Food, Drug and Cosmetics Act and Good Manufacturing Practices and also with the
terms of all governmental authorizations and approvals ("Permits"), except as
set forth in Schedule 3.8 or where the failure to so comply would not have a
material adverse effect on the Business or the Transferred Assets. Schedule 3.8
sets forth a list of all Permits that are held by the Business and required for
the Seller to conduct the Business as currently conducted. To the best of the
Seller's knowledge, all such Permits are in full force and effect and no
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proceedings are pending or threatened that may result in the revocation,
cancellation or suspension thereof.
3.9 Litigation. Except as set forth in Schedule 3.9, there are no claims,
actions, suits, proceedings (including administrative proceedings) or
investigations pending or, to the best of the Seller's knowledge, threatened
before any court, arbitrator or governmental agency to which the Seller is a
party and that relate to the Transferred Assets or the Business or in which any
person or entity seeks to prevent, enjoin or restrain the consummation of the
transactions contemplated by this Agreement.
3.10 Intellectual Property. Schedule 3.10 sets forth a list of all
Patents, registrations and applications for Trademarks including, without
limitation, trademark registrations, renewals and applications, patents,
divisions, continuations and reissues therefor, all of which are unrevoked and
uncancelled. Except as set forth in Schedule 3.10, neither the Seller nor its
affiliates have granted to or received a grant from any third party any license
or other right to any of the Intellectual Property. Except as set forth in
Schedule 3.10, there is no claim pending or, to the best of the Seller's
knowledge, threatened alleging that the Seller's use or ownership of the
Intellectual Property infringes or has infringed the rights of any third party
and, to the best of the Seller's knowledge, such use of the Intellectual
Property by the Business as currently conducted does not infringe upon any such
rights. To the best of the Seller's knowledge, except as set forth on Schedule
3.10, no third party is infringing upon the Seller's or its affiliates' rights
in the Intellectual Property. Neither the Seller nor its affiliates own or use
any other item of Intellectual Property except as described in the above
referenced list, which is material to the Business. The Patents and
registrations for the Trademarks have not been revoked or cancelled due to the
failure to pay any taxes or maintenance fees. Seller or its affiliates, as set
forth in Schedule 3.10, have good and valid title to the Intellectual Property
free and clear of all Liens. The Patents and registrations for the Trademarks
have been properly maintained and renewed in accordance with all applicable laws
and in all applicable governmental offices, and are freely transferrable.
3.11 Taxes. All material federal, state and local tax returns, reports and
declarations of every kind required to be filed by the Seller with respect to
the Business prior to the Closing Date have been or will be timely filed, and
all material taxes shown thereon or to be shown thereon to be due and payable
have been paid or will be timely paid. The Seller has timely paid or will timely
pay all material taxes imposed on them with respect to the Business, including
with respect to the transactions contemplated by this Agreement except as
provided in Section 9.1, that are due and payable for each period ending on or
prior to the Closing Date and the portion ending on the Closing Date of any
period that includes but ends after the Closing Date.
3.12 Inventories. The Inventories to be reflected on the Closing Date
Inventory Statement will be manufactured by the Seller in the ordinary course of
business and will be in conformity in all material respects with applicable
specifications, except as described on Schedule 3.12. All such Inventories will
consist solely of merchandise useable or saleable in the ordinary course of
business and will not be obsolete or damaged, except as described on
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Schedule 3.12. Since the Financial Statement Date, there have been no material
changes in the Inventories except in the ordinary course of business. Seller has
good and valid title to the Inventories free and clear of all Liens. The
Inventories do not consist of any items held on consignment. Seller is not under
any obligation or liability with respect to accepting returns of items of
Inventory or merchandise in the possession of its customers other than in the
ordinary course of business. No clearance or extraordinary sale of the
Inventories has been conducted since December 31, 1996. Seller has not acquired
or committed to acquire or manufacture Inventory for sale which is not of a
quality and quantity usable in the ordinary course of the Business within a
reasonable period of time and consistent with past practices. Schedule 3.12 sets
forth a complete list of the addresses of the warehouses and other facilities in
which the Inventories (controlled by Seller in the Territory) are located. The
Inventories are at least equivalent in quality to the inventory generally
included in such inventory in the past and are not in excess of the normal
purchasing patterns of the Seller.
3.13 Customers and Suppliers. Schedule 3.13 sets forth the names and
addresses of the ten (10) largest customers and suppliers (in dollar volume) of
the Business for the fiscal year ended December 31, 1996. Except as set forth on
Schedule 3.13, no such customer or supplier has ceased, materially reduced or
materially changed its method of doing business with the Seller nor has Seller
received any notice that any such customer or supplier intends to cease,
materially reduce or materially change its method of doing business with Seller.
Seller's relationship with each customer and supplier is a good commercial
working relationship. Except as disclosed on Schedule 3.13 neither Seller or its
affiliates have any direct or indirect interest in any competitor, customer or
supplier of the Business or Seller.
3.14 Brokers and Finders. Neither the Seller nor any of its affiliates
have dealt with any finders, brokers, agents or others in connection with the
transactions contemplated by this Agreement.
3.15 Sales Representatives, Dealers and Distributors. Except as set forth
in Schedule 3.15, Seller, with respect to the Business, is not a party to any
contract or agreement with any person or entity under which such other person or
entity is a sales agent, representative, dealer or distributor of any of the
products of Seller or the Business which by its terms cannot be terminated at
will or on not more than 30 days' prior notice without penalty or further
payment and there has been no change in the rate of compensation paid or payable
to any such person or entity since December 31, 1996.
As a material inducement to Buyer to consummate this Agreement, at the
time of the Closing each of the specific representations and warranties of the
Seller set forth in this Article 3 will be deemed to be remade by the Seller as
of the time of the Closing.
ARTICLE 4
Representations and Warranties of the Buyer
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The Buyer hereby represents and warrants to the Seller as follows:
4.1 Organization. The Buyer is duly organized, validly existing and in
good standing under the laws of the State of Delaware.
4.2 Authorization. The Buyer has the corporate power to execute and
deliver this Agreement and all other documents contemplated hereby to be
executed and delivered by the Buyer, and to consummate the transactions
contemplated hereby and thereby. The Buyer has taken all corporate or other
action required to authorize the execution and delivery of this Agreement and
all other documents contemplated hereby and to authorize the consummation of the
transactions contemplated hereby and thereby. This Agreement has been and, on
the Closing Date, the other documents will be, duly executed and delivered by
the Buyer and this Agreement is, and on the Closing Date such other documents
will be, legal, valid and binding obligations of the Buyer, enforceable against
the Buyer in accordance with their terms.
4.3 Consents or Approvals. Except as set forth on Schedule 4.3 or in
connection with the HSR Act, no notice, declaration, report or other filing or
registration with, and no waiver, consent, approval or authorization of, any
governmental or regulatory authority or instrumentality or any third party is
required to be given, made or obtained by the Buyer in connection with the
execution, delivery or performance of this Agreement.
4.4 Resale of Inventories. The Inventories are being acquired by the Buyer
solely for the purpose of resale.
4.5 Brokers and Finders. Neither the Buyer nor any of its affiliates have
dealt with any broker, finder, agent or others in connection with the
transactions contemplated hereby.
ARTICLE 5
Covenants; Additional Agreements
5.1 Conduct of the Business Pending Closing. From and after the date of
this Agreement until the Closing Date, the Seller and its affiliates shall, with
respect to the Business and the Transferred Assets, except as otherwise approved
by the Buyer (such approval not to be unreasonably withheld or delayed):
(a) carry on the Business in the ordinary course in substantially the same
manner as heretofore conducted;
(b) keep in full force and effect insurance comparable in amount and scope
of coverage to that now maintained;
(c) perform in all material respects their obligations under the
Transferred Contracts;
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(d) comply in all material respects with applicable requirements of laws,
rules, regulations, orders, ordinances and directives, whether federal, state or
local or otherwise;
(e) not enter into any Transferred Contracts involving an amount in excess
of $15,000 and not, in any material respects, amend, modify, terminate or waive
compliance with any provision of any Transferred Contracts listed on Schedules
3.6 and 3.10;
(f) use commercially reasonable efforts to preserve the current
relationships of the Business with its customers, suppliers and distributors;
(g) not sell, assign, transfer or lease any of the Transferred Assets
(except for Inventory in the ordinary course of business);
(h) not mortgage, pledge, grant or suffer to exist any Lien on any of the
Transferred Assets;
(i) other than in the ordinary course of business, not waive any rights of
material value or cancel, discharge, satisfy or pay any debt, claim, lien,
liability or obligation, whether absolute, accrued, contingent or otherwise and
whether due or to become due;
(j) not effect any material change in the accounting practices, procedures
or methods of the Business;
(k) not enter into any transaction other than in the ordinary course of
business, or change in any material respects any of the business policies or
practices of the Business;
(l) not do or fail to do anything which would make any representations or
warranties in the Agreement or any certificate or other document contemplated
thereby, untrue; and
(m) give written notice to the Buyer promptly after the Seller becomes
aware of the occurrence of any event or series of events that materially
adversely affects the Business.
5.2 Access.
(a) From February 25, 1997 to the Closing Date, the Seller shall give to
the Buyer and its representatives and agents reasonable access during normal
business hours upon reasonable prior notice to the assets, books and records of
the Business and furnish to the Buyer such documents and information concerning
the Business as the Buyer from time to time may reasonably request, provided,
however, that the Seller may preclude access to trade secrets and formulas.
(b) Following the Closing Date, the Buyer and the Seller shall make
available on a reasonable basis to each other, and to each other's
representatives and agents, any financial data and other information that the
Seller or the Buyer have relating to the Business: (i) to permit the
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preparation of any tax returns, (ii) in connection with any governmental
examination of tax returns relating to the Business, (iii) to defend or
prosecute any claims relating to the Business, or (iv) for any other proper
purpose. A party's reasonable out-of-pocket expenses in connection with
responding to any such request shall be reimbursed by the requesting party.
5.3 Non-Compete Covenant. The Buyer acknowledges that it has been advised
by Seller that Seller has two divisions (Elizabeth Arden and Calvin Klein) who
market, and will continue to market, products (but not nail polish remover
products) which are sold as prestige products but such products may enter the
mass market and compete with the products (but not with the nail polish remover
products) of the Business. Subject to the above, Seller agrees that neither
Seller nor its affiliates shall at any time within the three (3) year period
immediately following the Closing Date:
(a) in the United States or Puerto Rico, directly engage for its own
account or the account of others, or have any ownership, management, employment,
agency consultancy or other interest in any firm, corporation, partnership,
limited liability company, proprietorship or other business entity that engages,
in the sale, distribution, packaging, manufacture or marketing of nail polish
remover products or, in the mass market, nail enamel products, nail care
treatment products, nail care implements, lipstick or any other nail care or lip
color products that are competitive with any products of the Business or assist
any other person so to do, except that Seller and its affiliates may: (i) own,
directly or indirectly, solely as an investment, securities of any entity that
are publicly traded if Seller and its affiliates do not, directly or indirectly,
beneficially own, collectively, five percent (5%) or more of any class of
securities of such entity, (ii) have an ownership interest otherwise proscribed
by this Section 5.3 during such period if such ownership interest arises as a
result of the acquisition of a business entity not principally engaged in
activities proscribed by this Section 5.3, (iii) sell such products to any of
their affiliates solely for resale outside of the Territory, and (iv) perform as
contemplated under the Manufacturing Agreement.
(b) directly or indirectly, for its own account or the account of others
shall attempt to or assist any other person or entity in attempting to do any of
the following with respect to the Business: (i) solicit any director, officer,
employee, or agent of Buyer or its affiliates who are employed or provide
services with respect to the Business or encourage any such person to terminate
such relationship with Buyer or its affiliates, (ii) encourage any customer,
client, supplier or other business relationship of Buyer or its affiliates with
respect to the Business to terminate or alter such relationship, whether
contractual or otherwise, to the disadvantage of the Buyer or its affiliates, as
the case may be (iii) encourage any prospective customer or supplier not to
enter into a business relationship with the Buyer or its affiliates with respect
to the Business; (iv) impair or attempt to impair any relationship, contractual
or otherwise, written or oral, between the Buyer or its affiliates and any of
their customers, suppliers or other business relationships.
The parties agree that damages at law for violation of any of the
foregoing covenants (and those contained in Section 5.12) may not be an adequate
remedy and that if Seller or its affiliates violate any of the provisions
hereof, in addition to any other available rights or remedies, Buyer,
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its affiliates and their successors and assigns, shall be entitled to seek
temporary or permanent injunctive relief with regard to such violation.
5.4 Reasonable Efforts; Cooperation. Each party will use commercially
reasonable efforts to take or cause to be taken all actions and to do or cause
to be done all things necessary, proper or advisable to perform its obligations
hereunder and to satisfy the conditions to the Closing and to consummate the
transactions contemplated by this Agreement and shall use commercially
reasonable efforts to obtain all necessary waivers, consents and approvals, to
effect all necessary registrations and filings, and to cause all waiting periods
thereunder to expire or terminate.
5.5 Regulatory Filings. Each of the parties hereto will furnish to the
other party hereto such necessary information and reasonable assistance as the
other party may reasonably request in connection with its preparation of
necessary filings or submissions to any governmental agency. Buyer and Seller
agree to file promptly any information required by the HSR Act and to request
early termination of the waiting period, to use best efforts to effect
compliance with the conditions specified in Section 6.1(b), and to equally share
the costs of all filing fees relating thereto.
5.6 Public Announcements. Prior to the Closing, none of the parties hereto
shall issue any press release or otherwise make any public statements to the
media with respect to this Agreement or the transactions contemplated hereby,
and after the Closing none of the parties hereto shall issue any press release
or otherwise make any public statements to the media with respect to this
Agreement and the other documents to be executed and delivered in connection
herewith, except in each case with the prior written approval of all of the
other parties hereto, unless required by law.
5.7 Confidentiality. The Buyer, Seller and their affiliates shall not
respectively, disclose, use or permit their officers, employees, counsel,
accountants or other representatives or agents to disclose or use, directly or
indirectly, any information about the Buyer, Seller or their affiliates, or the
Business, other than information in the public domain, information required by
Buyer's lenders, and information they knew (and which was not restricted from
disclosing or using) before they were first contacted by the Buyer, Seller or
their representatives in connection with the sale of the Transferred Assets,
provided that such confidentiality obligation of the Buyer shall expire, but
only with respect to information about the Business and not with respect to
information about the Seller or its affiliates, upon the Closing Date. If the
transaction contemplated hereby is not consummated, the parties, upon the
request of each other, shall return all written information and documents
received in connection with the proposed sale of Transferred Assets (other than
drafts of this Agreement) and shall destroy and cause their officers, employees,
counsel, accountants and other representatives and agents to destroy any copies
of such information and documents and any notes or abstracts of information in
their possession reflecting such information and documents or other confidential
information received in connection with this transaction about the parties,
their affiliates or the Business. The provisions of this Section 5.7 supplement
and are in addition to, not in lieu of, the provisions of any and all other
agreements between the parties and their affiliates respecting confidentiality
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of information. The provisions of any such other agreements shall remain in full
force and effect, provided that in the event of an inconsistency or conflict
between the provisions of such other agreements and this Section 5.7, the
provisions of this Section 5.7 shall control (except for Section 21 of the
Manufacturing Agreement and Section 5.8 below).
5.8 Post-Closing Confidentiality. The Seller, for a period of three (3)
years from the Closing Date, shall maintain and cause its affiliates to maintain
the confidentiality of information regarding the Business, the Transferred
Assets, the Buyer and its affiliates ("Confidential Information") unless
disclosure of such information is required by law or in connection with a
proceeding arising out of or relating to this Agreement. Confidential
Information is understood not to include (i) information which is currently in
the public domain, (ii) information which falls into the public domain through
no fault of the Seller, or (iii) information which comes to the Seller through a
third party unrelated to Buyer or its affiliates who has the right to receive
and disclose the same. The Seller and its affiliates agree that damages at law
for violation of any of the foregoing covenants may not be an adequate remedy
and that if Seller or its affiliates violate any of the provisions hereof, in
addition to any other available rights or remedies, Buyer, its affiliates and
their successors and assigns, shall be entitled to seek temporary or permanent
injunctive relief with regard to such violation. The provisions contained herein
shall be in addition to and not be deemed to be a limitation of the obligations
of Seller and its affiliates pursuant to Section 21 (Confidentiality) of the
Manufacturing Agreement.
5.9 Termination of Insurance. The Buyer acknowledges that the Seller's
insurance coverage for the Business shall terminate as of the close of business
on the Closing Date.
5.10 Manufacturing Agreement. The parties will execute and deliver at
Closing a Manufacturing Agreement, substantially in the form attached as Exhibit
G (the "Manufacturing Agreement").
5.11 Use of Name. From and after the Closing Date, the Seller shall cease
and desist from using the Trademarks of the Business including "CUTEX", any
variation thereof and any name confusingly similar thereto, except to affix such
Trademarks to products being manufactured by Seller for Seller's foreign
affiliates for sale outside of the United States and Puerto Rico.
Notwithstanding the foregoing, Buyer shall permit the Seller to sell damaged or
obsolete Inventories not purchased by the Buyer to any account other than to the
normal, usual or customary (including, without limitation, those referred to in
Schedule 3.13 of the Agreement) accounts.
5.12 License to Use Certain Trademarks and Trade Names.
(a) For a period of six (6) months after the Closing Date, the Seller
hereby permits and gives the Buyer a license to use in connection with sales of
any products of the Business (and without the payment of any additional
consideration therefor) the trade names Chesebrough-Pond's, CPI or CP, or any
variation thereof (the "Retained Trade Names") appearing on the Inventories or
inventories and packaging materials or labels used by Seller to
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manufacture products for Buyer under the Manufacturing Agreement, and the Buyer
shall not be required to take any action to remove or efface any such Trade
Names in connection therewith other than as provided in Section 5.12(b).
(b) Except co the extent permitted pursuant to Section 5.12(a), the Buyer
shall not use or permit the use of any of the Retained Trade Names in any
manner. Immediately upon the termination of the continued use period referred to
in Section 5.12(a) hereof, the Buyer shall effect the removal of the Retained
Trade Names from the products of the Business or shall destroy such products of
the Business.
5.13 Delivery of Certain Documentation Relating to Intellectual Property.
True copies of the registrations, applications and other relevant documentation
for the Trademarks, Patents and other Intellectual Property including, without
limiting the foregoing, listed on Schedule 3.10 shall be delivered to the Buyer,
at the Seller's expense, at the Closing.
5.14 Delivery of Permits. True and complete copies of all Permits listed
in Schedule 3.8 shall be furnished by the Seller to the Buyer within five (5)
days prior to the Closing Date to the extent not previously furnished to the
Buyer.
5.15 Shipment of the Inventories. After the Closing, the Buyer shall
arrange for, at its expense, the shipment of the Inventories from the Seller's
facilities to the Buyer's facilities. In accordance with Sections 1.1 and 2.1,
title and risk of loss with respect to the Inventories shall pass to the Buyer
effective as of the close of business on the Closing Date.
5.16 Allocation of the Purchase Price. Within one hundred twenty (120)
days after the Closing Date, Buyer shall prepare and submit to Seller for its
approval (which shall not be unreasonably withheld) Buyer's proposed allocation
of the Closing Purchase Price to the Transferred Assets; and all tax returns and
reports filed by Buyer and Seller with respect to the transactions contemplated
by this Agreement shall be consistent with that allocation. Each of Buyer and
Seller shall timely complete a Form 8594 Asset Acquisition Statement of
Allocation consistent with that allocation, shall provide a copy to the other
party and shall file a copy of such form with its Federal income tax return for
the period that included the Closing Date.
5.17 Exclusivity. From and after the date of this Agreement until the
Closing Date the Seller will not, nor will it permit any of its affiliates (or
authorize or permit any of their respective officers, employees, legal counsel,
accountants, investment brokers, financial advisers or other representatives
(together, "representatives") to take, directly or indirectly, any action to
solicit, facilitate, negotiate, permit access with regard to, encourage or
accept any offer or inquiry in respect of the acquisition of the Business or the
Transferred Assets from, enter into any agreement or understanding for the sale
of the Business or the Transferred Assets to, or furnish or cause to be
furnished any information with respect to the Business or the Transferred
Assets, to any other person or entity.
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5.18 Employee Matters. Buyer and Seller hereby acknowledge and agree that
Buyer shall not have any obligation or liability whatsoever to or with regard to
any employees of the Seller or its affiliates ("Employees"), or with regard to
matters or liabilities relating to such Employees including, but not limited to,
obligations or liabilities concerning employee compensation and benefits,
severance payments, occupational safety matters, health matters, ERISA matters,
workers' compensation matters, and other employee matters, all of which shall be
Retained Liabilities of Seller and their affiliates. For a period of one year
from the Closing Date Buyer will not solicit to employ any of Seller's current
employees so long as they are employed by Seller, without obtaining Seller's
consent.
ARTICLE 6
Conditions to Closing
6.1 Conditions to Obligations of Both Parties to Close. The obligation of
each party hereto to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction, at or prior to the Closing, of the
following conditions:
(a) No law, rule, regulation, order, decree, injunction, stay or
restraining order shall have been enacted, entered, promulgated or enforced by
any court of competent jurisdiction or governmental or regulatory authority or
instrumentality that prohibits the consummation of all or any part of the
transactions contemplated hereby, and no action or proceeding shall be pending
by any governmental or regulatory authority seeking any of the foregoing or
seeking to recover any damages or obtain other relief as a result of the
consummation of such transactions.
(b) All required registrations and filings with any Federal, state or
local government or regulatory authority shall have been made and any waiting
period or approval applicable to the transactions contemplated hereby pursuant
to any law, rule, regulation, order or decree of any Federal, state or local
government or instrumentality or agency thereof having jurisdiction with respect
to the transactions contemplated hereby shall have expired, been terminated or
been obtained, as the case may be.
6.2 Conditions to Obligation of the Buyer to Close. The obligation of the
Buyer to purchase the Transferred Assets and Business, to assume the Assumed
Liabilities and otherwise to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction, at or before the Closing, of the
following conditions:
(a) The Seller shall have performed in all material respects its
obligations required under this Agreement to be performed at or prior to the
Closing.
(b) The representations and warranties of the Seller contained herein
shall have been true and correct in all material respects when made and shall be
true and correct in all material respects at and as of the Closing Date.
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(c) The Seller shall have delivered to the Buyer a certificate, dated the
Closing Date and signed by an officer of the Seller, as to the satisfaction of
the conditions set forth in clauses (a) and (b) above.
(d) The Seller shall have delivered to the Buyer a good standing
certificate of Seller and a certified copy of resolutions duly adopted by the
board of directors of the Seller authorizing and approving the execution of this
Agreement (and other documents and instruments contemplated thereby) by the
Seller and the performance by the Seller of its obligations hereunder.
(e) The Seller shall have caused the assignment to the Buyer of the
License Agreement between Chesebrough-Pond's Inc., as Licensor, and Jean
Philippe Fragrances, Inc., as Licensee, as amended, referred to in Section
1.1(ii) of this Agreement and Buyer shall have entered into and consummated (i)
a termination agreement with Jean Philippe Fragrances, Inc. wherein such
Licensee has agreed that such License Agreement is terminated and of no further
force or effect, and (ii) an asset purchase agreement with Jean Philippe
Fragrances, Inc. wherein such Licensee has agreed to sell and Buyer has agreed
to purchase Licensee's inventory and other assets relating to Products referred
to in the License Agreement, on mutually agreeable terms, and Seller's and its
affiliates rights and obligations to purchase such assets have been waived.
Seller represents and warrants that Licensor has and will have on the Closing
Date, the right to terminate such License Agreement pursuant to Section 8.1
thereof, as the result of a failure to comply by Licensee thereunder, which
right of termination is assignable and will be assigned to Buyer and be
effective on the Closing Date. Without limiting any of its other waiver rights
set forth in this Agreement, Buyer may waive, in whole or in part, any or all of
the conditions contained herein, in its sole discretion.
(f) The Seller shall have delivered the executed Manufacturing Agreement.
(g) The Seller shall have delivered all Schedules which shall be
reasonably satisfactory in form and substance to the Buyer.
(h) All actions required to be taken or documents required to be delivered
by the Seller hereunder or in connection with the consummation of the
transactions contemplated by this Agreement shall be delivered to and be
reasonably satisfactory to the Buyer and the Buyer shall have received any
additional documents reasonably requested by the Buyer effectively to vest title
to the Transferred Assets in the Buyer or to consummate the transactions
contemplated by the Agreement.
6.3 Conditions to Obligations of the Seller to Close. The obligation of
the Seller to, and to cause its affiliates to, sell, transfer and assign the
Transferred Assets and the Business and otherwise to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, at or
before the Closing, of the following conditions:
(a) The Buyer shall have performed in all material respects its
obligations required under this Agreement to be performed at or prior to the
Closing.
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(b) The representations and warranties of the Buyer contained herein shall
have been true and correct in all material respects when made and shall be true
and correct in all material respects at and as of the Closing Date.
(c) The Buyer shall have delivered to the Seller a certificate, dated the
Closing Date and signed by an officer of the Buyer, as to the satisfaction of
the conditions set forth in clauses (a) and (b) above.
(d) The Buyer shall have delivered to the Seller a good standing
certificate of Buyer and a certified copy of resolutions duly adopted by the
board of directors of the Buyer authorizing and approving the execution of this
Agreement (and other documents and instruments contemplated thereby) by the
Buyer and the performance by the Buyer of its obligations hereunder.
(e) All actions required to be taken or documents required to be delivered
by the Buyer hereunder or in connection with the consummation of the
transactions contemplated by this Agreement shall be reasonably satisfactory to
the Seller and the Seller shall have received any additional documents
reasonably requested by the Seller effectively to transfer to the Buyer the
Assumed Liabilities.
ARTICLE 7
Termination, Amendment and Waiver
7.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing;
(a) By mutual consent of the Buyer and the Seller;
(b) By the Seller if the Buyer is in breach in any material respects of its
representations, warranties or covenants set forth in this Agreement;
(c) By the Buyer if the Seller is in breach in any material respects of its
representations, warranties or covenants set forth in this Agreement;
(d) By the Seller if it is not in breach of this Agreement, or by the
Buyer if it is not in breach of this Agreement, and in either case if the
Closing has not occurred by June 30, 1997.
Sections 5.7 and 9.1 and any rights and remedies for breaches of this
Agreement prior to its termination shall survive any such termination.
Otherwise, upon its termination, this Agreement shall forthwith become of no
further force and effect.
7.2 Amendment. This Agreement may not be amended except by an instrument in
writing signed by all parties.
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7.3 Waiver. Any party hereto may: (a) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (b) waive
any inaccuracies or breaches in the representations and warranties contained
herein or in any document delivered by the other parties pursuant hereto, or (c)
waive compliance with any of the agreements or covenants or satisfaction of any
of the conditions to be performed by the other parties that are contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
such party.
ARTICLE 8
Indemnification
8.1 Agreement to Indemnify.
(a) Subject to the limitations set forth in Section 8.3, the Seller shall
indemnify, defend and hold harmless the Buyer Group (as defined in Section
8.1(c)) against any and all claims, losses, damages, liabilities, deficiencies,
obligations, assessments, judgments, costs or expenses of any kind, including
without limitation reasonable attorney's fees and expenses reasonably incurred
in investigating, preparing for, defending against or prosecuting any claim,
litigation or proceeding (collectively, "Losses"), but net of any insurance
recoveries or tax benefits actually received by the Buyer Group because of such
Losses, arising out of or resulting from the following:
(i) the failure of the Seller or its affiliates to pay or otherwise
discharge the Retained Liabilities, or any other liabilities or obligations of
any kind to the extent arising out of or resulting from the operation or conduct
of the Business through the Closing Date except for the Assumed Liabilities;
(ii) the nonfulfillment by the Seller of any agreement or covenant
of the Seller hereunder or in any instrument or document delivered pursuant to
Sections 2.3 and 6.2 hereof;
(iii) the inaccuracy of any representation or breach of any warranty
made by the Seller herein or in any certificate or document delivered pursuant
to Sections 2.3 or 6.2(c); and
(iv) except with regard to Buyer's Assumed Liability, the conduct or
operation of the Business prior to the Closing Date.
(b) Subject to the limitations set forth in Section 8.3, the Buyer shall
indemnify, defend and hold harmless the Seller Group (as defined in Section
8.1(c)) against any and all Losses, but net of any insurance recoveries or tax
benefits actually received by the Seller Group because of such Losses, arising
or resulting from the following:
(i) the failure of the Buyer to pay or otherwise discharge the Assumed
Liabilities;
(ii) the non-fulfillment by the Buyer of any agreement or covenant
of the Buyer hereunder or in any instrument or document delivered pursuant to
Sections 2.4 or 6.3;
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(iii) the inaccuracy of any representation or the breach of any
warranty made by the Buyer herein or in any certificate or document delivered
pursuant to Sections 2.4 or 6.3(c); and
(iv) the conduct or operation of the Business after the Closing
Date, including without limitation the sale by the Buyer or its affiliates after
the Closing Date of any finished products included in the Inventories, subject,
however, to the limitations set forth in Section 1.3(a)(iii).
(c) The term "Buyer Group" shall include the Buyer, its
affiliates, subsidiaries and successors and the directors, officers, employees
and shareholders thereof, and the term "Seller Group" shall include the Seller,
its affiliates and successors and the directors, officers, employees and
shareholders thereof.
(d) Notwithstanding the provisions of this Article 8, neither
Buyer Group nor Seller Group shall be required to alter any positions or
elections it would otherwise take or make with respect to taxes or insurance in
order to reduce the amount of indemnifiable Losses under Section 8.1(a) or
Section 8.1(b), as the case may be.
8.2 Procedure for Indemnification.
(a) In the event that any of the Buyer Group or Seller Group as the case
may be (the "indemnified party") receives written notice of the commencement of
any action or proceeding, the assertion of any claim by a third party or the
imposition of any penalty or assessment for which indemnity may be sought
pursuant to this Article 8 (a "Third Party Claim"), and the indemnified party
intends to seek indemnity pursuant to this Article 8, the indemnified party
shall promptly provide the other of the Buyer Group or Seller Group as the case
may be (the "indemnifying party") with notice of such Third Party Claims and,
except for claims seeking equitable relief from the indemnified party, the
indemnifying party shall, upon receipt of such notice, be entitled to
participate in or, at the indemnifying party's option, assume the defense,
appeal or settlement of such Third Party Claim with respect to which such
indemnity has been invoked with counsel selected by it and approved by the
indemnified party (such approval not to be unreasonably withheld or delayed),
and the indemnified party shall fully cooperate with the indemnifying party in
connection therewith upon such indemnifying party's reasonable request. In the
event that the indemnifying party fails to assume the defense, appeal or
settlement of such Third Party Claim within forty-five (45) days after receipt
of written notice thereof from the indemnified party, the indemnified party
shall have the right to undertake the defense, appeal or settlement of such
Third Party Claim at the expense and for the account of the indemnifying party.
The indemnifying party shall not settle or compromise any such Third Party Claim
without the indemnified party's prior written consent, unless the terms of such
settlement or compromise release the indemnified party from any and all
liability with respect to such Third Party Claim. However, if such settlement or
compromise would have a material adverse effect on the indemnified party
notwithstanding such release, its prior written consent shall still be required,
which consent will not be unreasonably withheld. The indemnifying party shall
pay the amount of the Loss arising out of such Third Party Claim to and upon
demand of the indemnified party in immediately available funds.
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(b) In the event any of the Buyer Group or Seller Group as the case may be
(also referred to as "indemnified party") should have a claim for
indemnification against the other of the Buyer Group or the Seller Group as the
case may be (also referred to as "indemnifying party") that does not involve a
Third Party Claim, the indemnified party shall deliver a notice of such claim
with reasonable promptness to the indemnifying party. The failure to give such
notice shall not affect whether an indemnifying party is liable for
indemnification unless such failure has resulted in the loss of substantive
rights with respect to the indemnifying party's ability to defend such claim,
and then only to the extent of such loss. If the indemnifying party notifies the
indemnified party that it does not dispute the claim described in such notice or
fails to notify the indemnified party within forty-five (45) days after delivery
of such notice by the indemnified party whether the indemnifying party disputes
the claim described in such notice ("dispute notice"), the Loss in the amount
specified in the indemnified party's notice will be conclusively deemed a
liability of the indemnifying party and the indemnifying party shall pay the
amount of such Loss to the indemnified party on demand in immediately available
funds. If the indemnifying party timely disputes the claim within such
forty-five (45) day period, the indemnifying party and indemnified party will
proceed in good faith to negotiate and resolve the dispute within forty-five
(45) days after indemnified party receives the dispute notice. If such dispute
is not so resolved, then either party may have the dispute resolved by a court
of competent jurisdiction.
8.3 Limitations on Indemnification. Notwithstanding Sections 8.1(a)(iii)
and 8.1(b)(iii) of this Article 8, neither the Seller nor the Buyer shall be
responsible for any Losses arising or resulting from inaccuracies in
representations or breaches of warranties made by such breaching parties unless
the aggregate amount of any such Losses exceeds, on a cumulative basis, U.S.
$700,000.00, and then only to the extent of any such excess, and in no event
shall the aggregate liability for such Losses exceed $3,000,000.00. All
representations and warranties made by the Seller and the Buyer hereunder shall
survive the Closing; provided, however, that any claim for such Losses arising
out of or resulting from the inaccuracy of any such representation or the breach
of any such warranty must be asserted on or before the first anniversary of the
Closing, failing which any such claim shall be waived and extinguished
excluding, however, claims for Losses with respect to the inaccuracy of
representations and breach of warranties contained in (i) Section 3.1
(Organization), Section 3.2 (Authorization), Section 3.5 (Title to Transferred
Assets) or Section 3.11 (Taxes), which may be asserted at any time under the
applicable statute of limitations, failing which any such claims shall be waived
and extinguished. For purposes of this Section 8.3, a claim has been asserted
when written notice thereof, including reasonable supporting documentation, if
available, has been given by the indemnified party to the indemnifying party in
accordance with Section 9.3
ARTICLE 9
Miscellaneous
9.1 Expenses, Taxes. Except as otherwise provided herein, each party
hereto shall pay all fees and expenses incurred by it in connection with this
Agreement and the consummation of the transactions contemplated hereby. Any
excise, sales, use or transfer taxes or any other such taxes (other than income
taxes) that are payable or arise as a result of
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execution of this Agreement or the transfer of the Transferred Assets and the
Business to the Buyer pursuant to this Agreement shall be borne equally by the
Buyer and the Seller.
9.2 Further Assurances. From time to time after the Closing, the Seller
and the Buyer shall execute and deliver such documents and instruments as any
other party may reasonably request in order to consummate more effectively the
transactions contemplated by this Agreement.
9.3 Notices. Any notice or other communication required or permitted under
this Agreement shall be in writing and shall be deemed to have been duty given:
(i) on the date of delivery, if delivered personally, (ii) on the business day
after dispatch by documented overnight delivery service such as Federal Express,
if sent in such manner, (iii) on the date of transmission by telecopy or telex
or other means of electronic transmission, if so transmitted, provided that a
confirmation copy of any such electronic transmission is sent no later than the
business day following the day of electronic transmission by documented
overnight delivery service or registered mail, postage prepaid (return receipt
requested), or (iv) on the fifth business day after deposit in the United States
mail and sent by registered mail, postage prepaid (return receipt requested).
Notices or other communications shall be directed to the following addresses:
If to the Seller to: Chesebrough-Pond's USA Co.
33 Benedict Place
Greenwich, CT 06813
Attention: General Counsel
With a copy to: Conopco, Inc.
390 Park Avenue
New York, NY 10022
Attention: Ronald M. Soiefer
If to the Buyer to: Carson, Inc.
64 Ross Road
Savannah, GA 31405
Attention: Dr. Leroy Keith,
Chairman and CEO
With a copy to: Bathgate, Wegener & Wolf, P.C.
One Airport Road
P.O. Box 2043
Lakewood, NJ 08701
Attention: Jan L. Wouters, Esq.
and: Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Place
New York, New York 10005-1413
Attention: Lawrence Lederman, Esq.
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Any party may, by notice given in accordance with this Section 9.3, specify a
new address for notices under this Agreement.
9.4 Headings. The descriptive headings of the several Articles and
Sections of this Agreement and the table of contents are inserted for
convenience only, do not constitute a part of this Agreement, and shall not
affect the interpretation hereof.
9.5 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York regardless of the laws that
might otherwise govern under applicable principles of conflict of laws.
9.6 Assignment; No Third Party Beneficiaries. This Agreement and all the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither this
Agreement nor any rights hereunder shall be assigned by either of the parties
hereto without the prior written consent of the other party, except that Buyer
may assign such Agreement and rights to its affiliates, subsidiaries or
successors or, as collateral security, to its lenders without Seller's consent
(provided that in the event Buyer assigns an obligation hereunder, it shall be
responsible for such obligation if its assignee fails to perform such
obligation). In the event of any such assignment for which consent has been
obtained, the assigning party shall nevertheless remain responsible for
compliance with the terms of this Agreement. This Agreement shall not confer
upon any person other than the parties hereto any rights or remedies hereunder
except as otherwise provided in this Section 9.6.
9.7 Affiliates. The term "affiliates" is used in this Agreement as defined
in the rules and regulations of the Securities and Exchange Commission
promulgated under the Securities Act of 1933, as amended.
9.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.9 Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement between the
parties with respect to the subject matter hereof, and supersedes all other
prior agreements and understandings, both written and oral, between the parties
with respect thereto, except the Confidentiality Agreement, dated February 24,
1997 between Seller and Morningside Capital Group L.L.C., which Confidentiality
Agreement is also binding on the Buyer until Closing, after which the provisions
of Section 5.7 shall govern. All of the covenants and agreements contained in
this Agreement (including the documents and instruments referred to herein)
shall survive Closing, subject to the provisions of Section 8.3.
9.10 Severability. In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect in any jurisdiction, such invalidity, illegality
or unenforceability shall not affect any other provision of this Agreement in
any other jurisdiction, but this Agreement shall be reformed and construed in
any such jurisdiction as if such invalid or illegal or unenforceable provision
had never been
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contained herein and such provision shall be reformed so that it would be valid,
legal and enforceable to the maximum extent permitted in such jurisdiction.
9.11 Bulk Sales. The Buyer hereby waives compliance by the Seller with any
applicable bulk sales transfer laws, including without limitation, the bulk
transfer provisions of the Uniform Commercial Code of any State or Puerto Rico,
or any similar statute, with respect to the transaction contemplated hereby, and
the Seller hereby agrees to indemnify the Buyer and to defend and hold the Buyer
harmless from and against any damages, claims or expenses or penalties asserted
by any creditor of the Seller or any governmental authority with respect to any
noncompliance by Seller with any such bulk sales transfer laws.
9.12 Refunds and Remittances. After the Closing, if the Buyer receives any
refund, amount or other monetary benefit related to claims, litigation,
insurance, accounts receivable or other matters that is properly due and owing
to the Seller in accordance with this Agreement, the Buyer shall promptly (but
in no event later than seven (7) business days after the end of the calendar
month within which such benefit is received) cause same to be remitted to the
Seller at the applicable address specified in Section 9.3. Similarly, in the
event that the Seller receives any such refund, amount or other monetary benefit
that is properly due and owing to the Buyer in accordance with this Agreement,
the Seller shall promptly (but in no event later than seven (7) business days
after the end of the calendar month within which such benefit is received) cause
same to be remitted to the Buyer at the applicable address specified in Section
9.3.
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IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be duly executed and delivered as of the day and year first above
written.
CONOPCO, INC., Seller CARSON, INC., Buyer
By: BY:
Name: Melvin H. Kurtz Name: Dr. Leroy Keith
Title: Vice President Title: Chairman and CEO
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ASSET PURCHASE AGREEMENT
List of Schedules and Exhibits
Reference
at Page
Schedule 1.3 Assumption of Certain Liabilities........................4
Schedule 3.3 No Violations; No Consents or Approvals Required.........8
Schedule 3.4 Financial statements.....................................8
Schedule 3.6 Transferred Contracts...............................8,9,14
Schedule 3.7 Absence of Change........................................9
Schedule 3.8 Permits..............................................10,18
Schedule 3.9 Litigation..............................................11
Schedule 3.10 Intellectual Property.........................2,5,8,9,11,14,18
Schedule 3.12 Inventories11,12
Schedule 3.13 Customers and Supplier................................11,12,17
Schedule 3.15 Sales Representatives, Dealers and Distributors.............12
Schedule 4.3 Consents or Approvals...................................13
Exhibit A Bill of Sale, Assignment and Assumption Agreement........5
Exhibit B Assignment and Assumption Agreement......................5
Exhibit C Assignments for the Patents, Trademarks and
other Intellectual Property.............................5
Exhibit D Copyright Assignment.....................................5
Exhibit E Royalty-free Non-exclusive License Agreement (Buyer).....5
Exhibit F Royalty-free Non-exclusive License Agreement (Seller)....6
Exhibit G Manufacturing Agreement...............................5,17
Exhibit H Assignment regarding License Agreement...................5
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MANUFACTURING AGREEMENT
This Agreement is made and entered into as of the 30th day of April 1997,
by and between CONOPCO, INC. d/b/a CHESEBROUGH-POND'S USA CO., a corporation of
the State of New York having a place of business at 33 Benedict Place,
Greenwich, Connecticut 06830 (hereinafter "CP") and CARSON PRODUCTS COMPANY, a
Delaware corporation having a principal place of business at 64 Ross Road,
Savannah, Georgia 31405 (hereinafter "Buyer").
W I T N E S S E T H:
WHEREAS, CP is currently manufacturing and packaging nail polish remover
under the CUTEX trademark, including the plastic containers and caps used in the
packaging of the nail polish remover, for sale in the United States and Puerto
Rico and for Unilever N.V. and Unilever P.L.C. ("Unilever") foreign companies
for sale in countries outside the United States and Puerto Rico; and
WHEREAS, Buyer is acquiring the CUTEX business in the United States and
Puerto Rico pursuant to an Asset Purchase Agreement dated as of March 27, 1997
between CP and Buyer, as assignee (the "Asset Purchase Agreement"); and
WHEREAS, CP will continue to manufacture and package nail polish remover
for Unilever's foreign companies for sale in countries outside the United States
and Puerto Rico and is willing to continue to manufacture and supply Nail Polish
Remover and container and caps for that product (as such term is hereinafter
defined) to Buyer and Buyer is willing to purchase such products from CP for
sale in the United States and Puerto Rico;
NOW, THEREFORE, in consideration of the premises and of the covenants and
conditions hereinafter contained, the parties hereto mutually agree as follows:
1. Definitions. "Nail Polish Remover" shall mean the nail polish remover
products currently being manufactured by CP and identified in the attached
Exhibit A, including the current plastic containers and caps used in packaging
the nail polish remover (the "Product").
2. Products to be Purchased and Purchase Orders. CP agrees to manufacture,
sell and deliver to Buyer, and Buyer hereby agrees to purchase from CP all of
its requirements for Product (subject to Section 8 hereof). The Product shall be
manufactured by CP in accordance with the specifications therefor currently in
effect and attached as Exhibit B (the "Specifications") and as may be modified
by Buyer from time to time, if such modification has been agreed to in writing
by CP, which agreement will not be unreasonably withheld. The Product shall be
ordered in quantities and frequencies to be agreed upon by the parties hereto.
CP agrees not to manufacture, sell or deliver the Product for or on account of
itself
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or any other person or entity, except to the extent provided for in the
Asset Purchase Agreement.
3. Ingredients and Raw Materials. CP will supply all ingredients, raw
materials, finishing supplies, labels and packaging materials required to
process and pack the Product. Buyer agrees to assume responsibility for insuring
that all labels provided by Buyer or prepared by CP in accordance with Buyer's
specifications for the Product comply with all applicable packaging and labeling
requirements of Federal, state and local law.
4. Manufacturing Charges. The prices for the manufacture, packaging and
warehousing of the Product are set forth in the attached Exhibit A.
(a) Standard Cost. The prices relating to the standard cost of the
Product in Exhibit A ("Standard Cost") may be changed no more
often than quarterly where there is a 3% or greater cumulative
change in the Standard Cost from the later of the date of the
Agreement or the date of the most recent price change pursuant
to this Section. In no event shall the change in price be
greater than the cumulative change in the Standard Cost of the
particular Product.
(b) Overhead. The prices relating to seventy-five percent (75%) of the
overhead cost of the Product in Exhibit A ("Overhead") cover salary,
salary-related expenses, taxes and utilities, and may be changed annually where
there is a 3% or greater cumulative change in the Overhead from the later of the
date of the Agreement or the date of the most recent price change pursuant to
this Section. In no event shall the change in price be greater than the
cumulative change in the Overhead of the particular Product. The remaining
twenty-five percent (25%) of the Overhead covers depreciation, maintenance and
repairs, and will not change during the term of this Agreement.
5. Terms of Sale.
(a) CP will invoice Buyer upon manufacture of the Product pursuant
to the Binding Forecast (as defined in Section 7). All prices
for Product will be FOB CP plant.
(b) Invoices will reference the individual purchase order number
and will be due and payable in thirty (30) days net from date
of invoice.
(c) Buyer, within thirty (30) days of the receipt by Buyer of the
Product, shall inspect and reject any lots, cases or units of
such Product which fail to meet the Specifications, failing
which Buyer shall waive any right to reject or any other claim
for non-latent defects with respect to such Product, and Buyer
shall receive a credit for the price paid in respect of such
Product so rejected.
(d) If CP has purchased labels or packaging materials for the Product
pursuant to the rolling forecast (described in Section 7) and Buyer makes a
change in the
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labels or packaging materials, resulting in the labels or
packaging materials being rendered obsolete, Buyer shall pay
CP for the cost of the labels or packaging materials rendered
obsolete by the Buyer's changes in the packaging or labeling.
6. Failure to Pay. If Buyer fails to pay for the Product when payment
therefor is due, CP may withhold further shipments until payment is received or,
at its option, terminate this Agreement pursuant to the provisions of Section
11(c) hereof. CP's failure to exercise the option contained in this Section will
not constitute a waiver of its rights to exercise such option for a future
failure to pay, nor release Buyer from its obligation to pay for the Product
supplied to it, including nail polish remover, plastic containers and caps then
in process.
7. Production and Delivery. CP agrees to deliver the Product ordered by
the Buyer by the date specified in Buyer's purchase order (which date shall not
be less than thirty (30) days from the date of the purchase order), title to
which will pass to Buyer at the time of delivery. Delivery will take place at
the time the Product is loaded on Buyer's trucks or common carrier to be
delivered, freight collect, as directed by Buyer.
Buyer agrees to furnish CP a twelve (12) month rolling forecast of its
requirements for Product each month. The rolling forecast will, each month, also
fix the next month's requirements which Buyer is obligated to purchase from CP
(the "Binding Forecast").
8. Option to Purchase. Buyer shall have the option to purchase from CP
the tools and related materials dedicated by CP exclusively to the manufacture
of the plastic containers and caps if CP no longer manufactures the Product
pursuant to the terms of this Agreement. The purchase price to be paid by Buyer
in respect of a purchase pursuant to this Section 8 shall be the original cost
of such tools and related materials so purchased, multiplied by a fraction, the
numerator of which shall be the useful life, as determined by CP, of such tools
and related materials less the expended life of such tools and related
materials, and the denominator of which shall be the useful life of such tools
and related materials.
9. Force Majeure. In the event of strike by labor, lockout, war,
rebellion, fire, flood, earthquake, act of God, act of governmental authorities
or any other causes beyond the control of the parties hereto which renders it
impossible for either party to comply with the terms of this Agreement, other
than the payment of monies, no liability for non-compliance caused hereby during
the continuance thereof will exist or arise.
During any period of force majeure affecting either party's ability to
perform hereunder, that party agrees that it will use commercially reasonable
efforts to eliminate the cause of such inability to perform. Once the cause of
the party's inability to perform has been eliminated and the other party is so
notified, the placing or shipping of orders will resume pursuant to the terms
hereof; provided, however, that it can be done without breaching the terms of
any agreement a party may have had with an outside supplier during the period of
force majeure.
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10. Term. Subject to Section 11, this Agreement shall continue in full
force and effect for five (5) years from the Closing Date defined in the Asset
Purchase Agreement. Thereafter, the Agreement will be extended for additional
one (1) year terms, unless terminated in accordance with Section 11.
11. Termination. This Agreement may be terminated:
(i) by a party in the event the other party:
(a) files or has filed against it a petition under the Federal Bankruptcy
Act;
(b) makes an assignment for the benefit of creditors, has a receiver
appointed for it or otherwise takes advantage of laws designed for the relief of
debtors; or
(c) fails to perform or otherwise breaches any of its
obligations hereunder and such failure to perform or
breach continues for a period of thirty (30) days
after the receipt of notice from the other party of
its intent to terminate and the reasons therefor. If
such failure to perform or breach is cured by the
party receiving the notice within the curative period
provided herein, then said notice will be of no
further force or effect and this Agreement will
continue uninterrupted;
(ii) by Buyer, for any reason, by giving CP written notice of its
intent to terminate the Agreement at least one (1) year prior
to the termination date set forth in such notice.
12. Warranties of CP. CP hereby represents and warrants to Buyer that
all Product produced and packaged hereunder will be consistent with the
Specifications, CP's past practices and applicable law.
13. Warranties of Buyer. Buyer hereby represents and warrants to CP as
follows:
(a) That all labels provided by Buyer for use by CP in the
production and packaging of the Product will be in compliance
with all applicable laws and regulations in effect in any
jurisdiction in which the Product is manufactured, shipped or
sold; and
(b) That the labels, and changes to the Specifications supplied by
Buyer will not infringe any patent, trademark, trade name,
copyright, trade secret or other proprietary rights of any
person not a party hereto.
14. Indemnification of Buyer by CP. Subject to Section 16, CP hereby
agrees to indemnify and hold Buyer harmless from and against any and all losses,
claims, damages and expenses, including reasonable attorneys' fees and court
costs, arising from:
4
<PAGE>
(a) recalls of the Product ordered by governmental authorities or
mutually agreed to by CP and Buyer in reasonable anticipation
thereof which are necessitated solely by CP's negligence or
fault; and
(b)CP's breach of any representation, warranty or obligation hereunder.
15. Indemnification of CP by Buyer. Subject to Section 16, Buyer hereby
agrees to indemnify and hold CP harmless from and against any and all losses,
claims, damages and expenses, including reasonable attorneys' fees and court
costs, arising from (a) the manufacture, storage, or sale of the Product during
the term hereof except to the extent of CP's responsibility therefor pursuant to
Section 14, or (b) Buyer's breach of any representation, warranty or obligation
hereunder.
16. Indemnification Procedure. In the event that any party (the
"indemnified party") receives written notice of the commencement of any action
or proceeding, the assertion of any claim by a third party or the imposition of
any penalty or assessment for which indemnity may be sought pursuant to this
Section (a "Third Party Claim"), and the indemnified party intends to seek
indemnity pursuant to this Section 16, the indemnified party shall promptly
provide the other party (the "indemnifying party") with notice of such Third
Party Claims and, except for claims seeking equitable relief from the
indemnified party, the indemnifying party shall, upon receipt of such notice, be
entitled to participate in or, at the indemnifying party's option, assume the
defense, appeal or settlement of such Third Party Claim with respect to which
such indemnity has been invoked with counsel selected by it and approved by the
indemnified party (such approval not to be unreasonably withheld or delayed),
and the indemnified party shall fully cooperate with the indemnifying party in
connection therewith upon such indemnifying party's reasonable request. In the
event that the indemnifying party fails to assume the defense, appeal or
settlement of such Third Party Claim within twenty (20) days after receipt of
written notice thereof from the indemnified party, the indemnified party shall
have the right to undertake the defense, appeal or settlement of such Third
Party Claim at the expense and for the account of the indemnifying party. The
indemnifying party shall not settle or compromise any such Third Party Claim
without the indemnified party's prior written consent, unless the terms of such
settlement or compromise release the indemnified party from any and all
liability with respect to such Third Party Claim. However, if such settlement or
compromise would have a material adverse effect on the indemnified party
notwithstanding such release, its prior written consent shall still be required,
which consent will not be unreasonably withheld.
17. Limitation of Liability; No Consequential Damages.
Except as provided for in the Asset Purchase Agreement or Section 14
hereof:
(a) The liability of CP with respect to the Products delivered
hereunder shall be limited solely to the replacement or refund
of Products that fail to meet the Specifications therefor
(such replacement or refund to be subject to timely notice
being given pursuant to Section 5(c)), and CP shall have no
other liability whatsoever with respect to such Products;
provided, however, that if CP fails to supply Products as
provided in the Binding Forecasts, for any
5
<PAGE>
reason other than (i) a force majeure occurrence referred to
in Section 9; or (ii) Buyer's breach of this Agreement, then
Buyer may obtain from a third party on commercially reasonable
terms such amounts of Products that CP failed to supply and CP
shall pay Buyer for the net increase, if any, in the price of
such replacement Products over the price of the Products
hereunder.
(b) Neither party shall be liable for any punitive, special, indirect or
consequential damages.
18. Notices. All notices or communications provided for herein will be
deemed to have been properly given when deposited in the United States
registered or certified mail, postage pre-paid and addressed as follows:
If to CP: Chesebrough-Pond's USA Co.
33 Benedict Place
Greenwich, CT 06830
Attention: General Counsel
If to Buyer: Carson Products Company
64 Ross Road
Savannah, GA 31405
Attention: Dr. Leroy Keith,
Chairman and CEO
With a copy to: Bathgate, Wegener & Wolf, P.C.
One Airport Road
P.O. Box 2043
Lakewood, NJ 08701
Attention: Jan L. Wouters, Esq.
and: Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005-1413
Attention: Lawrence Lederman, Esq.
19. Assignment; Binding Effect. This Agreement may not be assigned in
whole or in part by either party without the written consent of the other party;
provided, however, that Buyer, without CP's consent, may (i) assign its interest
hereunder to its affiliates, subsidiaries or successors and (ii) may assign or
pledge its interest hereunder, as collateral security, to its lenders. Each such
assignee or pledgee shall be a third party beneficiary of this Agreement to the
extent necessary to enforce its rights hereunder. In the event of any such
assignment or pledge to secure indebtedness by Buyer of which CP has notice, (i)
CP shall provide the applicable pledgee or assignee with a copy of each notice
of default or other material notice given to Buyer by CP hereunder, (ii) CP
shall accept performance and the curing of any default hereunder by Buyer from
such pledgee or assignee, (iii) if notified by such pledgee or assignee to do
so, CP shall render its performance hereunder directly to such pledgee or
assignee in lieu of Buyer and (iv) no amendment of this Agreement shall be
6
<PAGE>
binding on such pledgee or assignee without such pledgee's or assignee's
consent. Any assignment made in contravention of the provisions of this section
shall be void and of no effect.
20. Entire Agreement. This Agreement (in addition to the Asset Purchase
Agreement) contains all of the covenants, stipulations and provisions agreed
upon by the parties and the terms hereof may not be altered, changed or waived
unless the alteration, change or waiver is in writing and signed by an
authorized officer of both parties.
21. Confidentiality. During the term of this Agreement, CP acknowledges
they may have access to, or become familiar with, various trade secrets and
confidential information belonging to or relating to Buyer, its affiliates
and/or their respective businesses, including, but not limited to, product
formulas, customer names, manufacturing techniques and processes, know how and
other proprietary or confidential information ("Confidential Information"). CP
acknowledges and agrees that such Confidential Information is owned and shall
continue to be owned solely by Buyer or its affiliates. During the term of this
Agreement and following the termination of this Agreement for any reason,
regardless of whether termination is initiated by Buyer or CP, CP agrees not to
use, communicate, reveal or otherwise make available such Confidential
Information for any purpose whatsoever, or to divulge such Confidential
Information to any person or entity other than Buyer or persons expressly
designated by Buyer, unless CP is compelled to disclose it by judicial process
or such Confidential Information is in the public domain or falls into the
public domain through no fault of CP. The parties agree that damages at law for
violation of any of the foregoing covenants may not be an adequate remedy and
that if CP or its affiliates violate any of the provisions hereof, in addition
to any other available rights or remedies, Buyer, its affiliates and their
successors and assigns, shall be entitled to obtain temporary or permanent
injunctive relief with regard to such violation.
22. Governing Law. This Agreement shall be governed by the laws of the
State of New York without regard to its principles of conflicts of law.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have respectively caused this
Agreement to be executed by a duly authorized officer effective as of the
Closing Date (as such term is defined in the Asset Purchase Agreement).
CONOPCO, INC., "CP" CARSON PRODUCTS COMPANY, "Buyer"
By: By:
Name: Melvin H. Kurtz Name:
Title: Vice President Title:
<PAGE>
Exhibit A
Cutex Nail Polish Remover
Manufacturing and Packaging Prices
<TABLE>
PER DOZEN PRICES
<S> <C> <C> <C> <C>
(a) (b) (a)+(b)=(c)
Product Standard Per Dozen
Description of Product Code Cost Overhead Price
2 oz.
Regular 2-1333-00-07-00 2.529 0.181 2.710
4 oz.
Nourishing w/Vitamin E 2-1335-00-03-00 3.002 0.196 3.198
Non Acetone 2-1306-00-03-00 3.659 0.217 3.876
Regular 2-1336-00-03-00 3.002 0.196 3.198
Nail Strengthener 2-1374-00-03-00 3.077 0.198 3.275
6 oz.
Nourishing w/Vitamin E 2-1347-00-03-00 3.714 0.218 3.932
Non Acetone 2-1377-00-07-00 4.681 0.248 4.929
Regular 2-1351-00-03-00 3.766 0.220 3.986
Nail Strengthener 2-1376-00-07-00 3.824 0.222 4.046
Instant 2-1328-00-07-00 6.618 0.033 6.651
7.2 oz
Nourishing w/Vitamin E 2-1305-01-00-00 4.541 0.244 4.785
Non Acetone 2-1306-01-00-00 5.708 0.280 5.988
Regular 2-1336-01-00-00 4.568 0.245 4.813
Nail Strengthener 2-1374-01-00-00 4.679 0.248 4.927
</TABLE>
WAREHOUSE FEES
In addition to the "Per Dozen Prices", Buyer will pay a monthly Warehouse
Fee according to the size of the Products and the average amount of inventory on
hand for each respective size, in accordance with the following table.
Size Price
2 oz. 0.050 per dozen per month
4 oz. 0.075 per dozen per month
6 oz. 0.100 per dozen per month
7.2 oz. 0.120 per dozen per month
The warehouse fee will not be charged by Seller to Buyer until termination
of the Services Agreement executed by the parties on April 30, 1997.
8
<PAGE>
CARSON, INC.
PO BOX 22309
SAVANNAH, GA 31403
FIRST AMENDMENT TO MANUFACTURING AGREEMENT
Dated as of August 15, 1997
Chesebrough-Ponds's USA Co.
33 Benedict Place
Greenwich, Connecticut 06830
Attn: General Counsel
Ladies and Gentlemen:
Reference is made to the Manufacturing Agreement, dated as of April 30,
1997 (the "Manufacturing Agreement") by and between CONOPCO, INC. d/b/a
CHESEBROUGH-POND'S USA CO. ("CP") AND CARSON PRODUCTS COMPANY.
This amendment letter (this "Amendment") will confirm our agreement to
amend the Manufacturing Agreement as follows:
Exhibit A to the Manufacturing Agreement is hereby amended to include the
following additional products at the following respective costs:
<TABLE>
<S> <C> <C> <C> <C>
(a) (b) (a)+(b)=(c)
Product Standard Per Dozen
Description of Product Code Cost Overhead Price
8 oz.
- -----
Nourishing w/ Vitamin E 2-1505-19-00-00 5.078 0.157 5.235
Non Acetone 2-1306-19-00-00 6.316 0.196 6.512
Regular 2-1336-19-00-00 5.017 0.155 5.172
Nail Strengthener 2-1374-19-00-00 5.166 0.166 5.327
6 dz Floorstand (4 oz.)
- -----------------------
Regular 2-1350-00-00-00 30.402 0.943 31.345
</TABLE>
Except as expressly amended herein, all terms and conditions of the
Manufacturing Agreement shall remain in full force and effect.
Please sign one of the copies of this Amendment and return it to us to
indicate CP's agreement to the foregoing. Please keep the other copy for your
files.
Very truly yours,
CARSON PRODUCTS COMPANY
By: /s/ Leroy Keith
Name: Dr. Leroy Keith
Title: Chairman
AGREED AND ACCEPTED:
CONOPCO, INC. d/b/a CHESEBROUGH-POND'S USA CO.
By: /s/ Melvin H. Kurtz
Name: Melvin H. Kurtz
Title: Vice President
copies to:
Bathgate, Wegener & Wolf, P.C.
One Airport Road
P.O. Box 2043
Lakewood, NJ 08701
Attention: Jan L. Wouters, Esq.
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, NY 10005-1413
Attention: Lawrence Lederman, Esq.
ASSET REPURCHASE AGREEMENT
between
JEAN PHILIPPE FRAGRANCES, INC.,
Seller
and
CARSON, INC.,
Buyer
dated as of March 27, 1997
<PAGE>
Exhibit 10.2
ASSET REPURCHASE AGREEMENT
ASSET REPURCHASE AGREEMENT made this 27th day of March 1997 between
Carson, Inc., a Delaware corporation ("Buyer"), and Jean Philippe Fragrances,
Inc., a Delaware corporation ("Seller").
In connection with the termination of the license agreement by Buyer as
successor in interest to Conopco, Inc. which termination is consented to by
Seller of even date herewith between Seller and Buyer to license in the United
States and Puerto Rico the use of the CUTEX trademark on Products (the "License
Agreement"), Seller wishes to sell and Buyer wishes to buy certain assets of
Seller, used in the packaging, distributing and selling of nail enamel and nail
care treatment products, nail care implements and lipstick under the trademark
CUTEX in the United States and Puerto Rico, but excluding nail enamel remover,
as set forth in Schedule 1 hereto (the "Products") all on the terms and
conditions of this Agreement.
Accordingly, the parties hereto agree as follows:
ARTICLE I
Transfer of Assets, Assumption of Certain Liabilities,
Purchase Price
1.1 Transfer of Assets. At the Closing, as defined in Section 2.1, Seller
will sell, convey, transfer, assign and deliver to Buyer and Buyer will purchase
and accept from Seller, the following properties, assets and rights used or held
by Seller for use exclusively in the sale of Products (the "Assets"):
(i) tools, dies and molds used in connection with the manufacture of
the Products, which shall include the tools, dies and molds as set forth
in Schedule 1.1(i), reasonable wear and tear excepted;
(ii) subject to the limitations set forth in Article 8 of the
License Agreement, inventories of finished products, work-in-progress,
components, raw materials, packaging materials, labels, samples and
supplies ("Inventory");
(iii) subject to Section 1.3, Seller's rights accruing after the
Closing Date under contracts, commitments, understandings, binding
arrangements and other
<PAGE>
agreements of any kind or nature, written or oral, including without
limitation, purchase orders for the sale of Products and for the purchase
of raw material and packaging materials (collectively, "Contracts") as set
forth in the annexed Schedule 1.1(iii), provided that Buyer's obligations
under the Contracts shall not exceed a dollar amount equal to 20% of
Annual Net Sales Value for the Contract Year immediately preceding
termination (as such terms are defined in the License Agreement) unless
Buyer consents to an increase in excess of 20% which consent shall not be
unreasonably withheld.
1.2 Excluded Assets. There shall be excluded from Assets and Seller shall
retain all assets not expressly set forth in Section 1.1 (the "Excluded
Assets"), including without limitation, all accounts receivable (and security
interests therein), cash and cash equivalents, real property, furniture,
equipment, machinery and vehicles related to or used in the sale of Products and
any rights and interests under leases respecting any of the foregoing.
1.3 Consents to Certain Assignments. To the extent that the sale,
conveyance, transfer or assignment of any Contract requires the consent of any
third party, this Agreement shall not constitute an agreement to complete such
sale, conveyance, transfer or assignment if such action would constitute a
breach of the terms of such Contract. If Seller is unable to obtain such consent
to the assignment of any Contract, the Closing shall nonetheless take place and
Seller will take all steps (not including the payment of any consideration)
reasonably requested by Buyer to secure such consent after the Closing or
otherwise to transfer or provide to Buyer the benefits of such Contract. Buyer
shall use its reasonable efforts to cooperate with Seller in obtaining such
consents.
1.4 Assumption of Certain Liabilities. On the Closing Date, as defined in
Section 2.1, Buyer shall assume and thereafter pay, honor and discharge when due
and payable the following liabilities and obligations of Seller with respect to
Assets (the "Assumed Liabilities"):
(i) all liabilities, obligations and commitments of Seller accruing
with respect to periods after the Closing Date under the Contracts
including but not limited to commitments and obligations for advertising,
premiums and coupons;
(ii) all Losses (as defined in Section 8.1.1(i)) arising out of the sale of
Products by Buyer from and after the Closing Date; and
(iii) all customer returns of Products and the crediting of
customers therefor in accordance with Seller's historical returns policy,
except that during the six-month period following the Closing Date and
with respect to customer returns of Products up to $850,000.00 Seller
shall within thirty (30) days
- 2 -
<PAGE>
reimburse Buyer for the difference between the cost of the returned
Product as set by Seller's standard cost sheets and the amount credited
the customer in accordance with Seller's order sheet and returns
authorization form. Seller also agrees to not undertake any action which
results in higher than normal customer returns of Products. In the event
Seller terminates the License Agreement prior to the expiration of the
initial term or renewal, Buyer shall not assume any liabilities for
returned Products and Seller shall have the right to sell Products
returned during the 12-month period following termination, to any customer
other than accounts regularly serviced by Seller selling Products at its
usual and customary price for a period not to exceed six (6) months from
the date the returned Products are received by Seller.
1.5 Retention of Certain Liabilities. Buyer shall not assume any
liabilities and obligations of Seller with respect to the sale of Products,
other than the Assumed Liabilities. All such liabilities, obligations or
commitments of Seller are herein referred to as the "Retained Liabilities." The
Retained Liabilities include, without limitation, (i) all Losses (as defined in
Section 8.1.1(i)) of Seller arising out of the sale of Products prior to the
Closing Date, (ii) any liabilities or obligations of the Seller for any
off-invoice allowances, markdown allowances, cash discounts that are prompt
payments on receivables, customer development funds, billbacks, other
promotional spending or other such sums attributable to sales made by Seller
prior to the Closing Date, whether the obligation to pay falls due before or
after the Closing Date, (iii) all responsibility for employees of Seller, and
(iv) all liabilities for borrowed money, trade accounts payable and income or
other taxes, in each case except for any of the foregoing that are Assumed
Liabilities.
1.6 Closing Purchase Price. The purchase price for Assets is cash in the
amount of Fifty Thousand Dollars ($50,000.00) for the tools, dies and molds as
listed in Schedule 1.1(i) plus the value of the Inventory as shown on the
Inventory Statement (set forth in Section 3.4) (referred to as the "Closing
Purchase Price") subject to adjustment as provided in Section 2.4.
1.7 Transfer Taxes. Buyer shall pay any sales tax and other transfer taxes
and any interest or penalties relating thereto arising from the transfer of
Assets pursuant to this Agreement.
- 3 -
<PAGE>
ARTICLE II
Closing and Post Closing Inventory Adjustment
2.1 Closing. The closing of the transactions contemplated hereby (the
"Closing") shall be held simultaneously with the closing of the acquisition by
Buyer of the Cutex trademarks from Conopco, Inc. at the offices of Milbank,
Tweed, Hadley & McCloy, 1 Chase Manhattan Plaza, New York, NY 10005-1413 or at
such other place or on such other date and time as the parties may agree. The
date on which the Closing takes place is called the "Closing Date." The Closing
shall be deemed to be effective as of the close of business on the business day
prior to the Closing Date.
2.2 Deliveries by Seller. At the Closing, Seller will deliver to Buyer the
following duly executed documents:
(i) a bill of sale covering Assets in the form of Exhibit A attached
hereto; and
(ii) an assignment and assumption agreement providing for the
assignment to Buyer of the Contracts and the assumption by Buyer of the
Assumed Liabilities (the "Assignment and Assumption Agreement") in the
form of Exhibit B attached hereto together with Schedules 3.4, 3.6, 3.9
and 3.10.
2.3 Deliveries by Buyer. At the Closing, Buyer will deliver to Seller the
following:
(i) immediately available funds by wire transfer, bank, cashier or
certified check payable to the order of Seller in United States dollars
drawn on a United States bank, foreign correspondent bank of a United
States bank, or a foreign bank with a regular corresponding United States
bank, acceptable to, Company, in an amount equal to the Closing Purchase
Price; and
(ii) a duly executed Assignment and Assumption Agreement.
2.4 Post Closing Inventory Adjustment
2.4.1 Closing Date. Within 45 days following the Closing Date,
Seller shall deliver to Buyer a statement of the lower of cost or fair market
value ("Book Value") of the Inventory as of the close of business on the
business day prior to the Closing Date (the "Closing Date Inventory Statement").
The Closing Date Inventory Statement shall be prepared in accordance with the
historical accounting principles and practices of Seller and prepared in a
manner consistent with the preparation of the Inventory Statement referred to in
Section 3.4.
- 4 -
<PAGE>
The Book Value of Inventory included on the Closing Date Inventory Statement
shall reflect a physical count of the Inventory conducted on the business day
prior to the Closing Date and shall exclude any Inventory which is damaged or
obsolete or which exists in quantities in excess of a commercially reasonable
mix and balance. For purposes of this Agreement, (i) "obsolete" shall mean
inventories of Products which have not been marketed and sold to the trade
within the 12-month period preceding the Closing Date and have been discontinued
as evidenced by deletion from Seller's order forms; and (ii) "commercially
reasonable mix and balance" shall mean inventories (on a unit and Product SKU
basis) of raw materials, work-in-process, components, finished goods, packaging
materials and labels that do not in each case exceed a 12-month's supply based
on gross sales less returns in the prior 12 months. The physical count of the
Inventory shall be conducted by Seller and its representatives. Buyer and its
representatives shall have the right to observe the physical count of the
Inventory.
2.4.2 Objections; Resolutions of Disputes. Unless Buyer notifies
Seller in writing within thirty (30) days after receipt of the Closing Date
Inventory Statement that it objects to the Book Value of the Inventory set forth
on the Closing Date Inventory Statement and specifies in reasonable detail the
basis for any such objection, the Book Value of the Inventory reflected on the
Closing Date Inventory Statement shall become final and binding upon the parties
for purposes of this Agreement. If Buyer submits written objections to Seller
within such period, Buyer and Seller, during the 15-day period following Buyer's
delivery of its notice of objections to Seller, shall attempt in good faith to
resolve Buyer's objections. If Buyer and Seller are unable to resolve all such
objections within such period, the matters remaining in dispute shall be
submitted to Arthur Andersen (the "Neutral Auditor"). The resolution of disputed
items by the Neutral Auditor shall be final and binding. The fees and expenses
of the Neutral Auditor shall be borne equally by Buyer and Seller. During the
15-day period following receipt of the Closing Date Inventory Statement and
during the pendency of any dispute, Seller shall provide access to Buyer and
Buyer's authorized representatives, during normal business hours, to Seller's
books, records and work papers related to preparation of the Closing Date
Inventory Statement. After final determination of any disputes with respect to
the Book Value of the Inventory as set forth on the Closing Date Inventory
Statement, Buyer shall have not further right to make any claims against Seller
with respect to any element of the Book Value of the Inventory on any basis.
2.4.3 Adjustment Payment. Within ten (10) days after the Book Value
of the Inventory on the Closing Date becomes final and binding in accordance
with Section 2.4.2, (i) if the Book Value of the Inventory on the Closing Date
(the "Final Inventory") exceeds the amount set forth on the Inventory Statement,
Buyer shall pay to Seller an amount equal to such excess plus simple interest
thereon at the prime rate as published in the Wall Street Journal per annum from
the Closing Date to the date of payment, by wire transfer of immediately
available funds; and (ii) if the Final Inventory is less than the amount set
forth on the Inventory Statement, Seller shall pay to Buyer an amount equal to
such shortfall plus simple interest thereon at the prime
- 5 -
<PAGE>
rate as published in the Wall Street Journal per annum from the Closing Date to
the date of payment, by wire transfer of immediately available funds.
2.4.4 Inventory Close Out. Within twelve (12) months of the Closing
Date, any inventory of Seller not purchased by Buyer may be used or sold by
Seller to any customer other than accounts regularly serviced by Seller selling
Products at its usual and customary price.
ARTICLE III
Representations and Warranties of Seller
Seller hereby represents and warrants to Buyer as follows:
3.1 Organization. Seller is a corporation duly incorporated, organized and
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power to own Assets.
3.2 Authorization. Seller has full corporate power and authority to
execute and deliver this Agreement and all other documents contemplated hereby
and to consummate the transactions contemplated hereby and thereby. Seller has
taken all corporate action required by its Certificate of Incorporation and
By-laws to authorize the execution and delivery of this Agreement and all other
documents contemplated hereby and to authorize the consummation of the
transactions contemplated hereby and thereby. This Agreement is a legal, valid
and binding obligation of Seller, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium
and other laws affecting creditors' rights generally from time to time in effect
and, as to enforceability, general equitable principles.
3.3 No Conflicts. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) conflict with
or violate any provision of the Certificate of Incorporation or By-laws of
Seller, (ii) conflict with or violate any statute, law, rule, regulation,
ordinance, order, writ, injunction, judgment or decree applicable to Seller or
by which Assets are bound, or (iii) conflict with or result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would constitute a default) under any agreement or other instrument to which
Seller is a party or by which Assets are bound which would either result in the
creation of any lien, claim, charge or other encumbrance on any Assets. Except
for consents of other parties to the Contracts, no notice, declaration, report
or other filing or registration with, and no waiver, consent, approval or
authorization of, any governmental or regulatory authority or any other person
is required in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby.
- 6 -
<PAGE>
3.4 Financial Statements. Schedule 3.4 to be delivered at Closing is the
unaudited Inventory Statement (the "Inventory Statement") as of the most recent
date prior to the notice of termination under Article 8 of the License Agreement
("Notice Date"), and the unaudited statement of Sales and Profits before
Indirects from the sale of Products for the two (2) most recent years prior to
the Notice Date, prepared in accordance with generally accepted accounting
principles and practices ("GAAP") consistently applied (except with respect to
the treatment of overhead costs, which shall be added in the calculation of the
Book Value of Inventory) and fairly present in all material respects the Book
Value of the Inventory as at that date and the Sales and Profits before
Indirects from the sale of products for the periods covered thereby. The Sales
and Profits before Indirects shall be set forth in the same detail as provided
in Schedule 3.4 of the Asset Purchase Agreement dated of even date hereto
between Buyer and Seller (the "Purchase Agreement").
3.5 Title to Assets. Seller has good title to Assets, subject to no liens,
claims, charges or other encumbrances, other than liens for taxes not yet due
and payable and other statutory liens arising in the ordinary course of business
which are being contested in good faith.
3.6 Contracts. Schedule 3.6, to be delivered at closing, sets forth a list
of all Contracts except (i) orders for the purchase by Seller of finished goods,
raw materials, components, packaging materials, labels and supplies used in the
sale of Products, in each case with a remaining commitment of Twenty Thousand
Dollars ($20,000.00) or less and a remaining term of twelve (12) months or less;
(ii) orders from customers for purchase of Products with a remaining commitment
of Twenty Thousand Dollars ($20,000.00) or less and a remaining term of twelve
(12) months or less; and (iii) commitments to customers for trade promotions, in
each case with a remaining commitment of Twenty Thousand Dollars ($20,000.00) or
less and a remaining term of twelve (12) months or less. The aggregate
commitment under Contracts not listed on Schedule 3.6 does not exceed Two
Hundred Thousand Dollars ($200,000.00). Seller has delivered or made available
to Buyer full and complete copies of all written Contracts and descriptions of
the terms of all oral Contracts listed on Schedule 3.6. Seller and, to the best
of Seller's knowledge, each other party to each Contract is in compliance in all
material respects with the terms thereof and each Contract was entered in the
ordinary course of business.
3.7 Inventory. All of the finished products included in the Inventory
reflected in the Inventory Statement were (a) manufactured by or on behalf of
Seller in the ordinary course of business; and (b) saleable in the ordinary
course of business, except to the extent of any reserve reflected on the
Inventory Statement.
3.8 Seller's Conduct. Since the date of this Agreement, Seller has
conducted the manufacture and sale of Products only in the ordinary course in a
manner consistent with past practice and there has been no material adverse
change in the sale of Products.
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3.9 Compliance with Law. Except as set forth in Schedule 3.9 to be
delivered at closing, the manufacture and sale of Products by Seller is in
compliance in all material respects with all applicable statutes, laws, rules,
regulations, orders, ordinances, judgments and decrees of all governmental
authorities ("Laws") and Seller has not been informed of any alleged violations
of any Laws.
3.10 Litigation. Except as set forth in Schedule 3.10 to be delivered at
closing, no claim, action, suit, proceeding or investigation seeking damages in
excess of Two Thousand Dollars ($2,000.00) is pending or, to the best of
Seller's knowledge, threatened before any court, arbitrator, or governmental
agency which may have a material adverse affect on the sale of Products or which
seeks to prevent the consummation of the transactions contemplated by this
Agreement.
ARTICLE IV
Representations and Warranties of Buyer
Buyer represents and warrants to Seller as follows:
4.1 Organization. Buyer is a corporation duly incorporated, organized,
validly existing and in good standing under the laws of the State of Delaware.
4.2 Authorization. Buyer has full corporate power and authority to execute
and deliver this Agreement and all other agreements contemplated hereby and to
consummate the transactions contemplated hereby and thereby. Buyer has taken all
corporate action required by its Certificate of Incorporation and By-laws to
authorize the execution and delivery of this Agreement and all other documents
contemplated hereby and to authorize the consummation of the transactions
contemplated hereby and thereby. This Agreement is a legal, valid and binding
obligation of Buyer, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, reorganization, insolvency, moratorium and
other laws affecting creditors' rights generally from time to time in effect
and, as to enforceability, general equitable principles.
4.3 Consents or Approvals. No consent, action, approval or authorization
of, or registration, declaration or filing with, any governmental department,
commission, agency or other instrumentality having jurisdiction over Buyer is
required to be obtained or made by Buyer to authorize the execution and delivery
by Buyer of this Agreement or the performance by Buyer of its terms.
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ARTICLE V
Covenants Pending the Closing
5.1 Seller's Conduct. Between the date of this Agreement and the Closing
Date, Seller will, except as otherwise agreed to in writing by Buyer, (i)
perform in all material respects its obligations under the Contracts and (ii)
not enter into any new Contract or an extension or amendment of any existing
Contract that would cause any representation or warranty of Seller hereunder to
be untrue.
5.2 Access. From the date of this Agreement to the Closing Date, Seller
will give to Buyer and its representatives, during normal business hours,
reasonable access to the books, records and Contracts of Seller related
exclusively to the manufacture and sale of Products and furnish to Buyer such
documents and information concerning exclusively the manufacture and sale of
Products as Buyer may reasonably request from time to time provided, however,
Seller shall have no obligation prior to the Closing to reveal to Buyer
proprietary information, including without limitation, know-how, formulas or
trade secrets.
5.3 Reasonable Efforts. Each party will use its reasonable efforts to take
or cause to be taken all actions and to do or cause to be done all things
necessary, proper or advisable to perform its obligations hereunder, to satisfy
the conditions to the Closing and to consummate the transactions contemplated
hereby. Seller shall use all reasonable efforts to obtain consents to the
assignments of the Contracts listed on Schedule 3.6.
ARTICLE VI
Conditions to Closing
6.1 Conditions to the Obligations of Both Parties. The obligations of each
party hereto to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction at or prior to the Closing of the following
conditions:
6.1.1 No law, rule, regulation, order, decree, injunction, stay or
restraining order shall have been enacted, entered, promulgated or enforced by
any court of competent jurisdiction or governmental or regulatory authority or
instrumentality that prohibits the consummation of all or any part of the
transactions contemplated hereby, and no action or proceeding shall be pending
or threatened by any governmental authority or private person seeking any such
order, or decree or seeking to recover any damages or obtain other relief as a
result of the consummation of such transactions.
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6.1.2 All required registrations and filings with any government or
governmental or regulatory authority shall have been made and any waiting period
applicable to the transactions contemplated hereby pursuant to any law, rule,
regulation, order or decree of any government or instrumentality or agency
thereof having jurisdiction with respect to the transactions herein contemplated
shall have expired or been terminated.
6.2 Conditions to Buyer's Obligation to Close. The obligation of Buyer to
purchase Assets, assume the Assumed Liabilities and otherwise consummate the
transactions contemplated hereby shall be subject to the satisfaction, at or
before the Closing, of the following conditions:
6.2.1 Seller shall have performed in all material respects the
obligations required to be performed by it at or prior to the Closing.
6.2.2 The representations and warranties of Seller contained herein
shall have been true and correct in all material respects when made and shall be
repeated at the Closing Date and shall be true and correct in all material
respects at and as of the Closing Date.
6.2.3 Seller shall have delivered to Buyer a certificate, dated the
Closing Date and signed by an officer of Seller, as to the satisfaction of the
conditions set forth in Sections 6.2.1 and 6.2.2 above.
6.3 Conditions to Seller's Obligation to Close. The obligation of Seller
to sell, convey, transfer and assign Assets and otherwise consummate the
transactions contemplated hereby shall be subject to the satisfaction, at or
before the Closing Date, of the following conditions:
6.3.1 Buyer shall have performed in all material respects the
obligations required to be performed by it at or prior to the Closing.
6.3.2 The representations and warranties of Buyer contained herein
shall have been true and correct in all material respects when made and shall be
repeated at the Closing Date and shall be true and correct in all material
respects at and as of the Closing Date.
6.3.3 Buyer shall have delivered to Buyer a certificate, dated the
Closing Date and signed by an officer of Buyer, as to the satisfaction of the
conditions set forth in Sections 6.3.1 and 6.3.2 above.
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ARTICLE VII
Termination
7.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing by mutual consent
of Buyer and Seller.
7.2 Effect of Termination. Any termination of this Agreement except
pursuant to Section 7.1 shall not affect or diminish any rights accruing to
either party pursuant to this Agreement at or prior to such termination.
ARTICLE VIII
Indemnification
8.1 Obligation of Parties to Indemnify.
8.1.1 Indemnification by Seller. Subject to the limitations set
forth in Section 8.3, Seller shall indemnify, defend and hold harmless Buyer and
its Affiliates (as defined in Section 10.6), on an after-tax basis and after
giving effect to the amount, if any, of insurance proceeds actually received by
Buyer, excluding any portion thereof attributable to policies directly or
indirectly self-insured, with respect to the following:
(i) any and all claims, losses, damages, liabilities, deficiencies,
obligations or expenses, including without limitation reasonable legal
fees and expenses ("Losses"), arising or resulting from the failure of
Seller to pay, honor and discharge when due and payable the Retained
Liabilities;
(ii) any and all Losses resulting or arising from the non-fulfillment by
Seller of any agreement or covenant of Seller under this Agreement; and
(iii) any and all Losses resulting or arising from the inaccuracy of
any representation or the breach of any warranty made by Seller herein.
8.1.2 Indemnification by Buyer. Subject to the limitations set forth
in Section 8.3, Buyer shall indemnify, defend and hold harmless Seller and its
Affiliates, on an after-tax basis and after giving effect to the amount, if any,
of insurance proceeds actually received by Seller, excluding any portion thereof
attributable to policies directly or indirectly self-insured, with respect to
the following:
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(i) any and all Losses resulting or arising from the failure of Buyer to
pay, honor and discharge when due and payable the Assumed Liabilities;
(ii) any and all Losses resulting or arising from the non-fulfillment by
Buyer of any agreement or covenant of Buyer under this Agreement;
(iii) any and all Losses resulting or arising from the inaccuracy of any
representation or the breach of any warranty made by Buyer herein; and
(iv) any and all Losses arising out of the sale of Products by Buyer
from and after the Closing Date.
8.1.3 Purchase Price Adjustments. Payments by Seller or Buyer
pursuant to this Section 8.1 shall be considered adjustments to the Closing
Purchase Price hereunder and treated as such for all purposes by the parties
hereto, except as otherwise required by applicable tax law.
8.2 Indemnification Procedure for Third Party Claims. If any indemnified
party receives written notice of the commencement of any action or proceeding or
the assertion of any claim by a third party or the imposition of any penalty or
assessment for which indemnity may be sought under this Article VIII (a "third
party claim") and such indemnified party intends to seek indemnity pursuant to
this Article VIII, such indemnified party shall promptly provide the
indemnifying party with notice of such third party claim. Except in the case of
claims seeking equitable relief from the indemnified party, the indemnifying
party shall, upon acknowledgment of its obligation to indemnify the indemnified
party, be entitled to participate in or, at its option, assume the defense or
settlement of such third party claim. The defense or settlement shall be
conducted through counsel selected by the indemnifying party and approved by the
indemnified party, which approval shall not be unreasonably withheld, and the
indemnified party shall fully cooperate with the indemnifying party in
connection therewith, provided that the indemnified party shall be entitled at
any time to employ, at its own expense, separate counsel to represent it. In the
event that the indemnifying party fails to assume the defense or settlement of
any third party claim within twenty (20) days after receipt of notice thereof
from the indemnified party, such indemnified party shall have the right to
undertake the defense or settlement of such third party claim at the expense and
for the account of the indemnifying party. The indemnifying party shall not
settle any third party claim the defense or settlement of which is controlled by
it without the indemnified party's prior written consent, unless the terms of
such settlement or compromise releases such indemnified party from any and all
liability with respect to such third party claim.
8.3 Limitation on Indemnification. Notwithstanding the foregoing provisions
of this Article VIII, (i) neither party shall be responsible for any
indemnifiable Losses suffered by the
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other under Sections 8.1.1 (iii) or 8.1.2 (iii) unless a claim therefor is
asserted in writing on or prior to the first anniversary of the Closing Date;
(ii) Seller shall not be liable for any Losses suffered by Buyer claimed under
Section 8.1.1 (iii) unless the aggregate amount of such Losses exceeds One
Hundred Thousand Dollars ($100,000.00), and then only to the extent of any such
excess; and (iii) the aggregate liability of Seller for Losses suffered by Buyer
shall in no event exceed the Closing Purchase Price set forth in Section 1.6.
ARTICLE IX
Additional Agreements
9.1 Announcements. Neither Buyer nor Seller will issue any press release,
public announcement or any communication to the trade with respect to this
Agreement or the transactions contemplated hereby except with the prior approval
of the other, such approval not to be unreasonably withheld or delayed, or
except as may be required by law.
9.2 Information Transfer. After the Closing Date, Seller shall provide to
Buyer at no charge access to all sales and business records relating exclusively
to the sale of the Products by Seller prior to the Closing including, without
limitation, advertising materials, customer lists, cost and pricing information,
supplier lists and catalogues. Seller shall also promptly provide copies
(including computerized records) of all customer lists, sales records, and such
other records that Buyer may reasonably specify.
9.3 Termination of Insurance. Buyer acknowledges that Seller's insurance
coverage for Assets shall terminate as of the Closing Date.
9.4 Asset Transfer. As soon as practicable after the Closing Date but
within thirty (30) days, Buyer shall remove Assets at Buyer's expense. Any
Assets not removed within such period may be deemed to be abandoned and
forfeited by Buyer to Seller.
9.5 Packaging Material. Seller hereby grants and hereby agrees to obtain
consents from its Affiliates (if any) granting the rights to Buyer to Use all
packaging or related material purchased by Buyer pursuant hereto that contains
or reflect, Seller's or its Affiliates' trademarks for a period not to exceed
twelve (12) months from the Closing Date.
9.6 Employee Matters. Buyer and Seller hereby acknowledge and agree that
Buyer shall not have any obligation whatever to employees of the Seller involved
with the manufacture, distribution and sale of the Products ("Employees"), or
with regard to matters of liabilities relating to such Employees, including but
not limited to obligations concerning employee compensation and benefits,
severance payments, occupational safety matters and workers'
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compensation matters, other than any obligations arising from the employment of
or similar arrangement made by Buyer with any of the Employees to commence on or
after the Closing Date.
ARTICLE X
Miscellaneous
10.1 Notices. Any notice or other communication given under this Agreement
shall be in writing and shall be either (i) delivered personally, (ii) sent by
documented overnight delivery service such as Federal Express, (iii) sent by
facsimile transmission, provided that a confirmation copy of any such
transmission is sent no later than the business day following the date of such
transmission by documented overnight delivery service or first class mail,
postage prepaid, or (iv) sent by first class mail, postage prepaid, unless the
party giving such notice knows or has reason to know of any strike or other
condition that may delay delivery of such mail. Such notice shall be deemed to
have been duly given (a) on the date of delivery, if delivered personally, (b)
on the business day after dispatch by documented overnight delivery service such
as Federal Express, if sent in such manner, (c) on the date of facsimile
transmission, if so transmitted during business hours, or (d) on the third
business day after deposit in the United States or Canadian mail, postage
prepaid, if sent in such manner. Notices or other communications shall be
directed to the following addresses:
Notices to Seller: Jean Philippe Fragrances, Inc.
551 Fifth Avenue
New York, NY 10176-0198
Attn: Mr. Jean Madar, Chief Executive Officer
with a copy to: Joseph A. Caccamo,
Attorney at Law
1001 Yamato Road, Suite 403
Boca Raton, FL 33431
Notices to Buyer: Carson, Inc.
64 Ross Road
Savananah, GA 31405
Attn: Dr. Leroy Keith, Chairman and CEO
with a copy to: Bathgate, Wegener & Wolf, P.C.
One Airport Road
Lakewood, NJ 08701
Attn: Jan Wouters, Esq.
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Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, NY 10005-1413
Attn: Lawrence Lederman, Esq.
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Either party, by notice given in accordance with this Section 10.1, may specify
a new address for notices under this Agreement.
10.2 Entire Agreement; Amendment; Waiver. This Agreement and the schedules
and exhibits annexed hereto constitute the entire understanding between the
parties with respect to the subject matter hereof, and supersede all other
understandings and negotiations with respect thereto. This Agreement may be
amended only in a writing signed by both parties hereto. Any provision of this
Agreement may be waived only in a writing signed by the party to be charged with
such waiver. No course of dealing between the parties shall be effective to
amend or waive any provision of this Agreement.
10.3 Assignment. This Agreement may not be assigned by either party
without the written consent of the other except to Affiliates of either party.
10.4 Governing Law. This Agreement shall be governed by the laws of the
State of New York which are applicable to agreements made and to be performed
entirely therein.
10.5 Captions. The captions in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the interpretation
hereof.
10.6 Affiliates. For purposes of this Agreement, an affiliate of any party
is any person controlling, controlled by or under common control with such party
and, in the case of Buyer, shall include any person the voting shares of which
is owned directly or indirectly by the parent of Buyer.
10.7 Bulk Sales Law. Buyer hereby waives compliance with the Bulk Sales
Law. Seller will indemnify Buyer for any Losses arising out of any noncompliance
therewith.
10.8 Fees. Each of the parties hereto shall pay its respective legal and
accounting fees and expenses incurred in connection with the preparation,
execution and delivery of this Agreement and all documents and instruments
executed pursuant hereto and any other costs and expenses incurred by such
party, except as otherwise expressly set forth herein, whether or not the
Closing occurs.
10.9 Further Assurances. From time to time after the Closing, Seller and
Buyer shall execute and deliver such documents and instruments as the other
party may reasonably request in order to consummate more effectively the
purchase and sale of Assets as contemplated hereby.
10.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
CARSON, INC.
By:
JEAN PHILIPPE FRAGRANCES, INC.
By:
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Exhibit 10.3
SERVICES AGREEMENT dated as of April 30, 1997, between CONOPCO,
INC. d/b/a CHESEBROUGH-POND' USA CO. a New York corporation
("Chesebrough"), and CARSON PRODUCTS COMPANY, a Delaware
corporation ("Carson").
The parties hereto desire that Chesebrough perform certain services for
Carson upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained in this
Agreement, the parties to this Agreement, intending to be bound by it, hereby
agree as follows:
SECTION 1. Services To Be Provided by Chesebrough. Chesebrough shall
provide Carson with the services described in Appendix A attached hereto (the
"Services") for the periods of time described in Appendix A. The Services shall
not be changed without the consent of Chesebrough. The nature, quality and
timeliness of the Services shall be the same as those performed by Chesebrough
with respect to its own businesses. Carson shall be entitled to have reasonable
access to Chesebrough's data relating to Carson to verify proper performance of
the Services.
SECTION 2. Payment for Services, As compensation for the provision of
services pursuant to this Agreement, Carson agrees to pay to Chesebrough, on the
last day of each month in which any service is furnished, fees in accordance
with Appendix A attached hereto.
SECTION 3. Duration. This Agreement shall remain in effect until the close
of business six months after the Closing Date as defined in the Purchase
Agreement (the "Purchase Agreement") entered into by Chesebrough and Carson
regarding the sale of the CUTEX business by Chesebrough (the "Closing Date"),
unless earlier terminated by Carson on written notice to Chesebrough. Carson may
terminate any services at any time on written notice to Chesebrough. Chesebrough
will cooperate with Carson to transition the Services so that Carson will make
itself self-sufficient with respect to the Services at the termination of the
Agreement.
SECTION 4. Status of Chesebrough. Chesebrough is an independent contractor
engaged by Carson for the provision of Services. Nothing in this Agreement shall
constitute Chesebrough an employee, agent or general representative of Carson.
SECTION 5. Limitation of Liability. Liability for damages hereunder shall
be limited to acts of gross negligence or willful misconduct, and in each such
case damages shall be limited to actual losses. In no event shall Chesebrough be
liable for any other damages, including without limitation consequential
damages, for its failure to make available any of the Services or for any other
breach of this Agreement.
<PAGE>
SECTION 6. Confidentiality. Chesebrough agrees that any information with
respect to Carson and its operations that Chesebrough receives in connection
with the provision of Services pursuant to this Agreement is confidential and
proprietary to Carson. Chesebrough hereby agrees not to use or disclose to any
third party any such information with out the prior written consent of Carson.
This duty shall continue throughout the term of this Agreement, and any renewals
or extensions thereof, and after termination thereof for a period of one year.
SECTION 7. Force Majeure. Chesebrough shall not be liable to Carson
hereunder by reason of the failure of Chesebrough to provide any Services as the
result of injunction, court order, strike, riot, invasion, fire, flood,
explosion, breakdown acts of God, or the public enemy, or any cause beyond the
control of Chesebrough; it being the intention of Carson to relieve Chesebrough
of its obligation to provide the Services or to receive and pay for the Services
when, as a result of any of the above-mentioned causes, Chesebrough may be
unable to fulfill its obligations under this Agreement.
SECTION 8. Notices. Any notice or communication in respect of this
Agreement will be sufficiently given to a party if in writing and delivered in
person, sent by certified or registered mail or the equivalent (return receipt
requested) or by overnight courier or given by addressed to the party at its
address or fax number provided below.
If to Chesebrough:
Chesebrough-Pond's USA Co.
33 Benedict Place
Greenwich, Connecticut 06830
Fax 203-625-2246
Attention of General Counsel
If to Carson:
Carson Products Company
64 Ross Rd.
Savannah, Georgia 31506
Attention: President
with a copy to:
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Place
Fax: 212/530-5219
New York, NY 10005-1413
Attention: Lawrence Lederman, Esq.
<PAGE>
With a copy to:
Morningside Capital Group L.L.C.
One Morningside Drive North - Suite 200
Westport, CT 06880
Attention: Vincent A. Wasik, President
SECTION 9. Assignment. This Agreement may not be assigned by either party
without the prior written consent of the other party; provided, however, that
either party may assign and delegate this Agreement to any corporation that
acquires substantially all the business of such party.
SECTION 10. Effect of This Agreement; Headings; Governing Law;
Counterparts. This Agreement (including the attachments hereto) sets forth the
entire understanding of the parties and supersedes any and all prior agreements,
arrangements and understandings relating to the subject matter hereof. The
section headings of this Agreement are for convenience of reference only and do
not form a part hereof and do not in any way modify, interpret or construe the
intentions of the parties. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York. This
Agreement may be executed in two or more counterparts and such counterparts
bearing the signatures of the parties hereto shall, when taken together,
constitute one and the same instrument.
IN WITNESS WHEREOF, each party hereto has executed and delivered this
Agreement as of the date and year first above written.
CONOPCO, INC. d/b/a
CHESEBROUGH-POND'S USA CO.
by:
Title: Vice President
CARSON PRODUCTS COMPANY
by: John P. Brown, Jr.
Title: Secretart
<PAGE>
APPENDIX A
SERVICES TO BE PROVIDED
Customer Service
Order Processing
EDI Support
Operations Planning
Sales Reporting
Sales Audit
Accounts Receivable
Deductions Processing
Bank Reconciliation
Inventory Status System
Automatic Credit Approval
Freight Matching
Freight Rating and Routing
Distribution Truck Loading
The fee for the above services shall be $33,000 per month for the first
three months. $66,000 per month thereafter.
Freight Expense
The estimated fee for the above services shall be $65,000 per month.
<PAGE>
Exhibit 10.4
BROKER AGREEMENT
THIS BROKER AGREEMENT (the "Agreement") is entered into and effective as of
the 19th day of September, 1997 (the "Effective Date") by and between CARSON
PRODUCTS COMPANY, a Georgia corporation with its principal office at 64 Ross
Road, Savannah, Georgia 31405 ("Carson"), and AM COSMETICS, INC., a Delaware
corporation with its principal place of business at 461 Fifth Avenue, New York,
New York 10017 ("Broker").
For and in consideration of the mutual promises, covenants and conditions
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I.
OBLIGATIONS OF BROKER
1.1 Appointment as Broker. Carson hereby appoints Broker as a broker for,
and the exclusive distributor of, the products of Carson (the "Products")
described in the current Carson price list (attached hereto as Exhibit 1.1) in
the territory set forth on Schedule 1.1 (the "Territory"). This Agreement sets
forth the terms under which Broker shall solicit orders for and distribute the
Products within the Territory.
1.2 Duties of Broker. Broker shall solicit orders from customers in the
Territory for the Products, and distribute the Products to such customers as
provided hereunder. Additionally, Broker shall serve as the exclusive
distributor of Products in the Territory for which Carson receives orders and
which Carson sells directly to customers. In connection with this arrangement,
Broker agrees to:
(a) Maintain a staff of personnel knowledgeable in the
Products to perform sales and marketing activities within
the Territory;
(b) Ensure that the distribution of Products within
the Territory is consistent with Carson's marketing plan;
(c) Monitor competitive activity in the Territory and
prepare a summary of such activity for Carson on a monthly
basis;
(d) Perform other activities which may from time to
time be reasonably required by Carson;
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(e) Use its best efforts to meet all sales goals set
by Carson, from time to time, and participate in all
promotions offered by Carson; and
(f) Participate in and provide Carson with assistance
at any conventions, meetings and shows as Carson may
reasonably request from time to time.
1.3 Sale of Products. Broker will use its best efforts to market,
distribute, sell, and promote the Products in the Territory. The Products shall
be marketed by Broker in original packages without any alterations whatsoever.
Broker acknowledges that it has no authority to commit or bind Carson to any
warranty or guaranty of the Products other than those contemplated by this
Agreement, and agrees that the only authorized warranties or guaranties of the
Products are those written, express warranties or guaranties which Carson may
choose to place from time to time on authorized packaging of the Products.
1.4 Limitations on Distribution. Broker will not distribute, either
directly or indirectly, any of the Products for resale in any part of the world
other than in the Territory, and will use its best efforts to ensure that the
Products are not exported from the Territory. Broker will forward to Carson all
inquiries or orders received by Broker for the Products from sources outside the
Territory, and Broker acknowledges that Broker shall have no right to any
proceeds or commissions from sales of Products outside the Territory.
1.5 Pricing. Broker will sell the Products to its customers at such prices
and on such terms as Carson will determine from time to time.
1.6 Reports. Broker will submit to Carson at Carson's request, periodic
forecasts, budgets, promotional schedules and recommendations for the Territory
as may be desirable for the proper development of Carson's business.
1.7 Compliance with Laws. Broker will at all times in the performance of
its duties hereunder strictly comply with all applicable laws and regulations.
Broker hereby assumes responsibility for any penalties or damages occasioned by
the violation of or non-compliance with any such laws and regulations. Broker
shall inform Carson of all changes in the laws or regulations regarding the
import, distribution or marketing of the Products in the Territory of which it
is aware.
1.8 Sublicensing. Broker shall have no right to sublicense or subcontract
with respect to any matters under this Agreement.
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ARTICLE II.
OBLIGATIONS OF CARSON
2.1 Pricing. With the assistance of Broker (including, without limitation,
Broker's provision to Carson of information available to Broker regarding
pricing in the Territory), Carson will consider competitive price levels in the
Territory when formulating Carson's prices to customers. Carson will give Broker
thirty (30) days' prior notice before implementing any price changes. Such price
changes will not ever create any liability on the part of Carson to Broker.
2.2 Commission. Carson will pay Broker a commission (the "Commission") of
7.5% of the Net Sales (as defined herein). Such Commission will be paid in the
form of cash within 30 days after the close of each month during the term of
this Agreement, and will only be payable on amounts actually shipped and
invoiced to customers during the period. "Net Sales" shall equal gross sales
less adjustments for quantity discounts, promotional discounts and returns (but
shall not include adjustments for cooperative advertising allowances,
transportation charges, cash discounts, or samples).
ARTICLE III.
INDEMNIFICATION
3.1 Indemnification by Carson. Carson shall indemnify Broker for all
liabilities, losses, and expenses (including, without limitation, reasonable
attorneys' fees and other costs of defending such claims) arising out of claims
of third parties for damage or injury suffered or allegedly suffered as a result
of the breach of any warranty given by Carson in connection with the Products.
3.2 Indemnification by Broker. Broker shall indemnify Carson for all
liabilities, losses, and expenses (including, without limitation, reasonable
attorney's fees and other costs of defending such claims) arising out of claims
of third parties for damage or injury suffered or allegedly suffered as a result
of:
(a) Defects or alleged defects of Products handled and
sold or distributed by Broker, to the extent that such
defects or alleged defects are attributable to Broker in
shipping, storage, labeling and handling the Products;
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(b) Any negligence of Broker in the shipping,
transportation or delivery of the Products;
(c) Any warranty or guaranty given by Broker in
connection with the Products in violation of this Agreement;
or
(d) Any failure of Broker to comply with its
obligations under this Agreement.
3.3 Limitation of Liability. Notwithstanding anything in this Agreement to
the contrary, Carson will not be liable for any special, indirect, incidental or
consequential damages of any nature (including, but not limited to, loss of
profits and loss of use of ordered Products), regardless of whether based in
contract or in tort, arising in connection with the Products or this Agreement.
ARTICLE IV.
INTELLECTUAL PROPERTY
4.1 Use of Licensed Marks. All service marks, trademarks, trade names,
logos, brands, designs and distinctive packaging pertaining to the Products (the
"Licensed Marks") are recognized as being the property of Carson or the
licensors of Carson. Broker is authorized to sue such Licensed Marks within the
Territory in advertisements, letterheads and otherwise during the time this
Agreement is effective only in accordance with and subject to the terms and
conditions contained in, this Agreement or any prior written approval from
Carson. Broker agrees to use the Licensed Marks solely in the promotion,
marketing and sale of the Products. Broker agrees that it shall not, without the
prior written consent of Carson, use or modify for use any of the Licensed Marks
to the detriment of Carson or for the benefit of any person or entity other than
Carson or Broker in connection with Broker's performance under this Agreement.
Upon any expiration or termination of this Agreement, Broker shall return to
Carson all physical embodiments of any of the Licensed Marks then in the
possession of Broker or any of its current or former employees or consultants.
4.2 Quality of Licensed Marks. Broker shall use the Licensed Marks in the
form and manner prescribed from time to time by Carson. The nature and quality
of all (i) services rendered by Broker in connection with the Licensed Marks,
(ii) good sold by Broker under the Licensed Marks and (iii) related advertising,
promotional and other related uses of the Licensed
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Marks by Broker shall conform to standards set by and shall be under the
control of Carson. Broker shall (a) submit to Carson for Carson's approval in
advance of distribution of publication specimens of all uses of the Licensed
Marks, (b) comply with all applicable laws and regulations and obtain all
appropriate government approvals pertaining to the sale, distribution and
advertising of goods and services covered by this Agreement, (c) permit Carson
to inspect Broker's operations as they pertain to Carson and (d) cooperate and
assist Carson in its efforts to control the nature and quality of the goods and
services associated with the Licensed Marks. Broker expressly agrees that
immediately upon the termination of this Agreement it will discontinue and
refrain from using the Licensed Marks on any Products or in any manner
whatsoever.
4.3 Ownership of Licensed Marks. Broker will not, during the term of this
Agreement or thereafter, represent that Broker is the owner of the Licensed
Marks, whether or not such Licensed Marks are registered, nor will Broker
dispute the validity thereof. All right, title and interest in and to the
Licensed Marks, including all goodwill associated with the Licensed Marks, shall
remain vested in Carson or licensors of Carson. All use of the Licensed Marks by
Broker shall inure to the benefit of and be on behalf of Carson. Broker will not
at any time register, or cause to be registered, in its name or in the name of
another, or use or employ during or after the term of this Agreement, any of
such Licensed Marks or any service mark, trademark, trade name, logo, brand,
design or distinctive packaging similar to or likely to be confused with such
Licensed Marks. Broker will exercise due diligence and promptly report to Carson
any infringement or limitation of the Licensed Marks that comes to Broker's
knowledge, and will assist Carson in protecting any right of Carson, any
affiliated company of Carson, or licensors of Carson to such Licensed Marks.
Carson shall have the exclusive right to initiate any protective action with
respect to such infringements or limitation, and Broker shall extend all
cooperation to Carson to bring such infringements to a swift end. Carson will
use its reasonable efforts to protect such Licensed Marks in the Territory
during the term of this Agreement.
4.4 Product Registrations. In the event Broker holds in its name at any
time any permits, registrations or authorizations related to the Products
("Product Registrations") with any Board of Health, Ministry of Health or other
governmental agency, Broker shall hold such Product Registration solely as an
agent of Carson or Carson's affiliated companies, and only for the purposes of
facilitating the performance of this Agreement. Broker will transfer to Carson
(or Carson's designee in the Territory) any such Product Registrations then
existing in the
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Territory immediately after termination of this Agreement or at any time
that Carson deems it impractical to sell any Products in the Territory. Further,
Broker hereby gives its unconditional and irrevocable approval and statement of
"No Objection" to the transfer of such Product Registrations or to the
reissuance of fresh Product Registrations in the name of Carson or its
affiliated companies or in the favor of any other broker designated by Carson.
Broker further confirms that, for all practical purposes, any agency of the
government of the Territory or the Region is hereby authorized to act upon such
approval and statement of "No Obligation" fully and without any reservation. For
this purpose, Broker hereby undertakes to execute all necessary documents
required by such governmental agency. If it is not legally possible to transfer
such Product Registrations, Broker will take all steps to cancel such Product
Registrations, failing which Broker will be liable for all damages claimed by
Carson.
4.5 Termination. Upon termination of this Agreement, and at Carson's
request, Broker shall communicate to any of the concerned governmental agencies
of the Territory its unconditional "No Objection" to the transfer of Product
Registrations in favor of Carson or any other entity designated by Carson.
ARTICLE V.
TERM
5.1 Initial Term. This Agreement will become effective on the Effective
Date, and will continue in effect for two years (the "Initial Term"), unless
earlier terminated pursuant to this Article V. Notwithstanding any expiration or
any termination of this Agreement as provided below, the obligations of Broker
under Sections 3.1, 4.1 and 4.3 shall continue indefinitely.
5.2 Renewal. At the expiration of the Initial Term or the applicable
Renewal Term (as hereinafter defined), this Agreement shall automatically renew
for a successive one-year term (each a "Renewal Term") unless either party
notifies the other party in writing at least ninety (90) days prior to the
expiration of the then-current term that it wishes this Agreement to expire at
the end of such term. During the ninety (90) days period following such notice,
Carson may make such arrangements as it deems necessary for the operation of its
business after the expiration of this Agreement, including supplying the
Products to other parties for sale after such expiration, and Broker will render
such assistance, at Carson's expense, as Carson deems necessary
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to facilitate such arrangements. Carson shall not be liable to Broker for
any termination damages or indemnities, and Broker hereby agrees not to restrain
Carson from appointing an alternate broker or from distributing directly through
the expiration of the then-current term.
5.3 Early Termination by Carson. Carson may terminate this Agreement
immediately upon notice to Broker if:
(a) Broker becomes bankrupt or insolvent, is unable to
meet any of its financial obligations on the due dates
hereof, ceases to carry on business, goes into liquidation,
or a receiver, trustee, conservator or administrator is
appointed for its business or assets;
(b) The majority ownership or control of Broker
changes in any way; or
(c) Broker commits a material breach of this
Agreement, and fails to remedy such breach within thirty
(30) days of receipt of written notice of such breach from
Carson.
5.4 Early Termination By Broker. Broker may terminate this Agreement
immediately upon notice to Carson if:
(a) Carson fails to make reasonable efforts to fill
orders for deliveries from Broker within sixty (60) days
after receiving such orders; or
(b) Carson commits a material breach of this
Agreement, and fails to remedy such breach within thirty
(30) days of receipt of written notice of such breach from
Broker.
5.5 Effect of Termination. Upon expiration or termination of this
Agreement, as of the date of such expiration or termination (the "Termination
Date"):
(a) If Broker has any Products in its possession at
the Termination Date, Broker will so notify Carson, and at
Carson's request will (i) transfer such Products to Carson
(at Carson's expense) or (ii) distribute such Products at
the direction of Carson, in accordance with the terms of
this Agreement;
(b) Carson will pay the Commission (as provided under
Section 2.2) on all sales made by Broker up to and including
the Termination Date; Broker will not receive Commissions on
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sales made after the Termination Date other than those sales
made in accordance with Carson's directions pursuant to
Section 5.5(a);
(c) Broker will not sell or distribute any products
having service marks, trademarks, trade names, logos,
brands, designs and distinctive packaging similar to or
likely to be confused with the Licensed Marks used in
connection with the Products, and will not make use of any
confidential or proprietary information, trade secrets,
information relating to business plans, practices,
procedures, new products and documentation ("Confidential
Information") made available to it hereunder for a period of
five (5) years after the Termination Date; and Broker shall
not disclose, publish, release, transfer or otherwise make
available Confidential Information in any form to, or for
the use or benefit of, any person or entity for a period of
five (5) years after the Termination Date;
(d) Broker shall cease holding itself out as a broker
of the Products, and shall comply with all instructions
provided by Carson regarding a transfer of Broker's
Territory and the orderly termination of Carson's
relationship with Broker;
(e) Broker will transfer to Carson all pertinent
records, Confidential Information, unused advertising
materials, sales literature, and any and all other property
of Carson in the possession or control of Broker;
(f) Any orders accepted by Carson prior to the
Termination Date but not yet shipped to customers may be
canceled by Carson upon written notice to Broker;
(g) No indemnities, damages or any other payments will
be due Broker from Carson in respect of the termination of
this Agreement for any reason whatsoever, nor will Carson be
liable to Broker for any claims of goodwill or for any loss
of business or consequential damages; and
(h) Carson shall be exclusively responsible for the
payment of taxes, levies, duties, fees or governmental dues
of any kind arising out of Carson's sale of Products to
Broker; and Broker shall indemnify Carson for any other
taxes, levies, duties, fees or governmental dues of any kind
resulting from this Agreement.
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ARTICLE VI.
MISCELLANEOUS
6.1 Relationship of Parties. Except as set forth in Section 4.4, nothing in
this Agreement will constitute Broker as an agent or legal representative of
Carson for any purpose whatsoever, and Broker is not granted any right or
authority to create any obligation or liability, express or implied, on behalf
or in the name of Carson, or to bind Carson in any manner whatsoever.
6.2 Waiver. No delay or omission by either Carson or Broker to exercise any
of its rights hereunder (including, without limitation, any rights arising from
any default) will affect or impair such party's exercise of such rights, nor
will any waiver by such party of any particular default by the other party
affect or impair the first party's rights in respect of any subsequent default
of the same or a different kind.
6.3 Entire Agreement; Amendment. This Agreement supersedes, replaces, and
cancels any and all arrangements, agreements, or understandings between the
parties and their predecessors which may have been previously in existence with
respect to distribution of the Products in the Territory. There are no written
or oral understandings of any nature whatsoever between the parties hereto with
reference to the subject matter of this Agreement which are not expressed in
this Agreement and, except as expressly provided in this Agreement, this
Agreement may not be modified except as mutually agreed in writing by Carson and
Broker.
6.4 Assignment. This Agreement may not be assigned in whole or in part by
Broker. Any attempt by Broker to assign this Agreement in whole or in part to
others shall, at the option of Carson, operate to cancel, annul and terminate
this Agreement. Carson may freely assign this Agreement in whole or in part.
6.5 Severability; Enforceability. All terms and provisions of this
Agreement are severable. If any term or provision of this Agreement or any
application thereof shall be held to be invalid or unenforceable, the remainder
of this Agreement or any other application of such term of provision shall not
be affected thereby.
6.6 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Georgia. Broker and Carson agree that
the Federal courts of the Northern District of Georgia shall have exclusive
jurisdiction over
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disputes under this Agreement, and the parties agree hereby to jurisdiction
and the laying of venue in such courts.
6.7 Separate Parts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, with such counterparts together constituting one and the same
instrument.
6.8 Payment in Dollars. All amounts payable to Carson hereunder shall be
payable in U.S. Dollars unless otherwise agreed by Carson in writing.
(signature pages follow)
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IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first written above.
CARSON PRODUCTS COMPANY
By: /s/ Robert W. Pierce
Title: Executive Vice President
and Chief Financial Officer
Address:
64 Ross Road
P.O. Box 22309
Savannah, GA 31405
AM COSMETICS, INC.
By: /s/ J. Max Lewis
Title: Executive Vice President
Address:
461 Fifth Avenue
14th Floor
New York, NY 10017
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SCHEDULE 1.1
Territory
United States and Puerto Rico
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EXHIBIT 1.1
Carson Price List
Product Standard Price
Nail Polish
Strong Nail Uncarded $ 1.68
Strong Nail Carded 1.68
Color Quick Uncarded 1.68
Color Quick Carded 1.68
Fresh Colors Uncarded 1.68
Treatments Uncarded 1.80
Treatments Carded 1.80
Naturals Uncarded 2.37
French Manicure Kits 3.39
Manicare 10 - Dual 4.00
Manicare 10 - Single 1.99
Manitique 4.53
Remover
2 oz. $ 6.60
4 oz. 9.00
6 oz. 11.52
6 oz. Instant 14.28
7.2 oz. 9.00
