SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
[X ] Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 14, 1998
Commission file number 1-12271
CARSON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1428605
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) 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 June, 1998 the Company entered into a Purchase Agreement with Ivax
Corporation, d/b/a IVX Bioscience, Inc. in order to acquire the shares of
Johnson Products Co., Inc., a Florida corporation. Johnson Products is a major
manufacturer of personal care products for the ethnic market. The purchase price
approximated $85.0 million with $35.0 million paid in cash. The Company entered
into a credit agreement with Ivax Corporation for the remaining $50.0 million
purchase price. The transaction was completed on July 14,1998 and announced in
the accompanying press release. Total revenues of Johnson Products Co. for the
twelve months ended December 31, 1997 was $80.2 million. This acquisition will
be accounted for under the purchase method of accounting.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(A) Financial Statements of the Business Acquired - It is impracticable
to provide the required financial statements at this time. Such financial
statements will be filed as soon as practicable, but no later than 60 days after
the date that this Current Report on Form 8-K is filed with the Securities and
Exchange Commission.
(B) Pro Forma Financial Information - It is impracticable to provide
the required pro forma financial information at this time. Such pro forma
financial information will be filed as soon as practicable, but no later than 60
days after the date that this Current Report on Form 8-K is filed with the
Securities and Exchange Commission.
(C) Exhibits
10.1 Purchase Agreement dated as of June 16, 1998 between Ivax
Corporation, d/b/a IVX Bioscience, Inc., and the Company.
10.2 Credit Agreement dated as of July 14, 1998 between Ivax
Corporation, d/b/a IVX Bioscience, Inc., and the Company.
22.1 Press Release dated July 14, 1998 announcing purchase of Johnson
Products Company by the Company.
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, thereunto duly authorized.
CARSON, INC.
Date: July 29, 1998 By: /s/ Robert W. Pierce
Robert W. Pierce
Executive Vice President, Chief Financial Officer and
Secretary
(Principal Accounting and Financial Officer)
1
PURCHASE AGREEMENT
by and between
IVAX CORPORATION
and
CARSON, INC.
June 16, 1998
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE
SECTION 1.1 Purchase and Sale...............................................1
SECTION 1.2 Purchase Price..................................................2
SECTION 1.3 Closing.........................................................2
SECTION 1.4 Purchase Price Adjustment.......................................3
SECTION 1.5 Letter of Credit................................................5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 2.1 Organization....................................................6
SECTION 2.2 Capitalization..................................................7
SECTION 2.3 Ownership of Stock..............................................8
SECTION 2.4 Authorization; Validity of Agreement............................8
SECTION 2.5 Consents and Approvals; No Violations...........................8
SECTION 2.6 Financial Statements............................................9
SECTION 2.7 No Undisclosed Liabilities......................................9
SECTION 2.8 Absence of Certain Changes.....................................10
SECTION 2.9 Employee Benefit Plans; ERISA..................................10
SECTION 2.10 Litigation....................................................13
SECTION 2.11 No Default; Compliance with Applicable Laws...................13
SECTION 2.12 Taxes.........................................................14
SECTION 2.13 Title to Assets...............................................16
SECTION 2.14 Real Property.................................................16
SECTION 2.15 Company Intellectual Property.................................17
SECTION 2.16 Contracts.....................................................19
SECTION 2.17 Environmental Matters.........................................20
SECTION 2.18 Brokers or Finders............................................21
SECTION 2.19 Employees; Labor Relations....................................21
SECTION 2.20 Affiliate Transactions........................................21
SECTION 2.21 Substantial Customers and Suppliers...........................22
SECTION 2.22 Accounts Receivable...........................................22
SECTION 2.23 Inventory.....................................................22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 3.1 Organization...................................................23
SECTION 3.2 Authorization; Validity of Agreement...........................23
SECTION 3.3 Consents and Approvals; No Violations..........................24
SECTION 3.4 Acquisition for Investment.....................................24
SECTION 3.5 Financing......................................................24
SECTION 3.6 Brokers or Finders.............................................24
SECTION 3.7 Investigation by Buyer.........................................25
SECTION 3.8 Capital Adequacy; Solvency.....................................26
ARTICLE IV COVENANTS
SECTION 4.1 Interim Operations of Seller...................................26
SECTION 4.2 Access to Information..........................................28
SECTION 4.3 Tax Matters....................................................29
SECTION 4.4 Employee Matters...............................................33
SECTION 4.5 Publicity......................................................34
SECTION 4.6 Approvals and Consents; Cooperation; Notification..............35
SECTION 4.7 Non-Competition................................................36
SECTION 4.8 Use of "IVAX" Name.............................................38
SECTION 4.9 Affiliate Transactions.........................................38
SECTION 4.10 Further Assurances............................................38
SECTION 4.11 Post-Closing Purchase Transactions............................39
ARTICLE V INDEMNIFICATION
SECTION 5.1 Indemnification by Seller......................................43
SECTION 5.2 Indemnification by Buyer.......................................43
SECTION 5.3 Survival of Representations and Warranties.....................44
SECTION 5.4 Notice and Opportunity to Defend...............................44
SECTION 5.5 Adjustment for Insurance and Taxes.............................45
SECTION 5.6 Mitigation of Loss. ..........................................45
SECTION 5.7 Subrogation. .................................................46
SECTION 5.8 Tax Indemnification............................................46
SECTION 5.9 Set-Off. .....................................................46
SECTION 5.10 Exclusive Remedy. ...........................................46
ARTICLE VI CONDITIONS
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Closing....47
SECTION 6.2 Conditions to the Obligations of Buyer.........................47
SECTION 6.3 Conditions to the Obligations of Seller........................48
ARTICLE VII TERMINATION
SECTION 7.1 Termination....................................................49
SECTION 7.2 Procedure and Effect of Termination............................50
ARTICLE VIII MISCELLANEOUS
SECTION 8.1 Governing Laws and Consent to Jurisdiction.....................50
SECTION 8.2 Amendment and Modification.....................................51
SECTION 8.3 Notices........................................................51
SECTION 8.4 Interpretation.................................................52
SECTION 8.5 Counterparts...................................................53
SECTION 8.6 Entire Agreement; Third-Party Beneficiaries....................53
SECTION 8.7 Severability...................................................54
SECTION 8.8 Service of Process.............................................54
SECTION 8.9 Specific Performance...........................................54
SECTION 8.10 Assignment....................................................54
SECTION 8.11 Expenses......................................................54
SECTION 8.12 Waivers.......................................................55
SECTION 8.13 No Double Recovery............................................55
Page
Annexes
Index of Defined Terms Annex A
Procedures for Calculating Working Capital Annex B
Index to Disclosure Schedule
Title Section
Organization................................................................2.1
Capitalization..............................................................2.2
Consents and Approvals; No Violations.......................................2.5
No Undisclosed Liabilities..................................................2.7
Absence of Certain Changes..................................................2.8
Employee Benefit Plans; ERISA...............................................2.9
Litigation.................................................................2.10
No Default; Compliance with Applicable Law.................................2.11
Taxes......................................................................2.12
Real Property..............................................................2.14
Company Intellectual Property..............................................2.15
Contracts .................................................................2.16
Environmental Matters......................................................2.17
Employees; Labor Relations.................................................2.19
Affiliate Transactions.....................................................2.20
Substantial Customers and Suppliers........................................2.21
Accounts Receivable........................................................2.22
Inventory..................................................................2.23
General Disclosure..........................................................3.7
Employee Matters............................................................4.4
Affiliate Transactions......................................................4.9
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of June 16, 1998 (this
"Agreement"), by and between IVAX Corporation, a Florida corporation ("Seller"),
and Carson, Inc., a Delaware corporation ("Buyer").
WHEREAS, Seller is the owner of all of the outstanding shares
of capital stock (the "Shares") of Johnson Products Co., Inc., a Florida
corporation and a wholly-owned subsidiary of Seller (the "Company");
WHEREAS, Buyer has granted Seller the right to arrange for an
unaffiliated third party to purchase the Dermablend Business (as defined herein)
following the Closing (as defined herein);
WHEREAS, Buyer has granted Seller the right to purchase or
arrange for the purchase of, and Seller, if requested by Buyer, agrees to
purchase or arrange for the purchase of, the National Cosmetics Business (as
defined herein) and the Iman Business (as defined herein) following the Closing;
and
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, all of the Shares, subject to the terms and conditions
of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties, intending to be legally bound hereby, agree as
follows:
ARTICLE 1
PURCHASE AND SALE
SECTION 1.1 Purchase and Sale.
Upon the terms and subject to the conditions set forth in this Agreement, at the
Closing Seller shall sell, assign, transfer and deliver to Buyer, and Buyer
shall purchase from Seller, the Shares, free and clear of all options, pledges,
security interests, liens or other encumbrances or restrictions on voting or
transfer ("Encumbrances"), other than restrictions imposed by federal or state
securities laws.
SECTION 1.2 Purchase Price
(1) On the Closing Date (as defined herein) and subject to the terms and
conditions set forth in this Agreement in consideration of the sale, assignment,
transfer and delivery of the Shares, Buyer shall pay to Seller (i) $85 million
by wire transfer of immediately available funds to an account or accounts
designated by Seller (the "Purchase Price") provided, however, for purposes of
this Agreement, after the Closing Date the term "Purchase Price" will refer to
an amount equal to $85 million reduced by the funds received by Buyer in
accordance with Section 4.11.
(2) In addition, Buyer will cause the Company promptly to pay to Seller all net
proceeds received by the Company in connection with the settlement or final
adjudication of the litigation and other proceedings involving Johnson Products
Co., Inc. v. Pro-Line Corporation, Docket No. 94 C 3555 (the "Pro-Line
Litigation"). Buyer will cause the Company to allow Seller to assume complete
control of the Pro-Line Litigation and to cause the Company not to interfere
with Seller's prosecution of the Pro-Line Litigation on behalf of the Company.
Seller shall bear the costs of prosecuting the Pro-Line Litigation. Seller shall
not have any obligation to become a substituted or additional party to the
litigation. Buyer will cause the Company to cause such of its personnel as may
be reasonably requested by Seller, including, without limitation, Adu Darkwa, to
be available for consultation, testimony, acting as a Company representative at
trial on the matter and related matters, and shall cooperate in other ways as
Seller reasonably requests, in connection with the conduct of the Pro-Line
Litigation. Seller will reimburse Buyer for the reasonable out-of-pocket costs
of providing such personnel and cooperation. Seller will provide updates on the
status of the Pro-Line Litigation to Buyer as and when reasonably requested.
Buyer will cause the Company to agree to any settlement or voluntary dismissal
of any part of the Pro-Line Litigation proposed by Seller, provided that such
settlement does not impose any costs or any ongoing obligations or restrictions
on the Company and its Subsidiaries. Buyer acknowledges and agrees that only
Seller will have the right, subject to the preceding sentence, to agree to any
settlement or dismissal of the Pro-Line Litigation.
SECTION 1.3 Closing
(1) The sale and purchase of the Shares contemplated by this Agreement shall
take place at a closing (the "Closing") to be held at the offices of Skadden,
Arps, Slate, Meagher & Flom (Illinois) at 9:00 a.m. Chicago time on a date not
later than the second business day following the satisfaction of the condition
set forth in Section 6.1(b) (but in no event earlier than August 15, 1998 or
such earlier date selected by Seller) or at such other place or at such other
time or on such other date as Seller and Buyer mutually agree upon in writing
(the day on which the Closing takes place being the "Closing Date").
(2) At the Closing, Seller shall deliver or cause to be delivered to Buyer (i)
stock certificates evidencing the Shares duly endorsed in blank or accompanied
by stock powers duly executed in blank and (ii) all other previously undelivered
certificates and other documents required to be delivered by Seller to Buyer at
or prior to the Closing Date in connection with the transactions contemplated
hereby.
(3) At the Closing, Buyer shall deliver to Seller (i) the Purchase Price by wire
transfer in immediately available funds to an account or accounts designated by
Seller and (ii) all other previously undelivered certificates and other
documents required to be delivered by Buyer to Seller at or prior to the Closing
Date in connection with the transactions contemplated hereby.
SECTION 1.4 Purchase Price Adjustment.
(1) As soon as practicable but not later than 60 days following the Closing
Date, Seller shall prepare and deliver to Buyer a working capital statement of
the Company as of the close of business on the Closing Date (the "Closing
Statement") setting forth the current assets minus the current liabilities of
the Company (the "Working Capital") on the basis described in Annex B,
accompanied by a report from Arthur Andersen LLP; provided, however, if the
transactions contemplated in Section 4.11(a) or (b) occur, the Closing Statement
will be prepared as if the Company did not own the Dermablend Business or the
National Cosmetics Business and the Iman Business as of the Closing Date, as the
case may be; provided further that if Buyer retains the Dermablend Business and,
pursuant to Section 4.11(b), sells the National Cosmetics Business and the Iman
Business, the Dermablend Business will also include the net accounts receivable
(other than the Designated Receivables (as defined in Section 4.11)), bank
overdraft, accounts payable and accrued expenses related to the National
Cosmetics Business and the Iman Business. Seller and its authorized
representatives shall have reasonable access to all relevant books and records
and employees of the Company following the Closing Date to the extent required
to complete preparation of the Closing Statement, including, without limitation,
preparation of any financial reports or schedules needed to complete the Closing
Statement. Seller and Buyer shall split equally the cost of preparing and
delivering the Closing Statement.
(2) After receipt of the Closing Statement, Buyer shall have 15 days to review
it. Buyer and its authorized representatives shall have reasonable access to
Seller's accountants to the extent required to complete their review of the
Closing Statement, including, without limitation, the accountants' work papers
used in preparation thereof. Unless Buyer delivers written notice to Seller on
or prior to the 15th day after receipt of the Closing Statement specifying in
reasonable detail its objections to the Closing Statement on the grounds that
the Closing Statement (i) was not prepared in accordance with this Section 1.4
or (ii) contained arithmetic errors, the parties shall be deemed to have
accepted and agreed to the Closing Statement. If Buyer so notifies Seller of
such an objection to the Closing Statement, the parties shall within 15 days
following the date of such notice (the "Resolution Period") attempt to resolve
their differences.
(3) At the conclusion of the Resolution Period, any amounts remaining in dispute
shall, at the election of either party, be submitted to Price Waterhouse (the
"Neutral Auditor"). The Neutral Auditor shall be engaged within five days after
an election by either party to submit its objections to the Neutral Auditor, and
each party agrees to execute, if requested by the Neutral Auditor, a reasonable
engagement letter. All fees and expenses of the Neutral Auditor shall be borne
equally by Seller and Buyer. The Neutral Auditor shall act as an arbitrator to
determine, based solely on the written presentations by Seller and Buyer made
within 15 days of the Neutral Auditor's engagement or such other reasonable
period of time to which the parties agree, and not by independent review, only
those issues still in dispute. The Neutral Auditor's determination shall be made
within 30 days after Seller's and Buyer's written presentations have been made,
shall be set forth in a written statement delivered to Seller and Buyer and
shall be final, binding, conclusive and nonappealable. The term "Final Closing
Statement" shall mean the definitive Closing Statement agreed to by Seller and
Buyer in accordance with Section 1.4(b) or the definitive Closing Statement
resulting from the determination made by the Neutral Auditor in accordance with
this Section 1.4(c) (in addition to those items theretofore agreed to by Seller
and Buyer).
(4) On a date or dates mutually agreeable to Seller and Buyer within ten days of
the Closing Date, Seller and its accountants will take a physical inventory,
observed by Buyer and/or its representatives. All inventory reflected on the
Closing Statement shall be as of the Closing Date and based upon this physical
inventory. For purposes of the Closing Statement, the inventory shall include
all finished goods, work-in-process, raw materials and promotional materials
calculated in accordance with the procedures set forth in Annex B.
(5) The Purchase Price shall be (i) increased dollar-for-dollar to the extent
the Working Capital as reflected on the Final Closing Statement is greater than
the March Target Amount (as defined below) and (ii) decreased dollar-for-dollar
to the extent the Working Capital as reflected on the Closing Statement is less
than the December Target Amount. There shall be no adjustment to the Purchase
Price pursuant to this Section 1.4(e) if the Working Capital is equal to or
greater than the December Target Amount and less than or equal to the March
Target Amount. The amount of any such change in the Purchase Price pursuant to
this Section 1.4(e) shall be paid by Buyer to Seller, in the case of an
increase, or by Seller to Buyer, in the case of a decrease, plus interest on
such amount from the Closing Date through the date of payment at the Prime Rate,
within five business days after the Closing Statement is agreed to by Seller and
Buyer or is determined by the Neutral Auditor. The "Prime Rate" means the prime
lending rate announced by The Wall Street Journal as in effect from time to
time. Any amount paid pursuant to this Section 1.4(e) will be paid by wire
transfer of immediately available funds to an account or accounts designated by
Buyer or Seller, as the case may be. The "December Target Amount" means $11.95
million and the "March Target Amount" means $12.78 million; provided that (x) if
Buyer sells the National Cosmetics Business and the Iman Business pursuant to
Section 4.11(b) and Buyer retains the Dermablend Business, the December Target
Amount shall be $12.49 million and the March Target Amount shall equal $14.00
million less the amount of the Designated Receivables, if any, (y) if Buyer
sells the Dermablend Business, the National Cosmetics Business and the Iman
Business pursuant to Sections 4.11(a) and (b), the December Target Amount shall
be $10.63 million and the March Target Amount shall be $10.75 million and (z) if
Buyer sells the Dermablend Business pursuant to Section 4.11(a) and Buyer
retains the National Cosmetics Business and the Iman Business, Buyer and Seller
will negotiate in good faith to establish the Target Amount in a manner
consistent with setting of the foregoing amounts.
SECTION 1.5 Letter of Credit. In the event that following the Closing, Seller
publicly announces its intention on or prior to the second anniversary of the
Closing Date to (i) complete a liquidation of Seller or (ii) distribute by way
of extraordinary dividend or stock repurchase all or substantially all of
Seller's assets, Seller shall deliver to Buyer an irrevocable letter of credit
to secure Seller's obligations under this Agreement, in a form reasonably
satisfactory to Buyer, issued by a commercial bank having combined capital and
surplus of at least $100 million in favor of Buyer. Such letter of credit, if
issued on or prior to the end of the eighteenth month after the Closing Date
(the "Cut-Off Date"), shall be in the initial principal amount of 25% of the
Purchase Price, provided that the amount of any such letter of credit
outstanding at the Cut-Off Date will be reduced to equal the dollar value of all
pending claims for indemnification made by Buyer pursuant to Sections 4.3 and
5.1 as of the Cut-Off Date. Any such letter of credit issued after the Cut-Off
Date shall be in the initial principal amount equal to the dollar value of all
then pending claims for indemnification made by Buyer pursuant to Sections 4.3
and 5.1. Any such letter of credit shall have a term of two years and shall be
subject to automatic renewal for successive six-month periods to the extent that
claims for indemnification by Buyer under Section 5.1 remain unresolved. After
the second, but before the sixth anniversary of the Closing Date, if Seller
sells all or substantially all of its assets, Seller shall cause the buyer of
such assets to assume Seller's obligations under this Agreement, in which event
the obligation to issue a letter of credit pursuant to this Section 1.5 will
terminate.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
SECTION 2.1 Organization. Seller, the Company and the Company's Subsidiaries
each is a corporation or other entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not have a Company Material
Adverse Effect (as defined herein). The Company and each of its Subsidiaries are
duly qualified, licensed or admitted to do business and are in good standing in
those jurisdictions specified in Section 2.1 of the written statement delivered
by Seller to Buyer at or prior to the execution of this Agreement (the
"Disclosure Schedule"), which, except as disclosed in Section 2.1 of the
Disclosure Schedule, are the only jurisdictions in which the ownership, use or
leasing of the Company's and its Subsidiaries' properties, or the conduct or
nature of their businesses, may make such qualification, licensing or admission
necessary, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not have a Company Material
Adverse Effect. Before Closing, Seller will have delivered to Buyer a complete
and correct copy of the certificate of incorporation, bylaws, certificate of
formation, operating agreement or similar organizational documents of Seller,
the Company and the Company's Subsidiaries. As used in this Agreement, "Company
Material Adverse Effect" means any material adverse change in, or material
adverse effect on, the business, financial condition or operations of the
Company and its Subsidiaries, taken as a whole; provided, however, that, the
effects of changes that are generally applicable to (i) the industries or
markets in which the Company and its Subsidiaries operate, (ii) the United
States economy or (iii) the United States securities markets shall be excluded
from the determination of Company Material Adverse Effect; provided further,
that any adverse effect on the Company or its Subsidiaries resulting from the
execution and the announcement of this Agreement and the transactions
contemplated hereby shall also be excluded from the determination of Company
Material Adverse Effect. As used in this Agreement, "Subsidiary" means, with
respect to any party, any corporation, partnership or other entity or
organization, whether incorporated or unincorporated, of which (i) such party or
any subsidiary of such party is a general partner (excluding such partnerships
where such party or any subsidiary of such party does not have a majority of the
voting interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
subsidiaries. Section 2.1 of the Disclosure Schedule lists the name of each
Subsidiary and all lines of business in which each Subsidiary is participating
or engaged. Except for interests in the Subsidiaries of the Company and as
disclosed in Section 2.2 of the Disclosure Schedule, neither the Company nor any
of its Subsidiaries owns, directly or indirectly, any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity.
SECTION 2.2 Capitalization. Section 2.2 of the Disclosure Schedule sets forth
the authorized, issued and outstanding capital stock of the Company. All the
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. Section 2.2 of
the Disclosure Schedule lists for each Subsidiary the amount of its authorized
capital stock, the amount of its outstanding capital stock and the record owners
of such outstanding capital stock. All of the outstanding shares of capital
stock of each Subsidiary have been duly authorized and validly issued and are
fully paid and nonassessable. There are no existing (i) options, warrants,
calls, subscriptions or other rights, convertible securities, agreements or
commitments of any character obligating Seller, the Company or its Subsidiaries
to issue, transfer or sell any shares of capital stock or other equity interest
in the Company or its Subsidiaries or securities convertible into or
exchangeable for such shares or equity interests, (ii) contractual obligations
of the Company or its Subsidiaries to repurchase, redeem or otherwise acquire
any capital stock of Seller, the Company or the Company's Subsidiaries or (iii)
voting trusts or similar agreements to which Seller, the Company or its
Subsidiaries is a party with respect to the voting of the capital stock of the
Company or its Subsidiaries.
SECTION 2.3 Ownership of Stock. The Shares are owned beneficially and of record
by Seller, and the shares of each of the Company's Subsidiaries are owned of
record and beneficially by the Company, in each case free and clear of all
Encumbrances, other than restrictions imposed by Federal and state securities
laws. Upon the consummation of the transactions contemplated hereby, Buyer will
acquire title to the Shares, free and clear of all Encumbrances, other than
restrictions imposed by Federal and state securities laws.
SECTION 2.4 Authorization; Validity of Agreement. Seller has full power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Seller of this
Agreement, and the consummation by it of the transactions contemplated hereby,
have been duly authorized by all necessary corporate proceedings, and no other
corporate action on the part of Seller or its stockholders is necessary to
authorize the execution and delivery by Seller of this Agreement and the
consummation by it of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Seller (and assuming due and valid
authorization, execution and delivery hereof by Buyer) is a valid and binding
obligation of Seller enforceable against Seller in accordance with its terms,
except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws, now or hereafter
in effect, affecting creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
SECTION 2.5 Contents and Approvals; No Violations. Except as disclosed in
Section 2.5 of the Disclosure Schedule and except for (a) filings pursuant to
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (b) applicable requirements under corporation or "blue sky" laws of
various states and (c) matters specifically described in this Agreement, neither
the execution and delivery of this Agreement by Seller nor the consummation by
Seller of the transactions contemplated hereby will (i) violate any provision of
the certificate of incorporation, bylaws or other organizational documents of
Seller, the Company or the Company's Subsidiaries, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which Seller, the Company or the Company's Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound, (iii)
violate any order, writ, judgment, injunction, decree, law, statute, rule or
regulation applicable to Seller, the Company, the Company's Subsidiaries or any
of their properties or assets or (iv) require on the part of Seller, the Company
or the Company's Subsidiaries any filing or registration with, notification to,
or authorization, consent or approval of, any court, legislative, executive or
regulatory authority or agency (a "Governmental Entity"), except in the case of
clauses (ii), (iii) or (iv) for such violations, breaches or defaults which, or
filings, registrations, notifications, authorizations, consents or approvals the
failure of which to obtain, would (A) not have a Company Material Adverse Effect
and would not materially adversely affect the ability of Seller to consummate
the transactions contemplated by this Agreement or (B) become applicable as a
result of the business or activities in which Buyer is or proposes to be engaged
or as a result of any acts or omissions by, or the status of any facts
pertaining to, Buyer.
SECTION 2.6 Financial Statements. Seller has delivered to Buyer (i) the audited
consolidated balance sheets (including the related notes) of the Company for the
fiscal years ended December 31, 1997, 1996 and 1995, and the related audited
consolidated statements of income, shareholder's equity and cash flows
(including the notes thereto) for each of the three years in the period ended
December 31, 1997, together with a true and correct copy of the report on such
audited information by Arthur Andersen LLP, (ii) management letters to the
Company from such accountants with respect to the results of such audits and
(iii) the unaudited balance sheet of the Company as of March 31, 1998, and the
related unaudited consolidated statement of income for the three-month period
ended March 31, 1998 (the "Unaudited Financial Statements" and together with
(i), the "Financial Statements"). The Financial Statements present fairly, in
all material respects, the financial position of the Company as of the
respective dates or for the respective periods set forth therein in accordance
with United States generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods covered, except that the Unaudited
Financial Statements lack footnotes and are subject to normal year-end
adjustments.
SECTION 2.7 No Undisclosed Liabilities. Except as disclosed in Section 2.7 of
the Disclosure Schedule and except for liabilities and obligations (a) incurred
in the ordinary course of business after December 31, 1997, (b) disclosed in the
Financial Statements or (c) incurred in connection with the transactions
contemplated hereby or otherwise as contemplated by this Agreement, since
December 31, 1997, the Company and its Subsidiaries have not incurred any
liabilities or obligations that would be required to be reflected or reserved
against in a consolidated balance sheet of the Company, prepared in accordance
with GAAP as applied in preparing the audited consolidated balance sheets of the
Company included in the Financial Statements, and that would constitute a
Company Material Adverse Effect.
SECTION 2.8 Absence of certain Changes. Except as disclosed in Section 2.8 of
the Disclosure Schedule or in the Financial Statements and except as
contemplated by this Agreement (including Section 4.1), since December 31, 1997,
the Company has not (i) suffered any change constituting a Company Material
Adverse Effect, (ii) amended its certificate of incorporation or bylaws or other
organizational documents, (iii) split, combined or reclassified the Shares, (iv)
materially changed its accounting principles, practices or methods, except as
required by GAAP or applicable law or (v) entered into any transaction or
activity which would require the prior written consent of Buyer pursuant to
Section 4.1(b)-(m) if entered into after the date hereof.
SECTION 2.9 Employee Benefit Plans; ERISA.
(1) Section 2.9(a) of the Disclosure Schedule contains a complete list and
description of each of the material Benefit Plans. Neither the Company nor any
of its Subsidiaries has scheduled or agreed upon future material increases of
benefit levels (or creations of new material benefits) with respect to any
Benefit Plan.
(2) Neither the Company nor any of its Subsidiaries maintains or is obligated to
provide benefits under any life, medical or health plan (other than as
incidental benefit under a Qualified Plan) which provides benefits to retirees
or other terminated employees, excluding benefit continuation rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(3) None of the Company, any of its Subsidiaries, any ERISA Affiliate or any
other corporation or organization controlled by or under common control with any
of the foregoing within the meaning of Section 4001 of ERISA has at any time
within the past six years (i) sponsored, maintained or contributed to any
Defined Benefit Plan or (ii) contributed to any "multiemployer plan," as that
term is defined in Section 4001 ERISA.
(4) Each of the Benefit Plans is, and its administration and operation has been,
in all material respects in compliance with, and there is no outstanding claim
or notice that any such Benefit Plan is not in compliance with, all applicable
laws and orders, including, without limitation, the requirements of ERISA and
the Code, except for such failures to be in compliance which would not have a
Company Material Adverse Effect. Each Qualified Plan has received a
determination letter from the Internal Revenue Service stating that it is so
qualified.
(5) All contributions and other payments required to be made by Seller, the
Company or any Subsidiary to any Benefit Plan with respect to any period ending
before or upon the Closing Date have been made or reserves adequate for such
contributions or other payments have been or will be set aside therefor and have
been or will be reflected in financial statements of Seller in accordance with
GAAP.
(6) To the knowledge of Seller, no event has occurred, and there exists no
condition or set of circumstances in connection with any Benefit Plan, under
which Buyer, the Company or any Subsidiary, directly or indirectly (through any
indemnification agreement or otherwise), could reasonably be expected to be
subject to any risk of material liability pursuant to Section 409 of ERISA,
Section 502(i) of ERISA, Title IV of ERISA or Section 4975 of the Code.
(7) No transaction contemplated by this Agreement will result in material
liability to the PBGC under Section 302(c)(11), 4062, 4063, 4064 or 4069 of
ERISA with respect to Buyer, the Company, any Subsidiary or any corporation or
organization controlled by or under common control with any of the foregoing
within the meaning of Section 4001 of ERISA, and no event or condition exists or
has existed in respect of any Benefit Plan which could reasonably be expected to
result in any such material liability with respect to the Buyer, the Company,
any of its Subsidiaries or any such corporation or organization.
(8) Except as disclosed in Section 2.9 of the Disclosure Schedule, no benefit
under any Benefit Plan, including, without limitation, any severance or
parachute payment plan or agreement, will be established or become triggered,
accelerated, vested, funded or payable, directly or indirectly, by reason of any
transaction contemplated by or under this Agreement, either alone or upon the
occurrence of any additional or subsequent events.
(9) There are no pending or, to the knowledge of Seller, threatened claims by or
on behalf of any Benefit Plan, by any person covered thereby, or otherwise,
which allege violations of law which could reasonably be expected to result in
material liability on the part of Buyer, the Company, any Subsidiary or any such
Benefit Plan.
(10) Except as set forth in Section 2.9(j) of the Disclosure Schedule, no
spin-off of assets and liabilities or other similar division or transfer of
rights will be required with respect to a Benefit Plan as a result of
transactions contemplated by this Agreement.
(11)For purposes of this Agreement, the following terms shall have the following
meanings:
(1) "Benefit Plan" means any Plan established by the Company or any of its
Subsidiaries or Affiliates of any of the foregoing, to which the
Company or any of its Subsidiaries contributes or has contributed, or
under which any employee, former employee or director of the Company or
any of its Subsidiaries or any beneficiary thereof is covered, is
eligible for coverage or has benefit rights.
(2) "Defined Benefit Plan" means each Benefit Plan which is subject to Part
------- ------- ----
3 of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
(3) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
(4) "ERISA Affiliate" means any person or entity who is in the same
controlled group of corporations or who is under common control with
Seller or, before the Closing, the Company or any of its Subsidiaries
(within the meaning of Section 414 of the Code).
(5) "PBGC" means the Pension Benefit Guaranty Corporation established under
----
ERISA.
(6) "Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, cafeteria,
life, health, accident, disability or other insurance, severance,
separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including, but not
limited to, any "employee benefit plan" within the meaning of Section
3(3) of ERISA.
(7) "Qualified Plan" means each Benefit Plan which is intended to qualify
--------- ----
under Section 401 of the Code.
SECTION 2.10 Litigation
(1) Except as disclosed in Section 2.10 of the Disclosure Schedule, there is no
action, suit, proceeding (other than any action, suit or proceeding resulting
from or arising out of this Agreement or the transactions contemplated hereby)
or, to the knowledge of Seller, investigation pending or, to the knowledge of
Seller, action, suit, proceeding or investigation threatened, involving the
Company or its Subsidiaries by or before any Governmental Entity or by any third
party that, individually or in the aggregate, is reasonably likely to have a
Company Material Adverse Effect.
(2) Except as disclosed in Section 2.10 of the Disclosure Schedule, the Company
is not subject to any continuing order of, consent decree, settlement agreement,
or other similar written agreement with any Governmental Entity, or any
judgment, order, writ, injunction, decree, or award of any Governmental Entity,
court, or arbitrator.
SECTION 2.11 No Default; Compliance with Applicable Laws.
(1) Except as disclosed in Section 2.11 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries is in default or violation of any term,
condition or provision of (i) its certificates of incorporation, bylaws or
similar organizational documents, (ii) any Material Agreement (as defined
herein) or (iii) any applicable law (including statutes, laws, rules,
regulations, judgments, decrees, orders or arbitration awards) or licenses,
permits, consents, approvals and authorizations of any Governmental Entity
("Permits"), excluding defaults or violations which would not reasonably be
expected to have a Company Material Adverse Effect or which become applicable as
a result of the business or activities in which Buyer is or proposes to be
engaged or as a result of any acts or omissions by, or the status of any facts
pertaining to, Buyer.
(2) The Company and its Subsidiaries have all material Permits necessary to
conduct their businesses in the manner and in the areas in which they are
presently being conducted. All such Permits are valid and in full force and
effect, except where the failure to have such Permits or the invalidity or
ineffectiveness thereof would not, individually or in the aggregate, have a
Company Material Adverse Effect.
SECTION 2.12 Taxes
(1) Except as disclosed in Section 2.12 of the Disclosure Schedule, the Company
and each of its Subsidiaries has (i) timely filed or caused to be filed all Tax
Returns (as defined herein) required to be filed by it other than those Tax
Returns the failure of which to file would not have a Company Material Adverse
Effect and (ii) paid all material Taxes (as defined herein) shown to be due on
such Tax Returns other than such Taxes that are being contested in good faith by
the Company and its Subsidiaries.
(2) Except as disclosed in Section 2.12 of the Disclosure Schedule, none of
Seller, the Company or any of the Company's Subsidiaries has received written
notice of any ongoing federal, state, local or foreign audits or examinations of
any Tax Return of the Company or any of its Subsidiaries.
(3) Except as disclosed in Section 2.12 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries has waived any statute of limitations in
respect of income taxes or agreed to any extension of time with respect to the
assessment of any Taxes.
(4) Except as disclosed in Section 2.12 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries is a party to any agreement providing for
the allocation or sharing of Taxes.
(5) Except as disclosed in Section 2.12 of the Disclosure Schedule, the Company
and its Subsidiaries have complied with all applicable laws, rules and
regulations relating to the withholding of Taxes and payment of withheld taxes
(including withholding and reporting requirements under Code ss.ss. 1441 through
1464, 3401 through 3406, 6041 and 6049 and similar provisions under any other
laws) and have, within the time and in the manner prescribed by law, withheld
from employee wages and paid over to the proper governmental authorities all
required amounts.
(6) Except as disclosed in Section 2.12 of the Disclosure Schedule, no
deficiency for Taxes has been asserted in writing against the Company and its
Subsidiaries that has not been resolved and paid in full or is being contested
in good faith.
(7) Except as disclosed in Section 2.12 of the Disclosure Schedule, no power of
attorney currently in force has been granted by or on behalf of the Company or
any of its Subsidiaries concerning any Tax matter.
(8) Except as disclosed in Section 2.12 of the Disclosure Schedule, none of
Seller, the Company or any of the Company's Subsidiaries has received any
written ruling of a taxing authority relating to Taxes of the Company or any of
its Subsidiaries or any other written and legally binding agreement with a
taxing authority relating to any Taxes that would have continuing effect after
the Closing.
(9) Except as disclosed in Section 2.12 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries has filed a consent pursuant to Code ss.
341(f) or agreed to have Code ss. 341(f)(2) apply to any disposition of a
subsection (f) asset.
(10) Except as disclosed in Section 2.12 of the Disclosure Schedule, no property
of the Company or any of its Subsidiaries is property that is or will be
required to be treated as being owned by another person pursuant to the
provisions of Code ss. 168(f)(8) (as in effect prior to its amendment by the Tax
Reform Act of 1986) or is "tax-exempt use property" within the meaning of Code
ss. 168.
(11) Except as disclosed in Section 2.12 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries is required to include in income any
adjustment pursuant to Code ss. 481(a) by reason of a voluntary change in
accounting method initiated by or on behalf of the Company or any of its
Subsidiaries, and the Internal Revenue Service has not proposed an adjustment or
change in accounting method.
(12) Except as disclosed in Section 2.12 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries is a party to any agreement, contract or
arrangement that would result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Code ss. 280G as a result
of the transactions contemplated by this Agreement.
(13) "Taxes" shall mean any and all taxes, charges, fees, levies or other
similar assessments, including, without limitation, income, gross receipts,
excise, real or personal property, sales, withholding, social security,
occupation, use, service, service use, value added, license, net worth, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by any taxing
authority (whether domestic or foreign including, without limitation, any
federal, state, local or foreign government or any subdivision or taxing agency
thereof (including a United States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest, penalties or additional amounts attributable to, or imposed upon,
or with respect to, any such taxes, charges, fees, levies or other assessments
and any out-of-pocket expenses incurred in connection with the determination,
settlement or litigation of any Tax liability. "Tax Return" shall mean any
report, return, document, declaration or other information or filing required to
be supplied to any taxing authority or jurisdiction (foreign or domestic) with
respect to Taxes. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
SECTION 2.13 Title to Assets. On December 31, 1997 the Company and its
Subsidiaries had and, except with respect to assets disposed of since December
31, 1997, in the ordinary course of business, the Company and its Subsidiaries
have, good and valid title to, or a valid leasehold interest in, all material
tangible properties and assets (other than real property) owned or used by the
Company and its Subsidiaries and reflected on the balance sheet of the Company
dated as of December 31, 1997 included in the Financial Statements (the "Balance
Sheet"), or which would have been reflected on the Balance Sheet if acquired
prior to December 31, 1997, free and clear of all Encumbrances of any nature
except for (i) Encumbrances that secure indebtedness or obligations which are
properly reflected on the Balance Sheet (all of which shall be released and
dissolved at or prior to the Closing), (ii) liens for Taxes not yet payable or
any Taxes being contested in good faith and reserved for on the Balance Sheet,
(iii) liens arising as a matter of law in the ordinary course of business,
provided that the obligations secured by such liens are not delinquent or are
being contested in good faith and (iv) such imperfections of title and
Encumbrances, if any, as do not, individually or in the aggregate, materially
interfere with the present use of any of the Company's or its Subsidiaries'
properties and assets subject thereto (the "Permitted Encumbrances"). All such
material tangible property and assets used in the operation of the Company and
its Subsidiaries are, in all material respects, in good operating condition and
repair, wear and tear excepted in light of the age of such material tangible
property.
SECTION 2.14 Real Property
(1) With respect to each parcel of real property owned by the Company and its
Subsidiaries, the common address of which is included in Section 2.14 of the
Disclosure Schedule, and except for matters which would not have a Company
Material Adverse Effect, (i) the identified owner has good and valid title to
the parcel of real property, free and clear of any Encumbrance, easement,
covenant, or other restriction, except for installments of special assessments
not yet delinquent, recorded easements, covenants, conditions and other
restrictions, and utility easements, building restrictions, zoning restrictions,
and other easements and restrictions existing generally with respect to
properties of a similar character, (ii) there are no leases, subleases,
licenses, concessions, or other agreements granting any party the right of use
or occupancy of any portion of the parcel of real property and (iii) there are
no outstanding options or rights of first refusal to purchase the parcel of real
property or any portion thereof or interest therein.
(2) Except as set forth in Sections 2.14(b) and 2.11 of the Disclosure Schedule,
with respect to each parcel of real property owned by the Company and its
Subsidiaries, neither the Company nor any of its Subsidiaries has received any
written notice from any governmental entity, and Seller does not have any
knowledge, that any of its real property, buildings, structures, facilities,
fixtures or other improvements, or the use thereof, contravenes or violates any
building, zoning or administrative law (whether or not permitted on the basis of
prior nonconforming use, waiver or variance), except where such violation would
not have a Company Material Adverse Effect. The improvements located on each
parcel of real property owned by the Company and its Subsidiaries are adequate
and suitable for the purposes for which they are presently being used (ordinary
wear and tear excepted in light of the age of such improvements) and, to the
knowledge of Seller, there are no condemnation or appropriation proceedings
pending or threatened against any of such real property or the improvements
thereon.
(3) Seller has delivered to Buyer correct and complete copies of the leases and
subleases for all real property leased or subleased to any of the Company and
its Subsidiaries. Each such lease or sublease is legal, valid, binding,
enforceable and in full force and effect, except where the illegality,
invalidity, nonbinding nature, unenforceability or ineffectiveness would not
have a Company Material Adverse Effect.
SECTION 2.15 Company Intellectual Property
(1) Section 2.15(a) of the Disclosure Schedule sets forth a list of all
registrations and applications for copyrights, patents, trademarks and service
marks and, to the Company's knowledge, unregistered copyrights, patents,
trademarks and service marks ("Intellectual Property Rights"), owned by the
Company or any of its Subsidiaries that individually are material to the
business of the Company or any of its Subsidiaries (collectively, along with the
Intellectual Property Rights licensed to the Company or Subsidiaries from third
parties the "Company Intellectual Property Rights"), specifying as to each item
owned by the Company or any Subsidiary, as applicable: (i) the nature of such
Intellectual Property Right; (ii) the jurisdictions by or in which such
Intellectual Property Right has been issued or registered or an application for
issuance or registration thereof has been filed; and (iv) the registration or
application numbers for each such Intellectual Property Right.
(2) Section 2.15(b) of the Disclosure Schedule sets forth a list of all material
licenses, sublicenses and other agreements to which the Company or any of its
Subsidiaries is a party and pursuant to which the Company or any of its
Subsidiaries is permitted to use any Intellectual Property Rights owned or
controlled by a third party (excluding off-the-shelf software licenses) or any
person is authorized to use any Company Intellectual Property Right, including
(i) the identity of all parties thereto and (ii) a description of the nature and
subject matter thereof.
(3) Except as set forth in Section 2.15(a), (b) or (c) of the Disclosure
Schedule (i) the Company and its Subsidiaries own or have the right to use all
Company Intellectual Property Rights, as well as, to the Company's knowledge,
any trade secrets and inventions, in each case material to the operations of the
Company and its Subsidiaries, free and clear of any Encumbrances (other than
Permitted Encumbrances) or, with respect to items of Intellectual Property owned
by the Company or any of its Subsidiaries, to the Company's knowledge, any other
claim of ownership or, right to use by or of any other person, except pursuant
to the license agreements set forth in Section 2.15(b) of the Disclosure
Schedule and (ii) to the Company's knowledge, each Company Intellectual Property
Right owned by the Company which is the subject of a registration is in full
force and effect and to the Company's knowledge, is valid and enforceable. To
the knowledge of Seller, neither the Company nor any of its Subsidiaries is, or
has received any written notice that it is, in default under any license or
agreement pursuant to which it uses any Company Intellectual Property Rights,
except for defaults which are not reasonably expected to have a Company Material
Adverse Effect.
(4) Except as set forth in Section 2.15(d) of the Disclosure Schedule or except
for actions or claims which would not have a Company Material Adverse Effect:
neither the Company nor any of its Subsidiaries is a defendant in any action,
suit, investigation or proceeding relating to, or otherwise has been notified
of, any alleged claim of infringement by the Company or any of its Subsidiaries
of any third party's Intellectual Property Right, and Seller has no knowledge of
any other such infringement by the Company or any of its Subsidiaries, and there
is no outstanding claim or suit brought by the Company or its Subsidiaries for,
and Seller has no knowledge of, any continuing infringement by any other person
of any Company Intellectual Property Rights. Except as set forth in Section
2.15(c) of the Disclosure Schedule, no Company Intellectual Property Right owned
by the Company or any Subsidiary is subject to any outstanding judgment,
injunction, order, decree or agreement restricting the use or transfer thereof
by the Company or any of its Subsidiaries or restricting the licensing thereof
by the Company or any of its Subsidiaries to any person, except as may be
contained in the license agreements set forth in Sections 2.15(a) and (b) of the
Disclosure Schedule and under other non-material licenses.
(5) To the Company's knowledge and except as may be determined in connection
with the claims set forth in Section 2.15(c) of the Disclosure Schedule, none of
the products manufactured, nor any process or know-how used, by the Company or
any of its Subsidiaries infringes any Intellectual Property Right of any other
person, except for infringements which would not have a Company Material Adverse
Effect.
SECTION 2.16 Contracts. Section 2.16 of the Disclosure Schedule contains a true
and complete list of all Material Agreements. Except as set forth in Section
2.16 of the Disclosure Schedule, each Material Agreement is in full force and
effect, is a valid and enforceable agreement of the Company and its Subsidiary
and, to the knowledge of Seller, the other parties thereto in accordance with
its terms. As used in this Agreement, "Material Agreement" means each agreement,
arrangement, instrument, bond, commitment, franchise, indemnity, indenture,
lease, license or understanding to which the Company or any of its Subsidiaries
is a party or to which the Company, any of its Subsidiaries or any of their
respective properties is subject that (i) obligates the Company or any of its
Subsidiaries to pay an amount in excess of $100,000 in any twelve-month period
beginning after December 31, 1997 other than purchase orders entered into in the
ordinary course of business, (ii) provides for the extension of credit
(excluding trade credit issued in the ordinary course of business), (iii)
provides for a guaranty by the Company or any of its Subsidiaries of obligations
of others in excess of $100,000, (iv) constitutes an employment agreement or
personal service contract not terminable on less than sixty (60) days' notice
without penalty, (v) expressly limits, in any material respect, the ability of
the Company or any of its Subsidiaries to engage in any line of business,
compete with any person or expand the nature or geographic scope of its
business, (vi) includes a partnership, joint venture or shareholders'
arrangement, (vii) relates to the future dispositions or acquisitions of assets
or properties other than in the ordinary and usual course of business consistent
with past practice, or any merger or business combination, (viii) includes any
collective bargaining or similar labor agreement or (ix) includes arrangements
with distributors, dealers, manufacturer's representatives, sales agencies or
franchisees not terminable on less than sixty (60) days' notice without penalty.
SECTION 2.17 Environmental Matters
(1) Except as set forth in Section 2.17 of the Disclosure Schedule, Seller and
the Company have not, as of the date hereof, received any written notice
alleging the violation of, or liability under, any applicable Environmental
Laws, which violation or liability would be reasonably likely to result in a
Company Material Adverse Effect and, to the knowledge of Seller, (i) the Company
and its Subsidiaries are in compliance with all Environmental Laws, (ii) the
Company and its Subsidiaries have obtained and are in compliance with all
Permits received pursuant to applicable Environmental Laws with respect to the
business as currently conducted, (iii) no hazardous waste or Hazardous Substance
has been stored, treated or disposed of by the Company or its Subsidiaries on
the real estate owned or leased by the Company or its Subsidiaries except in
compliance with applicable Environmental Laws, (iv) the Company and its
Subsidiaries have lawfully disposed of their hazardous waste with respect to the
operations of their businesses and (v) there have been no "Releases" (as such
term is defined in the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss. 9601, et seq.) of Hazardous Substances at any of
the real estate owned or operated by the Company or its Subsidiaries, except, in
each case referred to in clauses (i) through (v) above, where such failure to
comply with applicable Environmental Laws and Permits or to obtain Permits or to
store, treat or dispose of hazardous waste or hazardous substances would not
have a Company Material Adverse Effect.
(2) For purposes of this Agreement, the term "Environmental Laws" means all
foreign, federal, state and local laws, regulations, rules and ordinances
relating to pollution or protection of the environment, including, without
limitation, laws relating to Releases or threatened Releases of Hazardous
Substances into the environment (including, without limitation, ambient air,
surface water, groundwater, land, surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
Release, transport or handling of Hazardous Substances and all laws and
regulations with regard to record keeping, notification, disclosure and
reporting requirements respecting Hazardous Substances, and all laws relating to
endangered or threatened species of fish, wildlife and plants and the management
or use of natural resources. The term "Hazardous Substances" means any toxic,
hazardous, radioactive, caustic, or dangerous substances, pesticides, wastes,
pollutants or contaminants, or any other substances that are defined as any of
the above by or regulated as such under, any Environmental Law, including,
without limitation, petroleum and asbestos.
(3) The representations and warranties set forth in this Section 2.17 shall be
the sole and exclusive representations and warranties with respect to
environmental matters made by Seller in this Agreement.
SECTION 2.18 Brokers or Finders. Seller represents, as to itself and the
Company, that, except for A.G. Edwards & Sons, Inc., no agent, broker,
investment banker, financial advisor or other firm or person is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement.
Seller acknowledges that it is responsible for the payment of the fees of A.G.
Edwards & Sons, Inc. in connection with the transactions contemplated by this
Agreement.
SECTION 2.19 Employees; Labor Relations. Seller has delivered to Buyer prior of
this Agreement a list identifying each employee of the Company and its
Subsidiaries with yearly base salary in excess of $50,000, the position and rate
of compensation of each such employee and copies of contracts entered into
between the Company and its Subsidiaries and such employee, if any. Except as
disclosed in Section 2.19 of the Disclosure Schedule, (a) to the knowledge of
Seller, there are no threatened or contemplated attempts to organize for
collective bargaining purposes any of the employees of the Company and its
Subsidiaries and (b) no unfair labor practice complaint or sex, age, race or
other discrimination claim has been brought since January 1, 1997 against the
Company and its Subsidiaries with respect to the conduct of their businesses
before the National Labor Relations Board, the Equal Employment Opportunity
Commission or any other Governmental Entity. Since January 1, 1997, the Company
and its Subsidiaries have complied in all material respects with all applicable
laws relating to the employment of labor, including those relating to wages,
hours and collective bargaining.
SECTION 2.20 Affiliate Transactions. Except as disclosed in Section 2.20 of the
Disclosure Schedule, (a) there are no intercompany liabilities between the
Company or any of its Subsidiaries, on the one hand, and Seller or any officer,
director or Affiliate of Seller (other than the Company and its Subsidiaries),
on the other; (b) neither Seller nor any such officer, director or Affiliate
provides or causes to be provided any assets, services or facilities to the
Company or any of its Subsidiaries; (c) neither the Company nor any of its
Subsidiaries provides or causes to be provided any assets, services or
facilities to Seller or any such officer, director or Affiliate; and (iv)
neither the Company nor any of its Subsidiaries beneficially owns, directly or
indirectly, any debt or equity securities issued by Seller or any such officer,
director or Affiliate. Except as disclosed in Section 2.20 of the Disclosure
Schedule, since December 31, 1997, all settlements of intercompany liabilities
between the Company or any Subsidiary, on the one hand, and Seller or any such
officer, director or Affiliate, on the other, have been made, and all
allocations of intercompany expenses have been applied, in the ordinary and
usual course of business consistent with past practice.
SECTION 2.21 Substantial Customers and Suppliers. Section 2.21 of the Disclosure
lists the ten largest customers of the Company and its Subsidiaries, on the
basis of revenues for goods sold or services provided for the year ended
December 31, 1997 and the four month period ended April 30, 1998. Section 2.21
of the Disclosure Schedule lists the ten largest suppliers of the Company and
its Subsidiaries, on the basis of cost of goods or services purchased for the
year ended December 31, 1997 and the four month period ended April 30, 1998. As
of the date hereof, except as disclosed on Section 2.21 of the Disclosure
Schedule, since April 30, 1998, neither the Company nor any of its Subsidiaries
has received written notice that there has been or will be any material change
in the business relationship of the Company with any of such customers or
suppliers.
SECTION 2.22 Accounts Receivable. Except as set forth in Section 2.22 of the
Disclosure Schedule, the accounts and notes receivable of the Company and its
Subsidiaries reflected on the Financial Statements, and all accounts and notes
receivable arising subsequent to December 31, 1997, (i) arose from bona fide
sales transactions in the ordinary and usual course of business and are payable
on ordinary trade terms, (ii) are legal, valid and binding obligations of the
respective debtors enforceable in accordance with their terms (provided that
such representation is not intended to be a representation as to collectability
and in no way guarantees the collectability of such accounts and notes
receivable), (iii) are not subject to any valid set-off or counterclaim (other
than rights of return in the ordinary course of business) and (iv) as of the
date hereof, are not the subject of any actions or proceedings brought by or on
behalf of the Company or any of its Subsidiaries (other than as fully reserved
in the Closing Balance Sheet or arising in the ordinary course of business).
SECTION 2.23 Inventory. Except as set forth on Section 2.23 of the Disclosure
Schedule, no clearance or extraordinary sale of inventory has been conducted
since December 31, 1997. The Company and its Subsidiaries have not committed to
acquire inventory for sale which is not of a quantity usable in the ordinary and
usual course of the business within a reasonable period of time and consistent
with past practices. Section 2.23 of the Disclosure Schedule sets forth a
complete list of the addresses of the warehouses and other facilities in which
the inventory is located as of the date hereof.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
SECTION 3.1 Organization. Buyer is a corporation or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority would not have
a Buyer Material Adverse Effect. As used in this Agreement, "Buyer Material
Adverse Effect" means any material adverse change in, or material adverse effect
on, the business, financial condition or operations of Buyer and its
Subsidiaries, taken as a whole; provided, however, that the effects of changes
that are generally applicable to (i) the industries or markets in which Buyer
and its Subsidiaries operate, (ii) the United States economy, or (iii) the
United States securities markets shall be excluded from the determination of
Buyer Material Adverse Effect; and provided, further, that any adverse effect on
Buyer and its Subsidiaries resulting from the execution and the announcement of
this Agreement and the transactions contemplated hereby shall also be excluded
from the determination of Buyer Material Adverse Effect.
SECTION 3.2 Authorization; Validity of Agreement. Buyer has full power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Buyer of this
Agreement, and the consummation by it of the transactions contemplated hereby,
have been duly authorized by all necessary corporate proceedings, and no other
corporate action on the part of Buyer is necessary to authorize the execution
and delivery by Buyer of this Agreement and the consummation by it of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Buyer (and assuming due and valid authorization, execution and
delivery hereof by Seller) is a valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws, now or hereafter in effect, affecting
creditors' rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
SECTION 3.3 Consents and Approvals; No Violations. Except for (a) filings
pursuant to the HSR Act and (b) matters specifically described in this
Agreement, neither the execution and delivery of this Agreement by Buyer nor the
consummation by Buyer of the transactions contemplated hereby will (i) violate
any provision of the articles of incorporation, bylaws or other organizational
documents of Buyer, (ii) result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which Buyer or any of
its Subsidiaries is a party or by which any of them or any of their properties
or assets may be bound, (iii) violate any order, writ, judgment, injunction,
decree, law, statute, rule or regulation applicable to Buyer, any of its
Subsidiaries or any of their properties or assets or (iv) require on the part of
Buyer any filing or registration with, notification to, or authorization,
consent or approval of, any Governmental Entity; except in the case of clauses
(ii), (iii) or (iv) for such violations, breaches or defaults which, or filings,
registrations, notifications, authorizations, consents or approvals the failure
of which to obtain, would not have a Buyer Material Adverse Effect and would not
materially adversely affect the ability of Buyer to consummate the transactions
contemplated by this Agreement.
SECTION 3.4 Acquisition for Investment. Buyer is acquiring the Shares solely for
its own account and not with a view to any distribution or other disposition of
such Shares. The Shares will not be transferred except in a transaction
registered or exempt from registration under the Securities Act of 1933, as
amended.
SECTION 3.5 Financing. Buyer has available existing credit facilities (including
an acquisition line of credit and a revolving credit facility) which, together
with Buyer's cash on hand as of the Closing Date, will be sufficient to enable
Buyer to pay the full amount of the Purchase Price at the Closing.
SECTION 3.6 Brokers or Finders. Buyer represents, as to itself, its Subsidiaries
and its Affiliates, that other than PaineWebber Incorporated (whose fee Buyer
will pay), no agent, broker, investment banker, financial advisor or other firm
or person is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement. As used in this Agreement, the term
"Affiliate(s)" shall have the meaning set forth in Rule l2b-2 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
SECTION 3.7 Investigation by Buyer. In entering into this Agreement, Buyer:
(1) acknowledges that, except for the specific representations and warranties of
Seller contained in Article II, none of Seller, the Company, the Company's
Subsidiaries or any of their respective directors, officers, employees,
Affiliates, controlling persons, agents, advisors or representatives, makes or
shall be deemed to have made any representation or warranty, either express or
implied, as to the accuracy or completeness of any of the information
(including, without limitation, any estimates, projections, forecasts or other
forward-looking information) provided or otherwise made available to Buyer or
any of its directors, officers, employees, Affiliates, controlling persons,
agents, advisors or representatives (including, without limitation, in any
management presentations, information or offering memorandum, supplemental
information or other materials or information with respect to any of the above).
With respect to any such estimate, projection or forecast delivered by or on
behalf of Seller to Buyer, Buyer acknowledges that (A) there are uncertainties
inherent in attempting to make such projections and forecasts, (B) it is
familiar with such uncertainties, (C) it is taking full responsibility for
making its own evaluation of the adequacy and accuracy of all such projections
and forecasts so furnished to it, (D) it is not acting in reliance on any such
projection or forecast so furnished to it and (E) it shall have no claim against
any such person with respect to any such projection or forecast; and
(2) agrees, to the fullest extent permitted by law, that Seller and its
directors, officers, employees, Affiliates, controlling persons, agents,
advisors or representatives shall not have any liability or responsibility
whatsoever to Buyer or any of its directors, officers, employees, Affiliates,
controlling persons, agents, advisors or representatives on any basis
(including, without limitation, in contract or tort, under federal or state
securities laws or otherwise) based upon any information provided or otherwise
made available, or statements made, (or omissions to so provide, make available
or state) to Buyer or any of its directors, officers, employees, Affiliates,
controlling persons, agents, advisors or representatives, including, without
limitation, in respect of the specific representations and warranties of Seller
set forth in Article II, except as and only to the extent expressly set forth
herein with respect to such representations and warranties and subject to the
limitations and restrictions contained herein and in the Disclosure Schedule
(including Section 3.7 thereof).
SECTION 3.8 Capital Adequacy; Solvency. Buyer represents that immediately after
the sale of the Shares and the other transactions contemplated herein, Buyer
(and any successor corporation) will have a positive net worth (calculated in
accordance with GAAP) and will not be insolvent (as defined under the federal
Bankruptcy Code (the "Bankruptcy Code") and in equity) and that the sale of the
Shares and other transactions contemplated hereby and any borrowing by Buyer in
connection with such transactions will not have the effect of hindering,
delaying or defrauding any creditors of Buyer (or any successor corporation).
Buyer further represents that (A) upon consummation of the sale of the Shares
and within the meaning of Sections 544 and 548 of the Bankruptcy Code and
comparable state statutes, the Company (and any successor corporations) will not
(i) be insolvent or rendered insolvent, (ii) have an unreasonably small capital
with respect to the business or transactions engaged in or to be engaged in,
(iii) incur debts that would be beyond the ability of Buyer or any successor
corporation's ability to pay as such debts mature, and (B) the Purchase Price is
a reasonably equivalent value in exchange for the Shares.
ARTICLE 4
COVENANTS
SECTION 4.1 Interim Operations of Seller. Seller covenants and agrees that,
except (i) as contemplated by this Agreement, (ii) entering into new
warehousing/distribution arrangements to replace the agreement with Cosmetic
Essence, Inc., provided that Seller has consulted with Buyer as to the terms
with respect to such new arrangements prior to entering into any definitive
agreement related thereto and that any such definitive agreement (A) has an
initial term of 24 months or less and (B) is on terms no less favorable in the
aggregate in any material respect than the current arrangement, based on 1997
sales volume and product mix, (iii) the continuation of the Affiliate
transactions in Section 2.20 of the Disclosure Schedule, (iv) that Seller will
have the right to delay payment of accounts payable by an amount not in excess
of (A) $120,000, if Seller and/or its designees elect to purchase, and Buyer
sells, the Dermablend Business, the National Cosmetics Business and the Iman
Business pursuant to Sections 4.11 (a) and (b) or (B) $1,500,000, if Buyer
retains the Dermablend Business but Seller and/or its designees elect to
purchase, and Buyer sells, the National Cosmetics Business and the Iman Business
pursuant to Section 4.11(b) or (v) with the prior written consent of Buyer,
after the date hereof and prior to the Closing Date, Seller will cause:
(1) the Company and its Subsidiaries to conduct their businesses in the ordinary
and usual course of business;
(2) the Company and its Subsidiaries not to amend their certificates of
incorporation or bylaws or similar organizational documents;
(3) the Company not to (i) split, combine or reclassify the Shares, (ii)
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to the Shares, (iii) issue or sell any additional
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, the Shares or
(iv) redeem, purchase or otherwise acquire directly or indirectly any of its
capital stock;
(4) the Company and its Subsidiaries not to (i) adopt any new employee benefit
plan (including any stock option, stock benefit or stock purchase plan) or amend
any existing employee benefit plan in any material respect, except as may be
required by applicable law or (ii) materially increase any compensation or enter
into or amend any employment, severance, termination or similar agreement with
any of its present or future officers or directors;
(5) the Company and its Subsidiaries not to, except as may be required or
contemplated by this Agreement or in the ordinary and usual course of business,
acquire, sell, lease or dispose of any assets which in the aggregate are
material to the Company and its Subsidiaries taken as a whole;
(6) the Company and its Subsidiaries not to (i) incur or assume any long-term or
short-term debt or issue any debt securities except for borrowings under
existing lines of credit in the ordinary course of business consistent with past
practice, (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the material
obligations of any other person except in the ordinary and usual course of
business consistent with past practice in an amount not material to the Company
and its Subsidiaries taken as a whole, (iii) make any material loans, advances
or capital contributions to, or investments in, any other person other than in
the ordinary and usual course of business consistent with past practice, (iv)
pledge or otherwise encumber the Shares or (v) mortgage or pledge any of its
material assets, tangible or intangible, or create any material Encumbrance of
any kind with respect to any such asset;
(7) the Company and its Subsidiaries not to acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof or any equity interest therein;
(8) the Company and its Subsidiaries not to authorize any new capital
expenditure of capitalized items which, individually, is in excess of $50,000
or, in the aggregate, are in excess of $250,000;
(9) the Company and its Subsidiaries not to enter into or amend any contract,
agreement, commitment or arrangement providing for the taking of any action
which would be prohibited hereunder;
(10) the Company and its Subsidiaries not to adopt plan of complete or partial
liquidation or resolutions providing for or authorizing such liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization;
(11) the Company not to materially change any of the accounting policies used by
it in preparing the Financial Statements unless required by GAAP or applicable
law;
(12) the Company and its Subsidiaries not to settle or compromise any claim
(including arbitration) or litigation, which after insurance reimbursement is
material to the Company taken as a whole, without the prior written consent of
Buyer, which consent will not be unreasonably withheld;
(13) the Company and its Subsidiaries not to enter into any transaction with
Seller or any officer, director or Affiliate (other than the Company or any of
its Subsidiaries) of Seller (i) outside the ordinary and usual course of
business consistent with past practice or (ii) other than on an arm's-length
basis, other than pursuant to any arrangement disclosed in Section 2.20 of the
Disclosure Schedule; and
(14) the Company and its Subsidiaries not to authorize or enter into an
agreement to do any of the foregoing.
SECTION 4.2 Access to Information. Seller shall cause the Company to afford
Buyer's officers, employees, accountants, counsel and other authorized
representatives full and complete access during normal business hours throughout
the period prior to the Closing Date or the date of termination of this
Agreement, to its and its offices, properties, contracts, commitments, tax and
accounting work papers, books and records (including but not limited to Tax
Returns) and any material report, schedule or other document filed or received
by it during such period pursuant to the requirements of Federal or state
securities laws and to use all reasonable efforts to cause its representatives
to furnish promptly to Buyer such additional material financial and operating
data and other information as to its businesses and properties as Buyer or its
duly authorized representatives may from time to time reasonably request;
provided, however, that nothing herein shall require Seller or the Company to
disclose any information to Buyer if such disclosure (i) would cause significant
competitive harm to Seller, the Company, the Company's Subsidiaries or their
Affiliates if the transactions contemplated by this Agreement were not
consummated or (ii) would violate applicable laws or regulations or the
provisions of any confidentiality agreement to which Seller, the Company, the
Company's Subsidiaries or their Affiliates is a party. Buyer will hold any such
information which is nonpublic in confidence in accordance with the provisions
of the Confidentiality Agreement between Seller and Buyer, dated as of October
28, 1997 (the "Confidentiality Agreement").
SECTION 4.3 Tax Matters.
(1) Code 338(h)(10) Election. Seller and Buyer shall jointly make all
available elections described in Code ss. 338(h)(10) and any corresponding
elections under applicable state and local tax laws (the "Elections") for the
Company and its Subsidiaries. Seller and Buyer agree to report the transactions
under this Agreement consistently with the Elections. Buyer will prepare all
forms required to be filed in connection with the Elections ("Code ss. 338
Forms"), and Buyer and Seller shall each execute an Internal Revenue Service
Form 8023 for the Company and each of its Subsidiaries at Closing. All Code ss.
338 Forms shall be filed by the party required to file such forms under
applicable law. Each party shall promptly execute and deliver to the other party
all documentation reasonably requested by such other party, including the
completed Code ss. 338 Forms. Within 150 days after the Closing, Buyer will
compute the Modified Aggregate Deemed Sale Price ("MADSP") of the assets of the
Company and its Subsidiaries (pursuant to applicable Treasury Regulations) and
will notify Seller of its allocation of the MADSP among the assets. After
receipt of Buyer's calculation of the MADSP, Seller shall have 30 days to review
such calculation. Unless Seller delivers written notice to Buyer on or prior to
the thirtieth day after receipt of the MADSP calculation specifying in
reasonable detail its objection to the MADSP calculation, such calculation shall
be deemed final and binding between Buyer and Seller. In the event Seller has
provided a timely notice of objections to the MADSP calculation with which Buyer
does not agree, the Neutral Auditor shall resolve such dispute in accordance
with the provisions of Section 1.4(c) subject to Section 4.11(f). Buyer and
Seller each agrees to act in accordance with these allocations in any relevant
Tax Returns. Notwithstanding anything to the contrary contained in this Section
4.3, all income Taxes imposed as a result of the transactions contemplated by
this Agreement, including as result of the Elections, shall be the
responsibility of Seller.
(2) Seller Indemnification. Seller shall be liable for, and shall indemnify and
hold Buyer harmless against, all Taxes of the Company, including income Taxes
imposed on the Company as a result of the Elections, payable for any taxable
year or taxable period ending on or before the Closing Date (other than Taxes
imposed as a result of actions outside the ordinary course of business occurring
after the Closing on the Closing Date). To appropriately apportion any income
Taxes relating to any taxable year or period beginning before and ending after
the Closing Date by a closing of the Company's books as of the end of the day on
the Closing Date, the parties shall apportion such income Taxes to the portion
of the taxable period ending on or before the Closing Date by a closing of the
Company's books at the end of the day on the Closing Date except that (i)
exemptions, allowances or deductions that are calculated on a time basis, such
as the deduction for depreciation, shall be apportioned on a time basis and (ii)
all Taxes relating to actions outside the ordinary course of business occurring
after the Closing on the Closing Date (other than income Taxes imposed as a
result of the Elections) shall be apportioned to the period ending after the
Closing Date. To appropriately apportion any non-income Taxes relating to any
taxable year beginning before and ending after the Closing Date, the parties
shall apportion such non-income Taxes to the portion of the taxable period
ending on or before the Closing Date as follows: (x) ad valorem Taxes
(including, without limitation, real and personal property Taxes) shall be
accrued on a daily basis over the period for which such Taxes are levied, or if
it cannot be determined over the period such Taxes are being levied, over the
fiscal period of the relevant taxing authority, in each case irrespective of the
lien or assessment date of such Taxes, (y) all Taxes relating to actions outside
the ordinary course of business occurring on or after the Closing on the Closing
Date (other than income Taxes imposed as a result of the Elections) shall be
apportioned to the period ending after the Closing Date and (z) franchise and
other privilege Taxes not measured by income shall be accrued on a daily basis
over the period to which the privilege relates. Seller's obligations under this
paragraph shall not be limited or affected by any disclosures made by Seller in
or pursuant to Article II.
(3) Buyer and Company Indemnification. Except as otherwise provided in (b)
above, Buyer and the Company shall be liable for, and shall indemnify and hold
Seller and any of its Affiliates harmless against, any and all Taxes imposed on
the Company relating or apportioned to any taxable year or portion thereof
ending after the Closing Date, including, without limitation, Taxes imposed as a
result of actions outside the ordinary course of business occurring after the
Closing on the Closing Date (other than income Taxes imposed as a result of the
Elections).
(4) Tax Sharing Agreement. Any Tax sharing agreements, settlement agreements,
arrangements, policies or guidelines, formal or informal, express or implied,
that may exist between the Company or any of its Subsidiaries on the one hand,
and Seller or any other affiliate of Seller, on the other hand (a "Tax Sharing
Agreement"), shall terminate as of the Closing Date and, except as specifically
provided herein, any obligation to make payments under any Tax Sharing Agreement
shall be cancelled as of the Closing Date. Seller shall not amend any Tax
Sharing Agreement prior to its termination pursuant to this Section 4.3(d).
(5) Pre-Closing Taxes. Seller shall cause the Company and its Subsidiaries, and
the Company and its Subsidiaries shall consent, to join for all taxable periods
ending on or before the Closing Date in Seller's consolidated federal income Tax
Return and in any required state or local consolidated or combined income or
franchise Tax Returns that include the Company and its Subsidiaries
("Pre-Closing Consolidated Tax Returns"). Seller's Consolidated Group shall
timely prepare and file all Pre-Closing Consolidated Tax Returns that include
the Company and its Subsidiaries. Seller's Consolidated Group shall timely
prepare and file (or cause to be so prepared and filed) all Tax Returns required
by law, other than Pre-Closing Consolidated Tax Returns, covering the Company
and its Subsidiaries for all taxable periods ending on or before the Closing
Date ("Pre-Closing Separate Tax Returns"; together with Pre-Closing Consolidated
Tax Returns, "Pre-Closing Tax Returns"). Seller shall prepare all Tax Returns in
accordance with the Tax accruals on the books and records of the Company and its
Subsidiaries. Seller will not amend any Pre-Closing Tax Returns without the
consent of Buyer (which consent shall not be unreasonably withheld) if such
amended Tax Return would affect the amount of Taxes for which Buyer is liable
under this Agreement. Seller's Consolidated Group shall timely pay or cause to
be paid all Taxes related to Pre-Closing Tax Returns.
(6) Transfer Taxes. Buyer shall pay all sales, use, transfer, real property
transfer, recording, gains, stock transfer and other similar Taxes and fees
("Transfer Taxes") arising out of or in connection with the transactions
effected pursuant to this Agreement, and shall indemnify, defend, and hold
harmless Seller and the Company and its Subsidiaries on an after-Tax basis with
respect to all Transfer Taxes. Buyer shall file all necessary documentation and
Tax Returns with respect to such Transfer Taxes.
(7) Tax Returns for Stub Period. To the extent that the taxable period for any
Tax of the Company or any of its Subsidiaries does not end on the Closing Date,
Seller and Buyer will, to the extent permitted by applicable law, elect with the
relevant state and local taxing authorities to close the taxable period of the
Company and its Subsidiaries on the Closing Date. In any case where applicable
law does not permit the Company or any of its Subsidiaries to close its taxable
year on the Closing Date, Buyer will cause to be prepared and duly filed all Tax
Returns relating to Taxes of the Company and its Subsidiaries for any taxable
period that includes and ends after the Closing Date. At least 30 days prior to
the due date of any such Tax Return Buyer shall provide copies of such Tax
Return to Seller for Seller's review and approval, which approval shall not be
unreasonably withheld. The Taxes shown as due on such Tax Returns shall be
apportioned between Seller and Buyer in accordance with Section 4.3(b).
(8) Refunds or Credits. Buyer or the Company shall promptly pay to Seller any
refunds or credits (including interest thereon) relating to Taxes for which
Seller may be liable under this Section 4.3. For purposes of this Section
4.3(h), the terms "refund" and "credit" shall include a reduction in Taxes and
the use of an overpayment of Taxes as an audit or other Tax offset. Receipt of a
refund shall occur upon the filing of a Tax Return or an adjustment thereto
using such reduction, overpayment or offset, or upon the receipt of cash. Upon
the reasonable request of Seller, Buyer shall prepare and file, or cause to be
prepared and filed, all claims for refunds relating to such Taxes; provided,
however, that Buyer shall not be required to file such claims for refund to the
extent such claims for refund would have a Company Material Adverse Effect in
future periods or to the extent the claims for refund relate to a carryback of
an item. Buyer shall be entitled to all other refunds and credits of Taxes;
provided, however, Buyer will not allow the amendment of any Tax Return relating
to any Taxes for a period (or portion thereof) ending on or prior to the Closing
Date or the carryback of an item to a period ending prior to Closing without
Seller's consent.
(9) Mutual Cooperation. As soon as practicable, but in any event within 15 days
after either Seller's or Buyer's request, as the case may be, Buyer shall
deliver to Seller or Seller shall deliver to Buyer, as the case may be, such
information and other data relating to the Tax Returns and Taxes of the Company
(and shall provide such other assistance as may reasonably be requested), to
cause the completion and filing of all Tax Returns or to respond to audits by or
litigation with any taxing authorities with respect to any Tax Returns or
taxable periods or to otherwise enable Seller, Buyer or the Company to satisfy
their accounting or Tax requirements. For a period of five years from and after
the Closing, Buyer and Seller shall, and shall cause their Affiliates to,
maintain and make available to the other party, on such other party's reasonable
request, copies of any and all information, books and records referred to in
this Section 4.3(i). After such five-year period, Buyer or Seller may dispose of
such information, books and records, provided that prior to such disposition,
Buyer or Seller shall give the other party the opportunity to take possession of
such information, books and records.
(10) Contests. Whenever any taxing authority asserts a claim, makes an
assessment, or otherwise disputes the amount of Taxes for which Seller is or may
be liable under this Agreement, Buyer shall, if informed of such an assertion,
promptly inform Seller within 5 business days, and Seller shall have the right
to control any resulting proceedings and to determine whether and when to settle
any such claim, assessment or dispute to the extent such proceedings or
determinations affect the amount of Taxes for which Seller may be liable under
the Agreement, provided that Seller shall have agreed in writing to assume all
costs and expenses of any such contest and shall have recognized its obligation
to indemnify Buyer under this Agreement for any such Taxes. Whenever any taxing
authority asserts a claim, makes an assessment or otherwise disputes the amount
of Taxes for which Buyer is liable under this Agreement, Buyer shall have the
right to control any resulting proceedings and to determine whether and when to
settle any such claim, assessment or dispute, except to the extent such
proceedings affect the amount of Taxes for which Seller are liable under this
Agreement.
SECTION 4.4 Employee Matters
(1) As of the Closing Date, Buyer shall cause the Company and its Subsidiaries
to continue to employ all persons who, immediately prior to the Closing Date,
were employees (the "Company Employees") of the Company or its Subsidiaries on
terms no less favorable in the aggregate (including with respect to position,
duties, responsibilities, location, compensation, incentives and Benefit Plans,
(as defined herein)) than those in effect on the date hereof with respect to
such Company Employees. Buyer agrees that, for a period of at least two years
following the Closing, Buyer shall provide the Company Employees with employee
benefits that are generally comparable in the aggregate than those provided to
the Company Employees immediately prior to the date hereof. With respect to any
employee benefits that are provided to the Company Employees under any of
Buyer's employee benefit plans, programs, policies and arrangements, including
vacation policies ("Buyer Plans"), service accrued by the Company Employees
during employment with Seller, the Company and the Company's Subsidiaries prior
to the Closing Date shall be recognized for all purposes, except to the extent
necessary to prevent duplication of benefits. Without limiting the generality of
the foregoing, Buyer agrees to maintain the Company's general severance policy
as described in Section 4.4(a) of the Disclosure Schedule for a period of one
year following the Closing Date.
(2) Buyer agrees to assume and honor, and cause the Company and its Subsidiaries
to assume and honor, without modification, the employment, severance, retention,
other incentive agreements and arrangements, as amended through the date hereof
(each, an "Employee Arrangement") for the benefit of the employees of the
Company or its Subsidiaries as described in Section 4.4(b) of the Disclosure
Schedule. Seller shall indemnify Buyer for any severance payments the Company
owes to any Company employee other than as described in Section 4.4(b) of the
Disclosure Schedule or to any former Company employees whose employment with the
Company terminates prior to the Closing to the extent any such amounts are not
accrued for on the Final Closing Statement.
(3) Buyer shall cause each Buyer Plan to waive any (i) pre-existing condition
restriction which was waived under the terms of any analogous Benefit Plan
immediately prior to the Closing and (ii) waiting period limitation which would
otherwise be applicable to a Company Employee on or after the Closing to the
extent such Company Employee had satisfied any similar waiting period limitation
under an analogous Benefit Plan prior to the Closing. The Company Employees
shall also be given credit for any deductible or co-payment amounts paid in
respect of the Benefit Plan year in which the Closing occurs, to the extent
that, following the Closing, they participate in any Buyer Plan for which
deductibles or co-payments are required. For purposes of this Agreement,
"Company Employees" shall include those Company Employees who, as of immediately
prior to the Closing Date, are on lay-off, disability or leave of absence, paid
or unpaid.
SECTION 4.5 Publicity. The initial press releases with respect to the execution
of this Agreement shall be reasonably acceptable to Buyer and Seller.
Thereafter, so long as this Agreement is in effect, neither Buyer nor Seller nor
any of their respective Affiliates shall issue or cause the publication of any
press release with respect to the transactions contemplated hereby or this
Agreement without the prior agreement of the other party, except as may be
required by law or by any listing agreement with a national securities exchange.
SECTION 4.6 Approvals and Consents; Cooperation; Notification
(1) The parties shall use all reasonable efforts and cooperate with each other
to obtain as promptly as practicable all Permits and third-party consents
necessary or advisable to consummate the transactions contemplated by this
Agreement. Each party shall keep the other apprised of the status of matters
relating to completion of the transactions contemplated hereby. Buyer and Seller
shall have the right to review in advance, and shall consult with the other on,
in each case subject to applicable laws relating to the exchange of information,
all the information relating to Seller, the Company, the Company's Subsidiaries
or Buyer, as the case may be, and any of their respective Affiliates, which
appears in any filing made with, or written materials submitted to, any third
party or any Governmental Entity in connection with the transactions
contemplated by this Agreement, provided, however, that nothing contained herein
shall be deemed to provide any party with a right to review any information
provided to any Governmental Entity on a confidential basis in connection with
the transactions contemplated hereby. The party responsible for any such filing
shall promptly deliver to the other party evidence of the filing of all
applications, filings, registrations and notifications relating thereto (except
for any confidential portions thereof) and any supplement, amendment or item of
additional information in connection therewith (except for any confidential
portions thereof). The party responsible for a filing shall also promptly
deliver to the other parties a copy of each material notice, order, opinion and
other item or correspondence received by such filing party from any Governmental
Entity in respect of any such application (except for any confidential portions
thereof).
(2) Seller and Buyer shall take all actions necessary to file as soon as
practicable all notifications, filings and other documents required to obtain
all governmental authorizations, approvals, consents or waivers, including,
without limitation, under the HSR Act, and to respond as promptly as practicable
to any inquiries received from the Federal Trade Commission, the Antitrust
Division of the Department of Justice and any other Governmental Entity for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any state attorney
general or other Governmental Entity in connection therewith. Without limiting
the generality of the foregoing, the parties agree to file any applications
required under the HSR Act within three business days after the date hereof.
(3) Buyer and Seller shall promptly advise each other upon receiving any
communication from any Governmental Entity whose consent or approval is required
for consummation of the transactions contemplated by this Agreement which causes
such party to believe that there is a reasonable likelihood that any requisite
regulatory approval will not be obtained or that the receipt of any such
approval will be materially delayed.
(4) Seller shall give prompt notice to Buyer of the occurrence of any Company
Material Adverse Effect, and Buyer shall give prompt notice to Seller of the
occurrence of any Buyer Material Adverse Effect. Seller and Buyer each shall
give prompt notice to the other of the occurrence or failure to occur of an
event that would, or with the lapse of time would, cause any condition to the
consummation of the transactions contemplated hereby not to be satisfied.
SECTION 4.7 Non-Competition.
(1) Seller agrees that neither Seller nor any of its Affiliates shall, directly
or indirectly, at any time within the four year period immediately following the
Closing Date:
(1) engage for its own account or the account of others, or have any
ownership, management, employment, agency, consultancy or other
interest in, or provide financing to, any person or entity that engages
in the sale, distribution, packaging, manufacture or marketing of any
(i) Afrocentric hair care products, (ii) in the event that Seller or
its designees do not acquire the National Cosmetics Business after the
Closing, ethnic cosmetics or (iii) in the event that Seller or its
designees do not acquire the Dermablend Business after the Closing,
corrective cosmetics (other than corrective cosmetics sold through the
medical channels) (the "Prohibited Activities"), or assist any other
person or entity to do so, except that Seller and its Affiliates may
(x) own, directly or indirectly, solely as an investment, securities of
any entity engaged in the Prohibited Activities 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 or (y) have an ownership interest
otherwise prescribed by this Section 4.7 during such period if such
ownership interest arises as a result of the acquisition of a business
entity not principally engaged in the Prohibited Activities; provided
that Seller or its Affiliate uses commercially reasonable efforts to
sell the competing portion as soon as reasonably practicable;
(2) for its own account or for the account of others, attempt to or assist
any other person or entity in attempting to do any of the following
with respect to the Prohibited Activities: (w) solicit to employ any
director, officer or employees of Buyer or its Affiliates or encourage
any such person to terminate such relationship with Buyer or its
Affiliates, (x) encourage any customer, client, supplier or other
business relationship of Buyer or its Affiliates to terminate or alter
such relationship, whether contractual or otherwise, to the
disadvantage of Buyer or its Affiliates, as the case may be, (y)
encourage any customer or supplier not to enter into a business
relationship with Buyer or its Affiliates or (z) impair or attempt to
impair any relationship, contractual or otherwise, between Buyer or its
Affiliates or any of their customers, suppliers or other business
relationships. As used in this Agreement, the term "solicit to employ"
shall not include general solicitations not specifically directed
toward employees of Buyer or its Affiliates; or
(3) the provisions of clauses (i) and (ii) above will not apply in the
event of a change in control of Seller, including as a result of a
merger resulting in Seller's then-current stockholders owning less than
a majority of the outstanding voting securities of the entity resulting
from such merger, or sale of all or substantially all of the assets or
outstanding voting securities of Seller, if the entity which takes
control of Seller derived, immediately prior to such change in control,
substantial revenues from Prohibited Activities.
(2) The parties agree that damages at law for violation of the provisions of
this Section 4.7 may not be an adequate remedy and that if Seller or its
Affiliates violate any of the provisions thereof, 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 parties recognize that laws and public policies of
the jurisdictions may differ as to the validity and enforceability of covenants
similar to those set forth in this Section 4.7. It is the intention of the
parties that the provisions of this Section 4.7 be enforced to the fullest
extent permissible under the laws and policies of each jurisdiction in which
enforcement of this Section 4.7 may be sought, and that the unenforceability (or
the modification to conform to such laws or policies) of any provisions of this
Section 4.7 shall not render unenforceable, or impair, the remainder of the
provisions of this Section 4.7. Accordingly, if any provision of this Section
4.7 shall be determined to be invalid or unenforceable, such invalidity or
unenforceability shall be deemed to apply only with respect to the operation of
such provision in the particular jurisdiction in which such determination is
made and not with respect to any other provision or jurisdiction.
SECTION 4.8 Use of "IVAX" Name. Buyer agrees and agrees to cause the Company or
its Subsidiaries not to use the "IVAX" name, trademark (including the "double
equilateral triangle design"), tradename or logo (including the hourglass logo)
at any time after the Closing Date.
SECTION 4.9 Affiliate Transactions. Except as set forth in Section 4.9 of the
Disclosure Schedule, immediately prior to the Closing, all indebtedness and
other amounts owing under any arrangement between Seller or any officer,
director or Affiliate (other than the Company or any of its Subsidiaries) of
Seller, on the one hand, and the Company or any of its Subsidiaries, on the
other, will be paid in full, and Seller will terminate and will cause any such
officer, director or Affiliate to terminate each such arrangement with the
Company or any of its Subsidiaries.
SECTION 4.10 Further Assurances
(1) Prior to Closing, each party agrees to use all reasonable efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations or as
reasonably requested by the other party to consummate and make effective the
transactions contemplated by this Agreement. At any time or from time to time
after the Closing, Seller shall execute and deliver to Buyer such other
documents and instruments, provide such materials and information, and take such
other action as Buyer may reasonably request to make effective the transactions
contemplated by this Agreement.
(2) Seller shall use all reasonable efforts to assist Buyer, Deloitte & Touche
LLP and Arthur Andersen LLP, at Buyer's cost and expense, in the preparation of
historical financial statements of the Company and its Subsidiaries which Buyer
may be required to file in a current report on Form 8-K pursuant to the
requirements of the Exchange Act including, without limitation, the unaudited
balance sheet of the Company as of March 31, 1997 and the related unaudited
statements of income and cash flow for the three-month period ended March 31,
1997, the statement of cash flow for the three-month period ended March 31,
1998, and the unaudited balance sheets of the Company as of June 30, 1998 and
1997 and the related unaudited statements of income and cash flow for the three-
and six-month periods ended June 30, 1998 and 1997.
(3) After the Closing Date, Buyer shall execute and deliver to Seller such other
documents and instruments, provide such materials and information, and take such
other action as Seller or its designees may reasonably request to make effective
the transactions contemplated in Section 4.11.
SECTION 4.11 Post-Closing Purchase Transactions
(1) Seller or its designees shall have an option to arrange for a third party
not affiliated with Seller, including without limitation, a trust or similar
escrow agent, (the "Third Party Purchaser") to purchase the Dermablend Business
from Buyer for a payment to Buyer of $15 million (it being understood that any
amount paid by the Third Party Purchaser exceeding $15 million will be paid to
Seller), provided that the Seller has delivered written notice to Buyer of its
election to arrange for the purchase the Dermablend Business at least two
business days prior to the Closing Date. Following the delivery of such written
notice, the Third Party Purchaser shall purchase, and Buyer will sell, the
Dermablend Business on the Closing Date immediately following the Closing. At
such closing, either the Third Party Purchaser or Seller on behalf of the Third
Party Purchaser will deliver to Buyer $15 million by cashier's check or wire
transfer of immediately available funds to an account designated by Buyer in
exchange for the transfer of the Dermablend Business, free and clear of all
Encumbrances created by Buyer. The Dermablend Business may be transferred, at
Seller's election, either in the form of (i) the transfer of all of the stock of
Flori Roberts Inc. if the Dermablend Business is transferred together with the
National Cosmetics Business; (ii) an asset sale by Flori Roberts Inc.; (iii) a
transfer by Flori Roberts Inc. of all of the membership interests of a new
limited liability company (a "LLC") that may be formed prior to Closing pursuant
to Section 4.11(c) or (iv) such other form of transfer reasonably acceptable to
Buyer.
The "Dermablend Business" means all the rights, title and
interest to all of the assets (including contracts and leases) used or held for
use in connection with the operation of the business of selling corrective
cosmetics under the brand name "Dermablend," including, without limitation, all
associated intellectual property used primarily in such business to the extent
not material to the Company's business to be retained by Buyer, and all
associated liabilities, provided that if Buyer retains the Dermablend Business
and, pursuant to Section 4.11(b), sells the National Cosmetics Business and the
Iman Business, the Dermablend Business will also include the net accounts
receivable (other than the Designated Receivables (as defined below)), bank
overdraft, accounts payable and accrued expenses related to the National
Cosmetics Business and the Iman Business as of the Closing Date.
(2) Buyer shall have the option to require Seller or its designees to purchase,
and Seller or its designees shall have the option to purchase, the National
Cosmetics Business (as defined) and the Iman Business (as defined) together and
not separately provided that either party has delivered written notice to the
other party of its election to have Seller or its designees purchase the
National Cosmetics Business and the Iman Business at least two business days
prior to Closing. Following the delivery of such written notice by either party,
Seller or its designees shall purchase, and Buyer will sell to Seller or its
designees, the National Cosmetics and Iman Businesses on the Closing Date
immediately following the Closing. At such closing, Seller or its designees, as
the case may be, shall deliver to Buyer $1 by check in exchange for the transfer
of the National Cosmetics Business and Iman Business, in each case free and
clear of all Encumbrances created by Buyer. The National Cosmetics Business may
be transferred, at Seller's election, either in the form of (i) the transfer of
all of the stock of Flori Roberts Inc. if the National Cosmetics Business is
transferred together with the Dermablend Business; (ii) an asset sale by Flori
Roberts Inc.; (iii) a transfer by Flori Roberts Inc. of all of the membership
interests of a new LLC that may be formed prior to Closing pursuant to Section
4.11(c) or (iv) such other form of transfer reasonably acceptable to Buyer. The
Iman Business may be transferred, at Seller's election, in the form of (i) the
transfer of all of the stock of Flori Roberts Inc. if the Iman Business is both
contributed to Flori Roberts Inc. and the Iman Business is transferred together
with the Dermablend Business; (ii) an asset sale by the Company; (iii) a
transfer by the Company of all of the membership interests of a new LLC that may
be formed prior to Closing pursuant to Section 4.11(c) or (iv) such other form
of transfer reasonably acceptable to Buyer. Notwithstanding the foregoing, if
the National Cosmetics Business and the Iman Business are transferred together
with the Dermablend Business, to the extent practicable, such transfer will be
accomplished by (x) a transfer of the Iman Business to Flori Roberts Inc.
followed by (y) a transfer of all of the stock of Flori Roberts Inc., subject to
there being no adverse tax or economic consequences (with adverse tax
consequences meaning taxes incremental to those incurred by using another method
of structuring such transfers) to Buyer or Seller or their affiliates therefrom.
The "National Cosmetics Business" means all the rights, title
and interest to all of the assets (including contracts and leases) used or held
for use in connection with the operation of the business of selling ethnic
cosmetics under the brand names "Flori Roberts","Patti LaBelle" and "Wu-Tang",
all associated intellectual property used primarily in such business to the
extent not material to the Company's business to be retained by Buyer, provided
that if Buyer retains the Dermablend Business and, pursuant to Section 4.11(b),
sells the National Cosmetics Business and the Iman Business, the net accounts
receivable (other than the Designated Receivables), bank overdraft, accounts
payable and accrued expenses related to the National Cosmetics Business will be
retained by the Buyer as part of the Dermablend Business. The "Iman Business"
means all the rights, title and interest to all of the assets (including
contracts and leases) used or held for use in connection with the operation of
the business of selling cosmetics under the "IMAN" brand name, all associated
intellectual property used primarily in such business to the extent not material
to the Company's business to be retained by Buyer and all associated
liabilities, provided that if Buyer retains the Dermablend Business and,
pursuant to Section 4.11(b), sells the National Cosmetics Business and the Iman
Business, the net accounts receivable (other than the Designated Receivables),
bank overdraft, accounts payable and accrued expenses related to the Iman
Business will be retained by the Buyer as part of the Dermablend Business.
The "Designated Receivables" means a group of net receivables
of the National Cosmetics Business and/or the Iman Business with aggregate net
value of not more than $1,500,000 which, prior to Closing, will be specifically
designated by Seller in a manner reasonably acceptable to Buyer according to
customer, invoice number or other means of identification and which may be
purchased by Seller or its designees for $1.00 if Buyer retains the Dermablend
Business and, pursuant to Section 4.11(b), sells the National Cosmetics Business
and the Iman Business. If the Designated Receivables include accounts receivable
from customers that also owe to Buyer accounts receivable retained by Buyer
after the Closing, Buyer will control the collections from such customers
pursuant to the transition service agreement contemplated by Section 4.11(c).
Seller agrees that the Designated Receivables will be selected in a manner so
that weighted average age of the Designated Receivables will not be less, in any
material respect, from the weighted average age of the accounts receivable
retained by Buyer after the Closing Date.
(3) Notwithstanding the provisions of Section 4.1, Seller will have the right
(i) to restructure the Company prior to the Closing to (A) transfer the
Dermablend Business to a new single member LLC to be held by Flori Roberts Inc.,
(B) transfer the National Cosmetics Business to a new single member LLC to be
held by Flori Roberts Inc. and (C) transfer the Iman Business to Flori Roberts
Inc. or to a newly formed LLC to be held by the Company or Flori Roberts Inc.
and (ii) to take such other steps as may be necessary to facilitate the
transactions contemplated by this Section 4.11, including, without limitation,
entering into reasonable contracts to (x) sell (either directly or by selling
the options described in Sections 4.11(a) and (b)) the National Cosmetics
Business, the Iman Business or the Dermablend Business, (y) provide transition
services to any purchasers of such businesses at cost (including, without
limitation, collection of accounts receivable and trades payable processing
services) and (z) license on a non-exclusive, royalty-free basis certain Company
Intellectual Property Rights to the Buyer and the purchasers of any such
business to allow such entities to continue to use such Company Intellectual
Property Rights in manner consistent with past practice. Buyer agrees to
maintain the legal entity status of each such business as it exists at the
Closing for purposes of completing any sale pursuant to Section 4.11(a) or (b).
(4) If written notice has been delivered pursuant to Section 4.11(a) or (b)
(each referred to as a "Purchase Notice"), then during the period between
Closing and the transfer of the applicable business, Buyer will (i) operate the
business to be transferred to Seller or its designees in the ordinary course of
business, (ii) not take any actions that would be prohibited under Section 4.1
with regard to the Dermablend Business, National Cosmetics Business or Iman
Business as if all reference to the "Company" in Section 4.1 referred to the
applicable business and "Seller" referred to Buyer in Section 4.1, (iii) not
sell, transfer, assign, or take any action that would result in the creation of
an Encumbrance other than Permitted Encumbrances on (A) any of the assets of any
of the Dermablend Business, the National Cosmetics Business and the Iman
Business; (B) the membership interests of any LLC created pursuant to Section
4.11(c) or (C) the stock of Flori Roberts Inc. and (iv) not take any other
action that will inhibit the transactions contemplated by this Section 4.11 in
any material respect.
(5) Seller and Buyer agree that the transfer documents used to complete the
purchases referred to in Section 4.11(a) and (b) and the transfers referred to
in Section 4.11(c) shall (i) be in forms mutually acceptable to Seller and Buyer
to ensure that such purchases will not result in (A) any adverse tax
consequences for Buyer or Seller or their affiliates (with adverse tax
consequences meaning taxes incremental to those incurred by using another method
of structuring such transfers), (B) the making of any representations or
warranties by Buyer except for customary representations regarding due
authorization to enter into and perform the transaction or (B) the granting of
any indemnities or liabilities to the purchasers of such businesses by the
Company, Buyer, or Buyer's affiliates and (ii) expressly state that the buyers
of the businesses waive any rights that they may have against the Company, Buyer
or Buyer's affiliates arising out of or relating to the condition or operation
of the business, provided that such statement will not render or impair any
rights Seller has against Buyer and its affiliates hereunder.
(6) Notwithstanding the provisions of Section 4.3(a), Buyer and Seller agree
that (i) the amount of MADSP to be allocated to the Dermablend Business shall be
equal to $15 million plus the amount of the liabilities to be assumed by the
purchasers of such business pursuant to Section 4.11(a) and (ii) the amount of
the MADSP to be allocated to the National Cosmetics Business and the Iman
Business shall be equal to an amount of the liabilities to be assumed by the
purchaser of such businesses pursuant to Section 4.11(b).
ARTICLE 5
INDEMNIFICATION
SECTION 5.1 Indemnification by Seller. Subject to the limits set forth in this
Article V, Seller agrees to indemnify, defend and hold Buyer, its officers,
directors, agents and Affiliates, harmless from and in respect of any and all
losses, damages, costs and reasonable expenses (including, without limitation,
reasonable expenses of investigation and defense fees and disbursements of
counsel and other professionals), in each case in excess of $2,500
(collectively, "Losses"), (i) that they may incur arising out of or due to the
inaccuracy of any representation or the breach of any warranty, covenant,
undertaking or other agreement of Seller contained in this Agreement or the
Disclosure Schedule (determined, without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein other than with
respect to the use of such qualifications in Sections 2.5, 2.7 and 2.8, the last
sentence of Section 2.21 and the use of the terms "Material Agreement" and
"Company Intellectual Property Rights" each of which includes materiality
qualifiers); (ii) that arise out of the Pro-Line Litigation; (iii) that arise
out of the operation or condition of the Dermablend Business or relate to the
liabilities of the Dermablend Business, if Buyer has sold such business pursuant
to Section 4.11; (iv) that arise out of the operation or condition of the
National Cosmetics Business or the Iman Business or relate to the liabilities of
the National Cosmetics Business or Iman Business if Buyer has sold such business
pursuant to Section 4.11; and (v) that arise out of the operation or condition
of Flori Roberts Inc. prior to the Closing or relate to liabilities of Flori
Roberts Inc. immediately prior to the Closing, if Flori Roberts Inc. remains a
subsidiary of the Company following the sale of the Dermablend Business, the
National Cosmetics Business and the Iman Business pursuant to Sections 4.11(a)
and (b), except for liabilities arising out of or relating to the operation of
the hair care and Posner businesses retained by Buyer; provided, however, that
the indemnification pursuant to Sections 5.1 (iii), (iv) or (v) will not be
available to the extent such Losses or liabilities arise out of a violation by
Buyer of Section 4.11(d).
SECTION 5.2 Indemnification by Buyer. Subject to the limits set forth in this
Article V, Buyer agrees to indemnify, defend and hold Seller, its officers,
directors, agents and Affiliates, harmless from and in respect of any and all
Losses that they may incur arising out of or due to any inaccuracy of any
representation or the breach of any warranty, covenant, undertaking or other
agreement of Buyer contained in this Agreement (determined without giving effect
to any limitation as to "materiality" or "material adverse effect" set forth
therein).
SECTION 5.3 Survival of Representations and Warranties. The several
representations and warranties of the parties contained in this Agreement or in
any instrument delivered pursuant hereto will survive the Closing Date and will
remain in full force and effect thereafter for a period of eighteen months from
the Closing Date (the "Cut-Off Date"); provided, however, that the
representations and warranties contained in Section 2.12 shall survive the
Closing Date for 90 days following the expiration of all applicable statutes of
limitations (including extensions); provided, further, that such representations
or warranties shall survive (if at all) beyond such period with respect to any
inaccuracy therein or breach thereof, notice of which shall have been duly given
within such applicable period in accordance with Section 5.4. Anything to the
contrary contained herein notwithstanding, neither party shall be entitled to
recover from the other unless and until the total of all claims for indemnity or
damages with respect to any inaccuracy or breach of any such representations or
warranties or breach of any covenants, undertakings or other agreements set
forth in Section 4.1 and whether such claims are brought under this Article V or
otherwise, exceeds three percent (3%) of the Purchase Price and then only for
the amount by which such claims for indemnity or damages exceeds three percent
(3%) of the Purchase Price; provided, however, that no party shall be entitled
to recover from the other more than twenty-five percent (25%) of the Purchase
Price in the aggregate pursuant to this Article V for indemnity or damages with
respect to any inaccuracy or breach of any such representations or warranties or
any breach of the covenants, undertakings or other agreements set forth in
Section 4.1.
SECTION 5.4 Notice and Opportunity to Defend. If an event occurs which a party
asserts is an indemnifiable event pursuant to Section 5.1 or 5.2, the party
seeking indemnification shall promptly notify the other party obligated to
provide indemnification (the "Indemnifying Party"), provided, however, that the
failure to provide prompt notice as provided herein will relieve the
Indemnifying Party of its obligations hereunder only to the extent that such
failure prejudices the Indemnifying Party hereunder. If such event involves (i)
any claim or (ii) the commencement of any action or proceeding by a third
person, the party seeking indemnification will give such Indemnifying Party
prompt written notice of such claim or the commencement of such action or
proceeding, provided, however, that the failure to provide prompt notice as
provided herein will relieve the Indemnifying Party of its obligations hereunder
only to the extent that such failure prejudices the Indemnifying Party
hereunder. In case any such action shall be brought against any party seeking
indemnification and it shall notify the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate therein and, to
the extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such party seeking indemnification, provided that the
Indemnifying Party will be deemed to have waived any right to dispute its
liability under this Agreement with respect to such action to the party seeking
indemnification for such action. After notice from the Indemnifying Party to
such party seeking indemnification of such election so to assume the defense
thereof, the Indemnifying Party shall not be liable to the party seeking
indemnification hereunder for any legal expenses of other counsel or any other
expenses subsequently incurred by such party in connection with the defense
thereof. The party seeking indemnification agrees to cooperate fully with the
Indemnifying Party and its counsel in the defense against any such asserted
liability. The party seeking indemnification shall have the right to participate
at its own expense in the defense of such asserted liability. In no event shall
an Indemnifying Party, or the party being indemnified, be liable for any
settlement effected without its consent which will not be unreasonably withheld.
SECTION 5.5 Adjustment for Insurance and Taxes. The amount which an Indemnifying
Party is required to pay to, for or on behalf of the other party (hereinafter
referred to as an "Indemnitee") pursuant to this Article V and Section 4.3 shall
be adjusted (including, without limitation, retroactively) (i) by any insurance
proceeds actually recovered by or on behalf of such Indemnitee in reduction of
the related indemnifiable loss (the "Indemnifiable Loss") and (ii) to take
account of any Tax benefit realized as a result of any Indemnifiable Loss.
Amounts required to be paid, as so reduced, are hereinafter sometimes called an
"Indemnity Payment." If an Indemnitee has received or has had paid on its behalf
an Indemnity Payment for an Indemnifiable Loss and subsequently receives
insurance proceeds for such Indemnifiable Loss, or realize any Tax benefit as a
result of such Indemnifiable Loss, then the Indemnitee shall promptly (i) notify
the Indemnifying Party of the amount and nature of such proceeds and benefits
and (ii) pay to the Indemnifying Party the amount of such insurance proceeds or
Tax benefit or, if lesser, the amount of the Indemnity Payment.
SECTION 5.6 Mitigation of Loss. Each Indemnitee is obligated to use all
reasonable efforts to mitigate, to the fullest extent practicable, the amount of
any Loss for which it is entitled to seek indemnification hereunder (including,
without limitation, seeking reimbursement for losses pursuant to contractual
rights with vendors). The Indemnifying Party shall not be required to make any
payment to an Indemnitee in respect of such Loss to the extent such Indemnitee
failed to comply with the foregoing obligation. SECTION 1.1
SECTION 5.7 Subrogation. Upon making any Indemnity Payment, the Indemnifying
Party will, to the extent of such payment, be subrogated to all rights of the
Indemnitee against any third party in respect of the Loss to which the payment
relates; provided, however, that until the Indemnitee recovers full payment of
its Loss, any and all claims of the Indemnifying Party against any such third
party on account of such payment are hereby made expressly subordinated and
subjected in right of payment of the Indemnitee's rights against such third
party. Without limiting the generality of any other provision hereof, each such
Indemnitee and Indemnifying Party will duly execute upon request all instruments
reasonably necessary to evidence and perfect the above described subrogation and
subordination rights.
SECTION 5.8 Tax Indemnification. None of the provisions of this Article V, with
the exception of Sections 5.5 and 5.10, shall apply to the claims, obligations,
liabilities, covenants and representations under Section 4.3, which shall be
governed solely by the terms thereof, provided that Buyer may seek indemnity for
Losses under this Article V with respect to a breach of the representations and
warranties of Seller contained in Section 2.12 to the extent such Losses are not
covered by Section 4.3. The terms of Section 4.3 shall supercede the terms of
this Article V where such terms conflict.
SECTION 5.9 Set-Off. Neither Seller nor Buyer shall have any right to set-off
any Losses against any payments to be made by such party or parties pursuant to
this Agreement, except as otherwise expressly provided herein.
SECTION 5.10 Exclusive Remedy. Following the Closing, the indemnities provided
for in Section 4.3 and this Article V shall be the sole and exclusive remedies
of the parties and their respective officers, directors, employees, Affiliates,
agents, representatives, successors and assigns for any breach of or inaccuracy
in any representation or warranty or any breach, nonfulfillment or default in
the performance of any of the covenants or agreements contained in this
Agreement (but not any such covenants or agreements to the extent they are by
their terms to be performed after the Closing Date). The parties shall not be
entitled to a recission of this Agreement or to any further indemnification
rights or claims of any nature whatsoever in respect thereof (whether by
contract, common law, statute, law, regulation or otherwise, including without
limitation, under the Racketeer Influence and Corrupt Organizations Act of 1970,
as amended) all of which the parties hereby waive, provided, however, that
nothing herein is intended to waive any claims for fraud.
ARTICLE 6
CONDITIONS
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Closing. The
obligations of Seller, on the one hand, and Buyer, on the other hand, to
consummate the Closing are subject to the satisfaction (or, if permissible,
waiver by the party for whose benefit such conditions exist) of the following
conditions:
(1) no arbitrator or Governmental Entity shall have issued any order, decree or
ruling, and there shall not be any statute, rule or regulation, restraining,
enjoining or prohibiting the consummation of the material transactions
contemplated by this Agreement, provided that the parties will have used all
reasonable efforts to cause any such order, decree, ruling, statute, rule or
regulation to be vacated or lifted;
(2) any waiting period applicable to the transactions contemplated hereby under
the HSR Act shall have expired or been terminated; and
(3) all authorizations, approvals or consents from any Governmental Entity
required to permit the consummation of the transactions contemplated hereby
shall have been obtained and be in full force and effect, except where the
failure to have obtained any such authorizations, approvals or consents would
not have a Company Material Adverse Effect or a Buyer Material Adverse Effect,
as the case may be.
SECTION 6.2 Conditions to the Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated hereby are subject to the satisfaction
(or waiver by Buyer) of the following conditions:
(1) the representations and warranties of Seller shall be true and accurate as
of the Closing Date as if made at and as of such time (other than those
representations and warranties that address matters only as of a particular date
or only with respect to a specific period of time which need to be true and
accurate only as of such date or with respect to such period), except where the
failure of such representations and warranties to be so true and accurate
(without giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein), would not have a Company Material Adverse
Effect; provided, that a Company Material Adverse Effect relating to the
Dermablend Business, the National Cosmetics Business or the Iman Business will
not be deemed a Company Material Adverse Effect for purposes of this Section
6.2(a) if Buyer is to sell such business pursuant to Sections 4.11(a) or (b), as
applicable.
(2) Seller shall have performed in all material respects the obligations
hereunder required to be performed by it at or prior to the Closing Date;
(3) Buyer shall have received a certificate signed on behalf of Seller by one
executive officer of Seller, dated as of the Closing Date, to the effect that,
the conditions set forth in Section 6.2(a) and Section 6.2(b) have been
satisfied;
(4) all authorizations, approvals or consents from any third party (other than a
Governmental Entity) required to permit the consummation of the transactions
contemplated hereby shall have been obtained and be in full force and effect,
except where the failure to have obtained any such authorizations, approvals or
consents would not have a Company Material Adverse Effect;
(5) if required pursuant to Section 4.11(b), Seller or its designees are
reasonably prepared and able to purchase the National Cosmetics Business and the
Iman Business from Buyer immediately following the Closing; and
(6) any director of the Company or any of its Subsidiaries whose resignation
shall have been requested by Buyer shall have submitted his or her resignation
to Buyer effective as of the Closing Date.
SECTION 6.3 Conditions to the Obligations of Seller. The obligations of Seller
to consummate the transactions contemplated hereby are subject to the
satisfaction (or waiver by Seller) of the following further conditions:
(1) The representations and warranties of Buyer shall be true and accurate as of
the Closing Date as if made at and as of such time (other than those
representations and warranties that address matters only as of a particular date
or only with respect to a specific period of time which need to be true and
accurate only as of such date or with respect to such period), except where the
failure of such representations and warranties to be so true and accurate
(without giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein) would not have a Buyer Material Adverse
Effect;
(2) Buyer shall have performed in all material respects all of the obligations
hereunder required to be performed by Buyer, at or prior to the Closing Date;
and
(3) Seller shall have received a certificate signed on behalf of Buyer by one
executive officer of Buyer, dated as of the Closing Date, to the effect that the
conditions set forth in Section 6.3(a) and Section 6.3(b) have been satisfied.
ARTICLE 7
TERMINATION
SECTION 7.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the Closing Date:
(1) by the mutual consent of Seller and Buyer;
(2) by Seller or Buyer:
(1) if the Closing shall not have occurred on or prior to September 15,
1998 (or October 30, 1998 if the only condition remaining unfilled at
September 15, 1998 is approval by any required Governmental Entity, and
Seller and Buyer are continuing to seek to obtain such approval);
provided, however, that the right to terminate this Agreement under
this Section 7.1(b)(i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur on or
prior to such date; or
(2) if any Governmental Entity shall have issued an order, decree or ruling
or taken any other action (which order, decree, ruling or other action
the parties shall use their best efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the
material transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and
non-appealable;
(3) by Seller if Buyer (x) breaches or fails in any material respect to perform
or comply with any of its material covenants and agreements contained herein or
(y) breaches its representations and warranties in any material respect and such
breach would have a Buyer Material Adverse Effect, in each case such that the
conditions set forth in Section 6.1 or Section 6.3 would not be satisfied;
provided, however, that if any such breach is curable by Buyer through the
exercise of Buyer's best efforts and for so long as Buyer shall so use its best
efforts to cure such breach, Seller may not terminate this Agreement pursuant to
this Section 7.1(c); or
(4) by Buyer if Seller (x) breaches or fails in any material respect to perform
or comply with any of their material covenants and agreements contained herein
or (y) breaches its representations and warranties in any material respect and
such breach would have a Company Material Adverse Effect, in each case such that
the conditions set forth in Section 6.1 or Section 6.2 would not be satisfied;
provided, however, that if any such breach is curable by Seller through the
exercise of Seller's best efforts and for so long as Seller shall so use its
best efforts to cure such breach, Buyer may not terminate this Agreement
pursuant to this Section 7.1(d).
SECTION 7.2 Procedure and Effect of Termination. In the event of the termination
and abandonment of this Agreement by Seller or Buyer pursuant to Section 7.1,
written notice thereof shall forthwith be given to the other party. If the
transactions contemplated by this Agreement are terminated as provided herein:
(1) each party will return all documents, work papers and other material of any
other party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party furnishing the same;
(2) all confidential information received by either party with respect to the
business of any other party or its subsidiaries or Affiliates shall be treated
in accordance with the provisions of the Confidentiality Agreement, which shall
survive the termination of this Agreement; and
(3) neither party will have any liability under this Agreement to the other
except (i) as stated in subparagraphs (a) and (b) of this Section 7.2, (ii) for
any willful breach of any provision of this Agreement and (iii) as provided in
the Confidentiality Agreement.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 Governing Laws and Consent to Jurisdiction. The laws of the state of
Illinois (irrespective of its choice of law principles) shall govern all issues
concerning the validity of this Agreement, the construction of its terms, and
the interpretation and enforcement of the rights and duties of the parties. Each
party irrevocably submits to the exclusive jurisdiction of the federal courts of
the United States of America for the Northern District of Illinois located in
Chicago (and the Federal courts having jurisdiction over appeals therefrom) in
respect of the transactions contemplated by this Agreement, the other agreements
and documents referred to herein and the transactions contemplated by this
Agreement and such other documents and agreements.
SECTION 8.2 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects by
written agreement of the parties at any time prior to the Closing Date with
respect to any of the terms contained herein.
SECTION 8.3 Notices. All notices, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly given (a) when
delivered by hand or by FedEx or a similar overnight courier, (b) five days
after being deposited in any United States Post Office enclosed in a postage
prepaid, registered or certified envelope addressed or (c) when successfully
transmitted by telecopier (with a confirming copy of such communication to be
sent as provided in clause (a) or (b) above), to the receiving party at the
address or telecopier number set forth below (or at such other address or
telecopier number for a party as shall be specified by like notice, provided,
however, that any notice of change of address or telecopier number shall be
effective only upon receipt):
(1) if to Buyer, to:
Carson, Inc.
c/o Morningside Capital Group, L.L.C.
One Morningside Drive North, Suite 200
Westport, CT 06880
Telephone No.: (203) 226-7664
Telecopy No.: (203) 226-8011
Attention: Vincent A. Wasik
and to:
Carson Products Company
P.O. Box 22309
Savannah, GA 31403
Telephone No.: (912) 651-3808
Telecopy No.: (912) 651-3990
Attention: Robert W. Pierce
with a copy to:
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
Telephone No.: (212) 530-5000
Telecopy No.: (212) 530-5219
Attention: Lawrence Lederman, Esq.
and Robert S. Reder, Esq.
(2) if Seller, to:
IVAX Corporation
4400 Biscayne Boulevard
Miami, FL 33137
Telephone : (305) 575-6000
Telecopy No: (305) 575-6298
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Telephone No.: (312) 407-0700
Telecopy No.: (312) 407-0411
Attention: Peter C. Krupp, Esq.
SECTION 8.4 Interpretation
(1) The words "hereof," "herein" and "herewith" and words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as a
whole and not to any particular provision of this Agreement, and article,
section, paragraph, exhibit and schedule references are to the articles,
sections, paragraphs, exhibits and schedules of this Agreement unless otherwise
specified. The words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa. The phrase "to the knowledge of" or any similar phrase shall mean such
facts and other information which as of the date of determination are actually
known to James M. Millsap, Chief Executive Officer of the Company; Thomas Polke,
Chief Operating Officer of the Company; Sharon Boone, Vice President, Sales and
Marketing of the Company; Robert Kavanaugh, Vice President, Finance and
Administration of the Company; James Harbert, Vice President, Operations of the
Company; or Joseph P. Diebold. The phrase "made available" in this Agreement
shall mean that the information referred to has been made available if requested
by the party to whom such information is to be made available. The phrases "the
date of this Agreement," "the date hereof" and terms of similar import, unless
the context otherwise requires, shall be deemed to refer to June 16, 1998. As
used in this Agreement, the term "business day" means a day, other than a
Saturday or a Sunday, on which banking institutions in The City of New York are
required to be open. The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement.
(2) The Disclosure Schedule shall be construed with and as an integral part of
this Agreement as if the same had been set forth verbatim herein. Any matter
disclosed pursuant to the Disclosure Schedule shall be deemed to be disclosed
for all purposes under this Agreement, but such disclosure shall not be deemed
to be an admission or representation as to the materiality of the item so
disclosed.
(3) Headings are for convenience of the parties only and shall be given no
substantive or interpretative effect whatsoever.
SECTION 8.5 Counterparts. This Agreement may be executed in multiple
counterparts, all of which shall together be considered one and the same
agreement.
SECTION 8.6 Entire Agreement; Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein), the
Confidentiality Agreement and the Disclosure Schedule (i) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and (ii),
except as provided herein, are not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
SECTION 8.7 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against its regulatory policy, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
SECTION 8.8 Service of Process. Each party irrevocably consents to the service
of process outside the territorial jurisdiction of the courts referred to in
Section 8.1 in any such action or proceeding by mailing copies thereof by
registered United States mail, postage prepaid, return receipt requested, to its
address as specified in or pursuant to Section 8.3. However, the foregoing shall
not limit the right of a party to effect service of process on the other party
by any other legally available method.
SECTION 8.9 Specific Performance. Each party acknowledges and agrees that in the
event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties will (a) waive, in any action
for specific performance, the defense of adequacy of a remedy at law and (b) be
entitled, in addition to any other remedy to which they may be entitled at law
or in equity, to compel specific performance of this Agreement in any action
instituted in accordance with Section 8.1.
SECTION 8.10 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by either party (whether by operation
of law or otherwise) without the prior written consent of the other party;
provided, however, that (i) Buyer may assign its rights hereunder to any direct
or indirect wholly-owned Subsidiary of Buyer or to any person or entity which
acquires, in one or a series of transactions, all of the assets and properties
of the Company and its Subsidiaries, provided such person or entity agrees to
assume Buyer's obligations hereunder in a form reasonably acceptable to Seller
and (ii) Seller may assign this Agreement to any person or entity that acquires,
in one or a series of transactions, all or substantially all of the assets or
shares of Seller, including through a merger or a share exchange. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective permitted successors and
assigns.
SECTION 8.11 Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with the transactions contemplated hereby, this
Agreement and the consummation of the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the
transactions contemplated hereby is consummated, provided that Buyer shall pay
all fees associated with any filings made under the HSR Act in connection with
the transactions contemplated by this Agreement.
SECTION 8.12 Waivers. Except as otherwise provided in this Agreement, any
failure of either party to comply with any obligation, covenant, agreement or
condition herein may be waived by the party or parties entitled to the benefits
thereof only by a written instrument signed by the party granting such waiver,
but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
SECTION 8.13 No Double Recovery. Notwithstanding anything herein to the
contrary, neither party shall be entitled to indemnification or reimbursement
under any provision of this Agreement for any amount to the extent such party
has been indemnified or reimbursed for such amount under any other provision of
this Agreement or otherwise.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
IVAX CORPORATION
By:
Name: James M. Millsap
Title: Senior VP, Corporate Development
CARSON, INC.
By:
Name: Vincent A. Wasik
Title: Chief Executive Officer
ANNEX A
Index of Defined Terms
Defined in
Terms Section
Affiliate(s)........................................................... 3.6
Agreement..............................................................Preamble
Balance Sheet.......................................................... 2.13
Bankruptcy Code........................................................ 3.8
Benefit Plan........................................................... 2.9(k)
business day........................................................... 8.4(a)
Buyer..................................................................Preamble
Buyer Material Adverse Effect.......................................... 3.1
Buyer Plans............................................................ 4.4(a)
Closing................................................................ 1.3(a)
Closing Date........................................................... 1.3(a)
Closing Statement...................................................... 1.4(a)
Code................................................................... 2.12(m)
Code ss. 338 Forms..................................................... 4.3(a)
Company................................................................Preamble
Company Employee(s).................................................... 4.4(a)
Company Intellectual Property Rights................................... 2.15
Company Material Adverse Effect........................................ 2.1
Confidentiality Agreement.............................................. 4.2
Cut-Off Date........................................................... 5.3
December Target Amount................................................. 1.4(c)
Defined Benefit Plan................................................... 2.9(k)
Dermablend Business.................................................... 4.11(a)
Designated Receivables................................................. 4.11(b)
Disclosure Schedule.................................................... 2.1
Elections.............................................................. 4.3(a)
Employee Arrangement................................................... 4.4(b)
Encumbrances........................................................... 1.1
Environmental Laws..................................................... 2.17(b)
ERISA.................................................................. 2.9(k)
ERISA Affiliate........................................................ 2.9(k)
Exchange Act........................................................... 3.6
Final Closing Statement................................................ 1.4(c)
Financial Statements................................................... 2.6
GAAP................................................................... 2.6
Governmental Entity.................................................... 2.5
Defined in
Terms Section
Hazardous Substances................................................... 2.17(b)
HSR Act................................................................ 2.5
Iman Business.......................................................... 4.11(b)
Indemnifiable Loss..................................................... 5.5
Indemnifying Party..................................................... 5.4
Indemnitee............................................................. 5.5
Indemnity Payment...................................................... 5.5
Intellectual Property Rights........................................... 2.15
LLC.................................................................... 4.11(a)
Losses................................................................. 5.1
MADSP.................................................................. 4.3(a)
March Target Amount.................................................... 1.4(e)
Material Agreement..................................................... 2.16
National Cosmetics Business............................................ 4.11(b)
Neutral Auditor........................................................ 1.4(c)
PBGC................................................................... 2.9(k)
Permits................................................................ 2.11(a)
Permitted Encumbrances................................................. 2.13
Plan................................................................... 2.9(k)
Pre-Closing Consolidated Tax Returns................................... 4.3(e)
Pre-Closing Separate Tax Returns....................................... 4.3(e)
Pre-Closing Tax Return................................................. 4.3(e)
Prime Rate............................................................. 1.4(e)
Prohibited Activities.................................................. 4.7(a)
Pro-Line Litigation.................................................... 1.2(a)
Purchase Notice........................................................ 4.11(d)
Purchase Price......................................................... 1.2(a)
Qualified Plan......................................................... 2.9(k)
Releases............................................................... 2.17(a)
Resolution Period...................................................... 1.4(b)
Seller.................................................................Preamble
Shares.................................................................Preamble
Subsidiary............................................................. 2.1
Tax Return............................................................. 2.12(m)
Tax Sharing Agreement.................................................. 4.3(d)
Taxes.................................................................. 2.12(m)
Third Party Purchaser.................................................. 4.11(a)
Transfer Taxes......................................................... 4.3(f)
Unaudited Financial Statements......................................... 2.6
Working Capital........................................................ 1.4(a)
ANNEX B
Procedures for Calculating Working Capital
The Closing Statement will be determined as set forth in this Annex B. To the
extent the procedures set forth herein are insufficient to determine an amount,
or some portion of an amount, for the Closing Statement, then the determination
of such amount, or portion of an amount, will be determined on a basis
consistent with the policies, procedures and methodologies used to prepare the
Financial Statements.
Cash
Amount per bank in account # 0010018800 at South Shore Bank adjusted for
deposits in transit checks outstanding that have not cleared the bank and other
reconciling items occurring through the Closing.
Accounts Receivable, Net
Amounts uncollected as of Closing, for product shipped through the Closing
(irrespective of when such amounts are invoiced), reduced for allowance for
doubtful accounts and reserve for credit memos as determined below.
Allowance for Doubtful
Specific portion of reserve - Provide a reserve of 100% for all
accounts in bankruptcy or sent to a collection agency. Analyze all
accounts greater than 90 days past invoice (other than those accounts
in bankruptcy or sent to a collection agency (or would have been sent
to a collection agency consistent with past practices, even if not
actually sent)) and determine, in a manner consistent with past
practices used to prepare the Financial Statements, a reserve
requirement to cover possible uncollectible amounts.
General portion of reserve - For accounts less than 90 days past
invoice, first reduce the total amount less than 90 days past invoice
for those items already reserved for in the credit memo reserve
analysis (i.e. IBNR, invoices outstanding more than one year and
customer deductions), then provide a reserve of 2% to the adjusted
amount.
Reserve for Credit Memos
Annex B
Procedures for Calculating Working Capital on the Closing Statement
(continued)
Specific portion of reserve - Provide a reserve of 100% on invoices
outstanding for more than one year and on customer deductions taken on
invoices otherwise paid in full (referred to as open debits or customer
deductions outstanding). Analyze all invoices outstanding not covered
by the reserve methodology described in the preceding sentence or by
the reserve methodology described below under "General portion of
reserve" and determine in a manner consistent with past practices used
to prepare the Financial Statements, a reserve requirement to cover
possible uncollectible amounts.
General portion of reserve - For mass market sales outstanding less
than 70 days and for department store sales outstanding less than 48
days (these parameters represent days sales outstanding at December 31,
1997 for each type of receivable) provide a general reserve to cover
claims incurred but not reported ("IBNR") using the reserve percentages
in the following table (these percentages represent 1997 returns
processed as a percent of 1997 sales):
- ------------------ -------------------------------------------------------------
Type of Credit Memo
- ------------------ -------------------------------------------------------------
Brand Returns and Demo Co-op Cash
Allowances Salaries Advertising Discounts
- ------------------ ----------- ----------- ------------------ ------------------
Mass Market 5.79% 0% 2.92% 2.00%
- ------------------ ----------- ----------- ------------------ ------------------
National Cosmetics 3.00% 11.76% 1.61% 0%
- ------------------ ----------- ----------- ------------------ ------------------
Dermablend 3.00% 10.83% .73% 0%
- ------------------ ----------- ----------- ------------------ ------------------
Inventories, Net
Inventories, net will be determined as follows:
I. To the extent reasonably practicable, inventory movements should be halted
(receiving and shipping) as of the Closing Date, in order to avoid any
cut-off problems, and physical count of inventory should be commenced on
the Closing Date and should be completed within the next 10 days. Items
held by a third party and not physically counted should be confirmed in
writing by such third party.
II. Determine Gross Inventory Value by extending inventory quantities on hand
on the Closing Date (including those not subject to a physical count in I
above) by the standard cost at Closing.
The following variances should be capitalized as of Closing Date.
Haircare:
Labor and overhead costs
The average monthly variance between standard and actual for the last
12 months should be computed and be multiplied by the number of months
inventory on hand, determined at December 31, 1997 to 3.67 months. This
amount is reduced by 12% (the amount determined to be E&O as of
December 31, 1997) to derive the final capitalizable amount.
III. The following departments/costs are included to determine the actual labor
and overhead cost pool at the stated capitalization percentages:
Department/costs % to be capitalized
----------------------------------- -- -- -----------
11 - Administration 75%
12 - Product Screening 100%
13 - Product Filling 100%
14 - Product Packing 100%
16 - Compounding 100%
20 - Receiving 100%
25 - Maintenance/Engineering 50%
26 - Operations Analysis 50%
27 - Purchasing 100%
62 - Quality control 100%
Tools & Dies 100%
28 - Security 50%
90 - Housekeeping 50%
91 - Building expense 50%
Freight
Inbound freight is capitalized in inventory based on inventory turnover
as determined at December 31,1997, 3.67 months of inventory.
Purchase price variance
Calculation is based on the variance for the number of months in ending
inventory, determined at 3.67 months.
Cosmetics:
Labor and overhead costs
The variance between standard and actual should be capitalized,
assuming 1 year's worth of labor of overhead included in inventory at
any time, thus capitalization is based on the last 12 months variance.
The following departments/costs are included to determine the actual
labor and overhead cost pool at the stated capitalization percentages:
21 - Purchasing (cosmetics) 100%
26 - Operations analysis 50%
Freight
Inbound freight is capitalizable based on 1 year's worth of freight,
i.e. the last 12 months of freight. The total freight costs are then
written down by E&O reserve as a % of inventory, determined at December
31, 1997 at 57%.
Purchase price variance
Calculation is based on the last 12 months variance between actual and
standard material cost.
IV. Determine the Excess and Obsolete Inventory Reserve ("E&O Reserve") as of
the Closing using the following methodology:
A. Obsolete Inventory Component of E&O Reserve - Identify items on an SKU
basis, where Company management has determined that no sales or usage
activity will occur over the twelve month period starting on the last full
month preceding the Closing Date. Management's determination will be based
as follows:
1. for finished goods that have existed for more than 12 month's, absence of
sales during the last 12 months.
2. for work in process or raw materials, absence of usage during the last 12
months AND absence of sales of the corresponding finished good(s) for the
last 12 months after giving consideration to reasonable substitution.
The Obsolete Inventory Component of E&O Reserve will equal 100% of SKUs
identified in this Section IV.A).
B. Excess Inventory Component of E&O Reserve:
1. For all SKUs except for those identified as obsolete in IV.A above,
calculate, on a SKU basis, the dollar amount of Gross Inventory Value on
the Closing in excess of the Gross Inventory Value sold or used during the
twelve month period preceding the Closing (using full months only). One
hundred percent (100%) of this excess represents the Preliminary Excess
Inventory Component of E&O Reserve.
2. Review all SKUs in the Preliminary Excess Inventory Component of E&O
Reserve calculated in IV.B.1 above to determine whether historical usage is
representative of anticipated usage. Situations where historical usage
would not be representative of anticipated usage would include new SKUs
introduced within 12 months prior to the Closing, discontinued items, or
promotional SKUs for periods prior to the Closing where such promotions are
not expected to recur or will recur only at reduced volumes. Increase or
decrease the Preliminary Excess Inventory Component of E&O Reserve for the
estimated impact of items identified in this section IV.B.2 to determine
the Excess Inventory Component of E&O Reserve.
C. Add the Obsolete Inventory Component of E&O Reserve calculated in IV.B.1 to
the Excess Inventory Component of E&O Reserve calculated in IV.B.2 to
determine the E&O Reserve.
V. Determine Net Inventory Value by reducing Gross Inventory Value by the E&O
Reserve.
Deferred Income Taxes
No calculation of deferred income taxes will be made. Amount per the Closing
Statement will be $0.
Prepaid Expenses and Other Current Assets
Promotional inventories will be determined in the same manner as set forth under
the caption "Inventories, Net." Prepaid expenses and other assets will be
determined based on prepayment according to invoice or contract including all
payments made or accrued through Closing related to the compounding system
Project for the Chicago faculty, allocated on straight-line basis over the
service/contract period, where applicable, determined on a basis consistent with
the Financial Statements.
Display units should not be capitalized.
TCM note receivable related to the sale of certain of the Company's brand names
in 1995 is considered long-term since all expected payments for 1998 have been
received and therefore will not be part of the calculation.
Bank Overdraft
Amount will equal $0.
Accounts Payable
Accounts payable are determined based on outstanding invoices according to
accounts payable detail ledger, and appropriate reconciling items, as of Closing
date.
In addition, account payable should include unvouched invoices for items that
have been received prior to Closing Date, but the invoice has not been obtained
as of Closing Date ("Other Accounts Payable"). The inventory items received
should be based on standard costs for items obtained.
Short term royalties payable should be based on royalty-% according to
underlying contract.
Accrued Expenses
Accrued expenses should be determined as follows:
Description Basis
Accrued bonus Bonus by job code and quota attainment,
accrued ratably where applicable
Vacation/sick accrual Based on IVAX sick/vacation report stating actual
days accrued on an employee by employee basis
Legal accrual Based on last time invoiced and a
computation for periods not yet invoiced,
on historical invoices received, excluding
transaction costs
Accrued freight Based on month's lag, and average weekly expense
to accrue for one month
Other accruals Based on support, estimate for services or goods
obtained as of Closing Date
No amounts will be included for severance, retention or similar items which
Buyer has agreed to pay pursuant to the Purchase Agreement.
Payroll, related payroll taxes and similar items through the Closing will be
either accrued in the Closing Statement and paid by Buyer after the Closing or
excluded from the Closing Statement and paid by Seller after the Closing.
Reserve for Cosmetic Returns
Amount will equal the sum of the reserve for J.C. Penney Base Business, All
Other Department Stores Base Business and Promotional/Holiday Items and New SKUs
Introduced in 1998 as determined below.
J.C. Penney Base Business - Perform following procedures on a SKU basis:
I.Obtain the "Brand Lot/Line Analysis" report from J.C. Penney (the "JCP
Report") for the most recent month-end prior to Closing. This report includes,
among other items, year-to-date sales information, product on hand extended at
J.C. Penney selling prices and weeks of product on hand.
II. Exclude from the JCP Report amounts for promotional/holiday items and new
SKUs introduced in 1998.
III. After adjustment as described in II above, multiply the product on hand
extended at J.C. Penney selling price from the JCP Report by 60% to determine
the Company's estimated selling price of such products to J.C. Penney.
IV. Use the reserve percentages as indicated in following table, applied to the
dollar amount of product at J.C. Penney (at Company selling price) in each aging
category set forth below, to determine the reserve requirements for J.C. Penney
(these percentages were developed for the 1997 audit by Company management
through a specific review, on a SKUs basis, of estimated sell-through of product
in J.C. Penney stores).
Reserve Percentage By Brand
- -------------------- -----------------------------------------------------------
Aging Category Dermablend Flori Roberts/ IMAN
(Weeks on Hand) Patti LaBelle
- -------------------- ------------- -------------------- ------------------------
Less than 16 0% 0% 0%
- -------------------- ------------- -------------------- ------------------------
16-32 11% 10% 9%
- -------------------- ------------- -------------------- ------------------------
33-52 37% 31% 33%
- -------------------- ------------- -------------------- ------------------------
Over 52 61% 56% 53%
- -------------------- ------------- -------------------- ------------------------
V. All Other Department Stores Base Business - Perform the following procedures:
Compute the following ratio: All Other Department Stores Base Business reserve
at December 31, 1997 divided by J.C. Penney Base Business reserve at December
31, 1997.
VI. Multiply the ratio determined in I above by the J.C. Penney Base Business
reserve at Closing (as determined in IV above under J.C. Penney Base Business)
to determine the reserve requirement for All Other Department Stores Base
Business.
Promotional/Holiday Items and New SKUs Introduced in 1998 - This reserve will be
determined based upon a specific review of anticipated sell-through of product
at retail as of the Closing related to promotional/holiday items and new SKUs
introduced in 1998.
CREDIT AGREEMENT
among
CARSON PRODUCTS COMPANY,
CARSON, INC.
and
IVAX CORPORATION
------------------------
Dated as of July 14, 1998
------------------------
$50,000,000
TABLE OF CONTENTS
Page
SECTION 1. Amount and Terms of Credit...................................1
1.01. Term Loan..........................................................1
1.02. Note...............................................................1
1.03. Interest...........................................................2
SECTION 2. Payments.....................................................2
2.01. Voluntary Prepayments..............................................2
2.02. Mandatory Prepayments..............................................2
2.03. Method and Place of Payment........................................3
2.04. No Net Payments....................................................4
SECTION 3. Conditions Precedent.........................................4
3.01. Conditions Precedent to the Term Loan..............................4
SECTION 4. Representations, Warranties and Agreements...................9
4.01. Corporate Status..................................................10
4.02. Corporate Power and Authority; Business...........................10
4.03. No Violation......................................................10
4.04. Litigation........................................................11
4.05. Use of Proceeds...................................................11
4.06. Governmental Approvals, Etc.......................................11
4.07. Investment Company Act............................................11
4.08. Public Utility Holding Company Act................................12
4.09. True and Complete Disclosure......................................12
410. Consummation of the Acquisition...................................12
4.11. Financial Condition; Financial Statements; Projections............12
4.12. Security Interests................................................13
4.13. Tax Returns and Payments..........................................13
4.14. ERISA.............................................................14
4.15. Subsidiaries......................................................15
4.16. Patents, Etc......................................................15
4.17. Compliance with Laws, Etc.........................................15
4.18. Properties........................................................15
4.19. Securities........................................................16
4.20. Collective Bargaining Agreements..................................16
4.21. Indebtedness Outstanding..........................................16
4.22. Environmental Matters.............................................16
4.23. Environmental Investigations......................................17
4.24. Fine Products Company.............................................18
SECTION 5. Affirmative Covenants.......................................18
5.01. Information Covenants.............................................18
5.02. Books, Records and Inspections....................................20
5.03. Maintenance of Property; Insurance................................21
5.04. Payment of Taxes..................................................21
5.05. Corporate Franchises..............................................22
5.06. Compliance with Statutes, Etc.....................................22
5.07. ERISA.............................................................22
5.08. Use of Proceeds...................................................22
5.09. Equal Security for Loan and Note; No Further Negative Pledges.....23
5.10. Pledge of Additional Collateral...................................23
5.11. Security Interests................................................24
5.12. Environmental Events..............................................24
5.13. New Subsidiaries..................................................25
5.14 Post-Closing Opinions.............................................25
SECTION 6. Negative Covenants..........................................25
6.01. Changes in Business...............................................25
6.02. Amendments or Waivers of Certain Documents........................25
6.03. Liens.............................................................26
6.04. Indebtedness......................................................27
6.05. Advances, Investments and Loans...................................29
6.06. Prepayments of Indebtedness.......................................30
6.07. Dividends, etc....................................................30
6.08. Transactions with Affiliates......................................31
6.09. Issuance of Subsidiary Stock......................................31
6.10. Disposition of Assets.............................................31
6.11. Contingent Obligations............................................34
6.12. ERISA.............................................................34
6.13. Merger and Consolidations.........................................35
6.14. Sale and Lease-Backs..............................................35
6.15. Sale or Discount of Receivables...................................35
6.16. Fine Products Company.............................................35
SECTION 7. Events of Default...........................................36
7.01. Payments..........................................................36
7.02. Representations, Etc..............................................36
7.03. Covenants.........................................................36
7.04. Default Under Other Agreements....................................36
7.05. Bankruptcy, Etc...................................................37
7.06. ERISA.............................................................37
7.07. Security Documents................................................38
7.08. Guarantees........................................................38
7.9. Judgments............................................................38
7.10. Ownership; Board Composition......................................38
7.11. Certain Transactions Involving Carson Holdings Limited............39
SECTION 8. Definitions.................................................40
SECTION 9. Miscellaneous...............................................53
9.01. Payment of Expenses, Etc..........................................53
9.02. Right of Setoff...................................................53
9.03. Notices...........................................................54
9.04. Benefit of Agreement..............................................54
9.05. No Waiver; Remedies Cumulative....................................55
9.06. Calculations; Computations........................................55
9.07. Governing Law; Submission to Jurisdiction; Venue..................55
9.08. Counterparts......................................................56
9.09. Effectiveness.....................................................56
9.10. Headings Descriptive..............................................56
9.11. Amendment or Waiver...............................................56
9.12. Survival..........................................................56
9.13. WAIVER OF JURY TRIAL..............................................56
9.14. Independence of Covenants.........................................56
9.15. Intercreditor Agreement with respect to Revolving Credit Facility 57
ANNEX I Schedule of Existing Debt
ANNEX II Schedule of Subsidiaries
ANNEX III Schedule of Collective Bargaining Agreements
ANNEX IV Summary of Corporate Insurance Policies
ANNEX V Schedule of Liens
ANNEX VI List of Mortgaged Real Property
ANNEX VII Schedule of Litigation
ANNEX VIII Schedule of Consents
ANNEX IX Schedule of Restrictions
ANNEX X Environmental Matters
ANNEX XI Taxes
ANNEX XII Schedule of Intellectual Property
ANNEX XIII Schedule of Existing Leases
ANNEX XIV Compliance with Laws
Exhibit A - Form of Term Note
Exhibit B - Form of Mortgage
Exhibit C - Form of Securities Pledge Agreement
Exhibit D - Form of Intellectual Property Security Agreement
Exhibit E - Form of General Security Agreement
Exhibit F - Form of Landlord Lien Assurance Agreement
Exhibit G - Form of Holdings Guarantee
Exhibit H - Form of Subsidiary Guarantee
<PAGE>
CREDIT AGREEMENT, dated as of July 13, 1998 (the "Agreement"), among
CARSON PRODUCTS COMPANY, a Delaware corporation (the "Borrower"), CARSON, INC.,
a Delaware corporation ("Holdings") and IVAX CORPORATION, a Florida corporation
(the "Lender"). Unless otherwise defined herein, all capitalized terms used
herein and defined in Section 8 are used herein as so defined.
W I T N E S S E T H :
WHEREAS, Holdings has entered into a Purchase Agreement dated as of
June 16, 1998 (as the same may be amended from time to time, the "Purchase
Agreement") with the Lender, and has assigned its rights thereunder to the
Borrower;
WHEREAS, pursuant to the Purchase Agreement, the Borrower shall
consummate on the Closing Date the acquisition (the "Acquisition") of all of the
outstanding shares of Johnson Products Co., Inc., a Florida corporation and a
wholly-owned subsidiary of the Lender;
WHEREAS, the Borrower desires to incur the Term Loan (as defined
herein) from the Lender, the proceeds of which will be applied to finance the
Acquisition and to pay certain fees and expenses related thereto, subject to the
conditions set forth herein;
WHEREAS, Holdings will execute a Guarantee, secured by a pledge of the
shares of capital stock of the Borrower, guaranteeing the Borrower's obligations
hereunder, and certain subsidiaries of Holdings will execute a Guarantee,
secured by a pledge of their assets, guaranteeing the Borrower's obligations
hereunder;
WHEREAS, in conjunction with this Agreement, the Borrower is
terminating its existing senior secured credit facility (the "Refinancing"), and
may enter into a new revolving credit facility (the "Revolving Credit Facility")
in accordance with the terms hereof; and
WHEREAS, the Lender is willing to make available the Term Loan provided
for herein.
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01. Term Loan.
Subject to and upon the terms and conditions herein set forth, the
Lender agrees to make a term loan to the Borrower on the Closing Date in the
principal amount of $50,000,000.00 (the "Term Loan"), which shall bear interest
and shall be repaid in accordance with the terms hereof.
1.02. Note.
(a) The Borrower's obligation to pay the principal of and interest on
the Term Loan made to it by the Lender shall be evidenced by a promissory note
(the "Term Note"), substantially in the form of Exhibit A hereto.
(b) The Term Note of the Borrower issued to the Lender shall (i) be
duly executed and delivered by the Borrower, (ii) be payable to the order of the
Lender and be dated the Closing Date, (iii) be in a stated principal amount
equal to $50,000,000.00 and be payable in the aggregate principal amount of the
Term Loan evidenced thereby, (iv) mature on the Maturity Date, (v) be subject to
mandatory prepayment as provided in Section 2.02, (vi) bear interest as provided
in Section 1.03 and (vii) be entitled to the benefits of this Agreement and the
other applicable Credit Documents.
1.03. Interest
(a) The unpaid principal amount of the Term Loan shall bear interest
from the Closing Date until maturity (whether by acceleration or otherwise) at a
rate per annum equal to 9.0%.
(b) Overdue principal and, to the extent permitted by law, overdue
interest in respect of the Term Loan shall bear interest at a rate per annum
equal to 12.0%, such amount payable upon demand upon the occurrence, and during
the continuation, of any payment default (after the lapse of any applicable
grace periods).
(c) Interest shall accrue from and including the Closing Date to but
excluding the date of any repayment thereof and shall be payable (i) monthly in
arrears on the last Business Day of each calendar month beginning July 1998 and
(ii) on any prepayment (on the amount prepaid), at maturity (whether by
acceleration or otherwise) and, after such maturity, on demand.
(d) All computations of interest hereunder shall be made in accordance
with Section 9.06(b).
SECTION 2. Payments.
2.01. Voluntary Prepayments
The Borrower shall have the right to prepay the Term Loan in whole or
in part from time to time, without premium or penalty, on the following terms
and conditions: (i) the Borrower shall give the Lender written notice (or
telephonic notice promptly confirmed in writing) of its intent to prepay the
Term Loan and the amount of such prepayment, which notice shall be given by the
Borrower at least one Business Day prior to the date of such prepayment; and
(ii) each partial prepayment of the Term Loan shall be in an aggregate principal
amount of at least $100,000 and integral multiples of $100,000 in excess of that
amount.
2.02. Mandatory Prepayments.
(A) Requirements:
(a) As promptly as practicable, but in any event within five Business
Days of the date of receipt by Holdings, the Borrower and/or any of the
Borrower's Subsidiaries, as the case may be, of Net Cash Proceeds or Net
Financing Proceeds, an amount equal to 100% of such Net Cash Proceeds or Net
Financing Proceeds shall be applied as provided in Section 2.02(B); provided
that with respect to any Net Cash Proceeds of the sale of equity securities of
Holdings, the Borrower or any of its Subsidiaries, clause (b) of this Section
2.02(A) will govern and that with respect to any Net Cash Proceeds from any
Destruction or Taking, clause (c) of this Section 2.02(A) will govern.
(b) As promptly as practicable, but in any event within five Business
Days of the date of the receipt thereof by Holdings, the Borrower and/or any of
its Subsidiaries, an amount equal to 100% of the proceeds received by the
Borrower or Holdings (including capital contributions, other than those referred
to in clauses (i) and (ii) of this paragraph (b), received by the Borrower or
any of its Subsidiaries) or such Subsidiary (net of underwriting discounts and
commissions and other costs and expenses directly associated therewith) of the
sale after the Closing Date of equity securities (other than proceeds from the
issuance of capital stock (i) of Holdings, the Borrower or any of its
Subsidiaries pursuant to any pension, stock option, profit sharing or other
employee benefit plan or agreement of Holdings, the Borrower or any of its
Subsidiaries in the ordinary course of business or (ii) by a Subsidiary to
another Subsidiary or to the Borrower) shall be applied as provided in Section
2.02(B).
(c) At the Lender's discretion, on the date of receipt thereof by
Holdings, the Borrower and/or any of the Borrower's Subsidiaries, an amount
equal to 100% of any proceeds received due to loss, damage, destruction or
condemnation of or to Assets (collectively, "Loss Proceeds"), less any portion
of such proceeds not in excess of $500,000, in the aggregate, to be used for
rebuilding, repairing or replacing productive assets of a kind then used or
usable in the business of the Borrower and its Subsidiaries (in each case to the
extent permitted by the Mortgages and the Security Documents) within 180 days of
receipt of such Loss Proceeds (or such longer periods as may be consented to by
the Lender, which consent shall not be unreasonably withheld) shall be delivered
by Holdings, the Borrower and/or the Borrower's Subsidiaries to the Lender to be
held by the Lender in a cash collateral account bearing interest payable to the
Borrower at a rate per annum (meaning 360 days) equal to the Federal Funds Rate.
Upon the Borrower's request, the Lender shall release such proceeds to the
Borrower for reinvestment, rebuilding, repair or replacement as described above.
To the extent the Borrower fails to use any or all of such released proceeds for
such rebuilding, repair or replacement of assets within 180 days (or such longer
periods as may be consented to by the Lender, which consent shall not be
unreasonably withheld) of such release, the Borrower shall, at the Lender's
discretion, return the unused portion of such released funds to the Lender and
authorize and direct the Lender to apply such proceeds as provided in Section
2.02(B).
(d) As promptly as practicable, but in any event within five Business
Days of the date of receipt by Holdings, the Borrower and/or its Subsidiaries of
any funds received pursuant to any post-closing purchase price adjustments
(unless such funds have been applied as an adjustment to working capital) or
indemnification payments in excess of out-of-pocket losses under either of stock
or asset purchase agreements and agreements related thereto pertaining to an
acquisition, an amount equal to 100% of such funds paid to Holdings, the
Borrower and/or any of its Subsidiaries shall be applied as provided in Section
2.02(B).
(B) Application:
Prepayments to be applied pursuant to this Section 2.02(B) shall be
applied without penalty or premium to the repayment of the Term Loan. With
respect to each such prepayment required by Section 2.02(A), the Borrower shall
give the Lender two Business Days' notice. All prepayments shall include payment
of accrued interest on the principal amount so prepaid and shall be applied to
the payment of interest before application to principal.
2.03. Method and Place of Payment
. (a) Except as otherwise specifically provided herein, all payments
under this Agreement shall be made to the Lender not later than 1:00 P.M. (New
York time) on the date when due and shall be made in immediately available funds
in lawful money of the United States of America to the account specified
therefor by the Lender or if no account has been so specified at the Lender's
Office.
(b) Any payments under this Agreement which are made by the Borrower
later than 1:00 P.M. (New York time) shall be deemed to have been made on the
next succeeding Business Day. Whenever any payment to be made hereunder shall be
stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest shall be payable during such extension at the
applicable rate in effect immediately prior to such extension.
2.04. No Net Payments.
All payments by the Borrower under this Agreement or under any Credit
Document shall be made without set-off or counterclaim, including any claim that
may otherwise be made by Holdings or the Borrower pursuant to the Purchase
Agreement.
SECTION 3. Conditions Precedent.
3.01. Conditions Precedent to the Term Loan.
The obligation of the Lender to make the Term Loan to the Borrower
hereunder is subject, at the time of the making of such Term Loan (except as
otherwise hereinafter indicated), to the satisfaction of the following
conditions:
(A) Credit Agreement.The Borrower and Holdings shall have duly executed
and delivered this Agreement.
(B) Officer's Certificates. On the Closing Date, the Lender shall have
received a certificate dated such date signed by an appropriate officer of each
of Holdings and the Borrower stating that all of the applicable conditions set
forth in Sections 3.01(D), (E), (I), (J), (K), (L), (O), and (Q) (in each case
disregarding any reference therein that such condition be deemed satisfactory by
the Lender) have been satisfied in all material respects (without giving effect
to any materiality or similar exceptions contained therein) or waived as of such
date.
(C) Opinions of Counsel. On the Closing Date (or on the date each
applicable Mortgage is executed and delivered), the Lender shall have received
an opinion or opinions addressed to it and dated the Closing Date, each in form
and substance reasonably satisfactory to the Lender, from (i) Milbank, Tweed,
Hadley & McCloy, counsel to the Borrower and Holdings (ii) Hunter, Maclean,
Exley & Dunn, P.C., special Georgia counsel to the Borrower and Holdings, and
(iii) local counsel to the Borrower and Johnson Products in each jurisdiction in
which Mortgaged Real Property is located.
(D) Corporate Proceedings. All corporate and legal proceedings and all
instruments and agreements in connection with the transactions contemplated by
the Credit Documents shall be reasonably satisfactory in form and substance to
the Lender, and the Lender shall have received all information and copies of all
certificates, documents and papers, including records of corporate proceedings
and governmental approvals, if any, which the Lender reasonably may have
requested from Holdings, the Borrower and any Affiliate thereof in connection
therewith, such documents and papers where appropriate to be certified by proper
corporate or governmental authorities. Without limiting the foregoing, the
Lender shall have received (i) resolutions of the Board of Directors of each of
Holdings, the Borrower and any Affiliate thereof approving and authorizing such
documents and actions as are contemplated hereby in form and substance
reasonably satisfactory to Lender including without limitation the execution and
delivery of all Credit Documents, certified by its corporate secretary or an
assistant secretary as being in full force and effect without modification or
amendment, and (ii) signature and incumbency certificates of officers of
Holdings, the Borrower or any Affiliate thereof executing instruments, documents
or agreements required to be executed in connection with the Refinancing and the
Credit Documents.
(E) Consummation of the Acquisition. On the Closing Date, the
Acquisition shall be consummated concurrently with the closing hereunder.
(F) Organizational Documentation, etc. On or prior to the Closing Date,
the Lender shall have received copies of a true and complete certified copy of
the following documents of each of Holdings and the Borrower and each other
Credit Party:
(1) Its respective Certificate of Incorporation, which shall be
certified and be accompanied by a good standing certificate from the Secretary
of State of the State of Delaware or its respective jurisdiction and good
standing certificates from the jurisdictions in which it is qualified to do
business as a foreign corporation, each to be dated a recent date prior to the
Closing Date;
(2) Its respective By-laws, certified as of the Closing Date by its
corporate secretary.
(G) Note. There shall have been delivered to the Lender the Term Note
executed by the Borrower in the amount and maturity and as otherwise provided
herein.
(H) Conditions Relating to Mortgaged Real Property and Real Property.
On or as soon as practicable but in any event no more than 10 days after the
Closing Date (except as otherwise specified below), the Borrower shall have
caused to be delivered to the Lender the following documents and instruments:
(i) a Mortgage encumbering each Mortgaged Real Property in
favor of the Lender, duly executed and acknowledged by the Credit Party
or another party that is the owner of or holder of an interest in such
Mortgaged Real Property, and otherwise in form for recording in the
recording office of each political subdivision where each such
Mortgaged Real Property is situated, together with such certificates,
affidavits, questionnaires or returns as shall be required in
connection with the recording or filing thereof to create a lien under
applicable law, and such UCC-1 financing statements and other similar
statements as are contemplated by the counsel opinions described in
Section 3.01(C)(iii) in respect of such Mortgage, all of which shall be
in form and substance reasonably satisfactory to the Lender and which
will be delivered to the Title Company for filing within 8 days after
the Closing Date, and any other instruments necessary to grant a
mortgage lien under the laws of any applicable jurisdiction, which
Mortgage and financing statements and other instruments shall be
effective to create a first priority Lien on such Mortgaged Real
Property subject to no Liens other than Prior Liens and Permitted
Encumbrances;
(ii) with respect to each Mortgaged Real Property, such
consents, approvals, amendments, supplements, estoppels, tenant
subordination agreements or other instruments as necessary or required
to consummate the transactions contemplated hereby or as shall
reasonably be deemed necessary by the Lender in order for the owner or
holder of the fee or leasehold interest constituting such Mortgaged
Real Property to grant the Lien contemplated by the Mortgage with
respect to such Mortgaged Real Property;
(iii) with respect to each Mortgage, a policy (or commitment
to issue a policy) of title insurance insuring (or committing to
insure) the Lien of such Mortgage as a valid first mortgage Lien on the
real property described therein in an amount not less than 115% of the
fair market value thereof as determined by appraisal reports, which
policies (or commitment) shall (a) be issued by the Title Company, (b)
include such reinsurance arrangements (with provisions for direct
access) as shall be reasonably acceptable to the Lender, (c) contain a
"tie-in" or "cluster" endorsement (if applicable and if available under
applicable law) (i.e., policies which insure against losses regardless
of location or allocated value of the insured property up to a stated
maximum coverage amount) and have been supplemented by such
endorsements (or where such endorsements are not available, opinions of
special counsel reasonably acceptable to the Lender to the extent that
such opinions can be obtained at a cost which is reasonable with
respect to the value of the Real Property subject to such Mortgage) as
shall be reasonably requested by the Lender (including, without
limitation, endorsements on matters relating to usury, first loss, last
dollar, contiguity (as applicable), doing business, zoning, variable
rate and so-called comprehensive coverage over covenants and
restrictions) and (d) contain only such exceptions to title as shall be
Prior Liens or are otherwise agreed to by the Lender on or prior to the
Closing Date with respect to such Mortgaged Real Property;
(iv) with respect to each Mortgaged Real Property, a Survey
(which in the case of the Mortgaged Property located in Illinois will
be delivered after the Closing Date as soon as it becomes available);
(v) with respect to each Mortgaged Real Property, policies or
certificates of insurance as required by the Mortgage relating thereto,
which policies or certificates shall comply with the insurance
requirements contained in such Mortgage;
(vi) with respect to each Mortgaged Real Property, UCC,
judgment and tax lien searches confirming that the personal property
comprising a part of such Mortgaged Real Property is subject to no
Liens other than Prior Liens;
(vii) with respect to each Mortgaged Real Property, such
affidavits, certificates, information (including financial data) and
instruments of indemnification (including, without limitation, a
so-called "gap" indemnification) as shall be required to induce the
Title Company to issue the policy or policies (or commitment) and
endorsements contemplated in subparagraph (iii) above;
(viii) evidence reasonably acceptable to the Lender of payment
by the Borrower of all title insurance premiums, search and examination
charges, survey costs and related charges, mortgage recording taxes,
fees, charges, costs and expenses required for the recording of the
Mortgages and issuance of the title insurance policies referred to in
subparagraph (iii) above;
(ix) with respect to each Real Property or Mortgaged Real
Property, copies of all Leases in which a Credit Party holds the
landlord's, tenant's or other interest and any other agreements
relating to possessory interests in such Real Property or Mortgaged
Real Property; and
(x) with respect to the Mortgaged Real Property located in
Savannah, Georgia, an Officers' Certificate or other evidence
reasonably satisfactory to the Lender that as of the date thereof, to
the best of such officer's knowledge, there (a) have been issued and
are in effect valid and proper certificates of occupancy or other local
equivalents for the use then being made of such Mortgaged Real Property
to the extent currently required by law in the jurisdiction in which
such Mortgaged Real Property is located which certificates if not
obtained or maintained would have a material adverse effect upon the
value of the Mortgaged Real Property and that there is not outstanding
any citation, violation or similar notice indicating that such
Mortgaged Real Property contains conditions which are not in compliance
in all material respects with local codes or ordinances relating to
building or fire safety or structural soundness, (b) has not occurred
any Taking or Destruction of any Mortgaged Real Property that has not
been repaired or restored except as set forth therein and (c) is no
litigation regarding boundary lines, encroachment or possession of any
Mortgaged Real Property and no state of facts known to any Credit Party
which could give rise to any such claim, except as set forth therein.
(I) Insurance. Set forth on Annex IV is a summary of all insurance
policies maintained by Holdings and its Subsidiaries.
(J) Indebtedness, etc. On or prior to the Closing Date and except as
set forth on Annex VIII, Holdings, the Borrower and its Subsidiaries shall have
received all necessary consents or waivers or amended, supplemented or otherwise
modified, repaid or defeased their outstanding Indebtedness in a manner and on
terms reasonably satisfactory to the Lender such that there exists no default or
potential default with respect to such Indebtedness or under any note, evidence
of indebtedness, mortgage, deed of trust, security document or other agreement
relating to such Indebtedness and such indentures, notes, evidences of
indebtedness, mortgages, deeds of trust or other agreements relating to such
Indebtedness shall not, other than as set forth on Annex IX, contain any
restriction on the ability of Holdings, the Borrower or any of its Subsidiaries
to enter into this Agreement, the Mortgages, Pledge Agreements or the granting
of any Lien in favor of the Lender in connection therewith, or contain any
financial covenants, agreements or tests applicable to Holdings, the Borrower or
any of its Subsidiaries. Annex V sets forth a true list of all Liens other than
Permitted Encumbrances (except for clause (j) of Section 6.03) on the property
of Holdings, the Borrower and its Subsidiaries as of the Closing Date.
(K) Security Documents and Guarantees. The applicable Security
Documents (other than the Mortgages) and Guarantees shall have been duly
executed and delivered by the respective parties thereto and there shall have
been delivered to the Lender (i) certificates representing all Pledged
Securities, together with executed and undated stock powers and/or assignments
in blank, (ii) evidence of the due execution of appropriate financing statements
under the provisions of the UCC, applicable domestic or local laws, rules or
regulations in each of the offices where such filing is necessary or appropriate
to grant to the Lender a perfected first priority Lien in the Collateral
superior to and prior to the rights of all third persons and subject to no other
Liens other than Prior Liens, (iii) certified copies of Requests for Information
(Form UCC-11 or the equivalent), or equivalent reports or lien search reports
listing all effective financing statements which name each Credit Party under
such Security Documents as debtor and which are filed in those jurisdictions in
which any of the Collateral is located and the jurisdictions in which each
Credit Party's principal place of business is located, none of which, except as
set forth in the applicable Security Documents, shall encumber the Collateral
covered or intended or purported to be covered by the Security Documents, (iv)
evidence that arrangements have been made for the prompt completion of all
recordings and filings of each Security Document related to Mortgaged Real
Property (to be filed upon execution and delivery of the relevant Mortgages) and
delivery to the Lender of such other security and other documents as may be
necessary or, in the reasonable opinion of the Lender, desirable to perfect the
Liens created, or purported or intended to be created, by the Security Documents
and (v) evidence that arrangements have been made for appropriate filings in all
relevant trademark, patent and copyright registration offices with respect to
recording the Lender's security interest in the patents, registration and
applications, if any, contained on the schedules to the Intellectual Property
Security Agreements.
(L) Consents, Etc. All material governmental and third party approvals
and consents (including, without limitation, all material approvals and consents
required in connection with any environmental statutes, rules or regulations),
if any, in connection with the transactions contemplated by the Credit Documents
and otherwise referred to herein or therein to be completed on or before the
Closing Date shall have been obtained and remain in effect, and all applicable
waiting periods shall have expired without any action being taken by any
competent authority which restrains, prevents or imposes, in the reasonable
judgment of the Lender, materially adverse conditions upon the consummation of
the Acquisition, the Refinancing or the consummation of the transactions
contemplated by this Agreement. There shall not exist any adverse judgment,
order, injunction or other restraint issued or filed with respect to the making
of the Term Loan hereunder or the consummation of the Refinancing or Acquisition
and Holdings and the Borrower shall be in compliance with all material
applicable federal, state, local and foreign laws and regulations, both before
and after giving effect to the Acquisition, the Refinancing and the transactions
contemplated by the Credit Documents.
(M) Litigation. Except as set forth in Annex VII hereto, there shall be
no litigation by any Person pending, or to Holdings' or the Borrower's knowledge
threatened, with respect to the Credit Documents that, in the Lender's good
faith judgment, could reasonably be expected to have a Material Adverse Effect
after giving effect to the Acquisition, the Refinancing and the transactions
contemplated by the Credit Agreement.
(N) Environmental Review. The Lender shall be reasonably satisfied with
its environmental risk assessment of the property of Holdings, the Borrower and
its Subsidiaries (including any potential levels of environmental liability),
such assessment to be based upon any information known to the Lender with
respect to the properties of Johnson Products and information provided to the
Lender by or on behalf of Holdings or the Borrower with respect to its
properties. The Borrower need not update its environmental review dated as of
May 1995.
(O) No Material Adverse Change. From March 31, 1998 to and including
the Closing Date, there shall have been no material adverse change in the
business, assets, properties, condition (financial or otherwise) or prospects of
Holdings or the Borrower or in the industries in which they compete that has not
been disclosed to the Lender.
(P) No Default; Representations and Warranties. At the time of the
making of the Term Loan and also after giving effect thereto (i) there shall
exist no Default or Event of Default and (ii) all representations and warranties
made by Holdings or the Borrower contained herein or in the other Credit
Documents in effect at such time shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of such Term Loan, unless such
representation and warranty expressly indicates that it is being made as of any
other specific date in which case on and as of such other date.
(Q) Options and Warrants. There shall be no outstanding capital stock
(or right, option, warrant or other arrangement to acquire such capital stock)
of the Borrower, other than that owned by Holdings.
(R) Margin Rules. On the Closing Date, neither the making of the Term
Loan nor the use of the proceeds thereof will violate the provisions of
Regulation T, U or X of the Board of Governors of the Federal Reserve System.
The acceptance of the proceeds of the Term Loan shall constitute a
representation and warranty by each Credit Party to the Lender that all of the
applicable conditions specified above (in each case disregarding any reference
therein that such condition be deemed satisfactory by the Lender) have been
satisfied or waived as of that time.
All of the certificates, legal opinions and other documents and papers
referred to in this Section 3.01, unless otherwise specified, shall be delivered
to the Lender at the offices of Milbank, Tweed, Hadley & McCloy, 1 Chase
Manhattan Plaza, New York, NY 10005 (or such other location as may be specified
by the Lender) and shall be reasonably satisfactory in form and substance to the
Lender.
SECTION 4. Representations, Warranties and Agreements.
In order to induce the Lender to enter into this Agreement and to
make the Term Loan provided for herein, each of Holdings and the Borrower makes
the following representations and warranties to, and agreements with, the
Lender, all of which shall survive the execution and delivery of this Agreement
and the making of the Term Loan (with the execution and delivery of this
Agreement and the making of the Term Loan being deemed to constitute a
representation and warranty that the matters specified in this Section 4 are
true and correct in all material respects both before and after giving effect to
the Refinancing and the Acquisition unless such representation and warranty
expressly indicates that it is being made as of any specific date; provided,
that (i) the representations and warranties relating to Johnson Products are
only to the best of Holdings' and the Borrower's knowledge based on the
information provided to them by the Lender in connection with the Purchase
Agreement and (ii) no representation or warranty hereunder shall be deemed a
waiver of any rights or the admission of the truth thereof by any Credit Party
as against any other party to the Purchase Agreement):
4.01. Corporate Status.
Each Credit Party (i) is a duly organized and validly existing
corporation in good standing under the laws of the jurisdiction of its
organization; (ii) has the corporate or other organizational power and authority
and, other than as set forth on Annex VIII, has obtained all requisite
governmental licenses, authorizations, consents and approvals to own and operate
its property and assets and to transact the business in which it is engaged and
presently proposes to engage including, without limitation, those in compliance
with or required by the Environmental Laws except as described in Annex X hereto
and except for those governmental licenses, authorizations, consents or
approvals the failure of which to be so obtained would not have a Materially
Adverse Effect and (iii) is duly qualified and is authorized to do business and
is in good standing in all jurisdictions where it is required to be so qualified
and where the failure to be so qualified would have a Materially Adverse Effect.
4.02. Corporate Power and Authority; Business.
(a) Each Credit Party has the corporate power and authority to
execute, deliver and carry out the terms and provisions of the Credit Documents
to which it is a party and has taken all necessary corporate action to authorize
the execution, delivery and performance of the Credit Documents to which it is a
party. Each Credit Party has duly executed and delivered each Credit Document to
which it is a party and each such Credit Document constitutes the legal, valid
and binding obligation of such Person enforceable against such Person in
accordance with its terms except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally and except as such enforceability may be limited by the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(b) Holdings was incorporated on May 10, 1995 and consummated (i) an
initial public offering of its common stock on October 18, 1996 and (ii) a
private placement of its Senior Subordinated Notes on November 6, 1997. The
Borrower was incorporated as Aminco, Inc. in Delaware on March 20, 1990. Prior
to the Closing Date, Holdings will not have engaged in any business or incurred
any liabilities except for activities, expenses and liabilities incident to its
organization, its initial public offering, its Senior Subordinated Notes
offering (and a related exchange offer of registered notes) and the carrying out
of the transactions contemplated by the Credit Documents, the Purchase Agreement
and the Refinancing.
4.03. No Violation.
Neither the execution, delivery or performance by any Credit Party of
the Credit Documents to which it is a party nor compliance with the terms and
provisions thereof, nor the consummation of the transactions contemplated
therein (i) will contravene any applicable provision of any law, statute, rule,
regulation, order, writ, injunction or decree of any court or governmental
instrumentality, (ii) will conflict or be inconsistent with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or (other than pursuant to the Security Documents)
result in the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of any Credit Party or its
Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust,
material agreement or other material instrument to which any Credit Party or its
Subsidiaries is a party or by which it or any of its property or assets is bound
or to which it may be subject or (iii) will violate any provision of the charter
or by-laws of any Credit Party or its Subsidiaries, except, in each such case,
where such contravention, conflict, inconsistency, breach, default, creation,
imposition, obligation or violation does not have a Materially Adverse Effect.
The consummation of the Acquisition and the Refinancing will not conflict or be
inconsistent with or result in any breach of any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any Lien
(except pursuant to the Security Documents) upon any of the property or assets
of Holdings, the Borrower or any of their respective Subsidiaries pursuant to
the terms of, any indenture, mortgage, deed of trust, material instrument or
material agreement relating to Indebtedness for borrowed money or the equivalent
thereof or other material agreement to which Holdings, the Borrower or any of
their respective Subsidiaries is a party or by which any of their respective
property or assets is bound or to which it may be subject, except, in each such
case, where such conflict, inconsistency, breach, default, creation, imposition
or obligation does not have a Materially Adverse Effect.
4.04. Litigation.
Except as set forth on Annex VII, there are no actions, judgments,
suits or proceedings pending or, to Holdings' or the Borrower's knowledge,
threatened in any court of competent jurisdiction with respect to any Credit
Party or its Subsidiaries that are, individually or in the aggregate, likely to
have a Materially Adverse Effect.
4.05. Use of Proceeds.
(a) All the proceeds of the Term Loan to be made hereunder shall be
utilized to provide the financing required to consummate the Acquisition and to
pay related fees and expenses.
(b) Neither the making of the Term Loan hereunder, nor the use of the
proceeds thereof, will violate or be inconsistent with the provisions of
Regulation T, U or X of the Board of Governors of the Federal Reserve System.
4.06. Governmental Approvals, Etc.
No order, consent, approval, license, authorization, or validation
of, or filing, recording or registration with, or exemption by, any third party
or any foreign or domestic Governmental Authority (other than those orders,
consents, approvals, licenses, authorizations or validations which, if not
obtained or made, would not have a Materially Adverse Effect or which have
previously been obtained or made and except for filings to perfect security
interests granted pursuant to the Security Documents) is required to authorize
or is required in connection with (i) the execution, delivery and performance of
any Credit Document or the transactions contemplated therein or (ii) the
legality, validity, binding effect or enforceability of any Credit Document. At
the time of the making of the Term Loan, there does not exist any judgment,
order, injunction or other restraint issued or filed with respect to the making
of the Term Loan or the performance by the Credit Parties of their obligations
under the Credit Documents.
4.07. Investment Company Act.
None of Holdings, the Borrower or their respective Subsidiaries is,
or will be after giving effect to the transactions contemplated hereby, an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
4.08. Public Utility Holding Company Act.
None of Holdings, the Borrower or their respective Subsidiaries is,
or will be after giving effect to the transactions contemplated hereby, a
"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
4.09. True and Complete Disclosure.
All factual information (taken as a whole) heretofore or
contemporaneously furnished by or on behalf of Holdings, the Borrower or any of
their Subsidiaries in writing to the Lender (including, without limitation, all
information contained in the Credit Documents) for purposes of or in connection
with this Agreement or any transaction contemplated herein is, and all other
such factual information (taken as a whole) hereafter furnished by or on behalf
of any such Person in writing to the Lender will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any material fact necessary to make such
information not misleading at such time in light of the circumstances under
which such information was provided. There is no fact known to any Credit Party
which has a Materially Adverse Effect which has not been disclosed herein or in
such other documents, certificates and written statements furnished to the
Lender for use in connection with the transactions contemplated hereby.
410. Consummation of the Acquisition.
On the Closing Date, the Acquisition shall concurrently be
consummated.
4.11. Financial Condition; Financial Statements; Projections. No Credit
Party is entering into the arrangements contemplated hereby and by the other
Credit Documents, or intends to make any transfer or incur any obligations
hereunder or thereunder with actual intent to hinder, delay or defraud either
present or future creditors. On and as of the Closing Date, on a pro forma basis
after giving effect to the Refinancing and to all Indebtedness incurred and
Liens created, or to be created, by each Credit Party in connection with the
Refinancing, the Acquisition and the Credit Documents, (w) Holdings and the
Borrower do not expect that final judgments against any Credit Party in actions
for money damages with respect to pending or threatened litigation will be
rendered at a time when, or in an amount such that, such Credit Party will be
unable to satisfy any such judgments promptly in accordance with their terms
(taking into account the maximum reasonable amount of such judgments in any such
actions and the earliest reasonable time at which such judgments might be
rendered and the cash available to each Credit Party, after taking into account
all other anticipated uses of the cash of such Credit Party (including the
payments on or in respect of debts (including their Contingent Obligations));
(x) no Credit Party will have incurred or intends to, or believes that it will,
incur debts beyond its ability to pay such debts as such debts mature (taking
into account the timing and amounts of cash to be received by such Credit Party
from any source, and amounts to be payable on or in respect of debts of such
Credit Party and the amounts referred to in the preceding clause (w)); (y) each
Credit Party, after taking into account all other anticipated uses of the cash
of such Credit Party, anticipates being able to pay all amounts on or in respect
of debts of such Credit Party when such amounts are required to be paid; and (z)
each Credit Party will have sufficient capital with which to conduct its present
and proposed business and the property of such Credit Party does not constitute
unreasonably small capital with which to conduct its present or proposed
business. For purposes of this Section 4.11, "debt" means any liability on a
claim, and "claim" means a (i) right to payment whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (ii)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
As of the Closing Date, except as adequately reflected or reserved
against in Holdings' consolidated financial statements and the notes thereto as
of and for the year ended December 31, 1997 and as of and for the three-month
period ended March 31, 1998 or as set forth in Annexes VII, X and XIV, there
were no liabilities or obligations with respect to Holdings, the Borrower or any
of their respective Subsidiaries of any nature whatsoever (whether absolute,
accrued, contingent or otherwise and whether or not due) which, either
individually or in the aggregate, would be material to Holdings, the Borrower or
any of their respective Subsidiaries, except as incurred by any Credit Party in
connection with this Agreement and the Refinancing. As of the Closing Date,
Holdings and the Borrower know of no basis for the assertion against Holdings,
the Borrower or any of their respective Subsidiaries of any liability or
obligation of any nature whatsoever that is not adequately reflected in the
consolidated financial statements of Holdings described above or otherwise
disclosed herein which, either individually or in the aggregate, could
reasonably be expected to be material to Holdings, the Borrower or any of their
respective Subsidiaries.
4.12. Security Interests.
At all times after the execution of the Security Documents, the
Security Documents create, in favor of the Lender, as security for the
obligations purported to be secured thereby, a valid and enforceable perfected
first priority security interest in and Lien upon all of the Collateral,
superior to and prior to the rights of all third persons and subject to no
Liens, except Prior Liens and Permitted Encumbrances applicable to such
Collateral. The mortgagor under each Mortgage has good and marketable title to
the Mortgaged Real Property free and clear of all Liens other than Prior Liens
and Permitted Encumbrances and Liens expressly permitted by the applicable
Mortgage. The respective pledgor or assignor, as the case may be, has (or on and
after the time it executes the respective Security Document, will have) good and
marketable title to all items of Collateral (other than the Mortgaged Real
Property) covered by such Security Document free and clear of all Liens except
Prior Liens and Permitted Encumbrances and Liens expressly permitted by the
applicable Security Document. No filings or recordings are required in order to
perfect or confirm the perfection of the security interests created under any
Security Document except for filings or recordings required in connection with
any such Security Document which shall have been made prior to or
contemporaneously with the execution and delivery thereof.
4.13. Tax Returns and Payments.
Except as set forth on Annex XI hereto, each Credit Party has filed
all material tax returns required to be filed by it and has paid all material
taxes and assessments payable by it which have become due, other than those not
yet delinquent and except for those contested in good faith and for which
adequate reserves have been established. Except as set forth on Annex XI hereto,
each Credit Party has paid, or has provided adequate reserves (in accordance
with GAAP) for the payment of, all material federal, state, local and foreign
income taxes (including, without limitation, franchise taxes based upon income)
applicable for all prior fiscal years and for the current fiscal year to the
date hereof. Holdings knows of no proposed tax assessment against Holdings or
any of its Subsidiaries that could reasonably be expected to have a Materially
Adverse Effect which is not being actively contested in good faith by such
Person to the extent affected thereby in good faith and by appropriate
proceedings; provided that such reserves or other appropriate provisions, if
any, as shall be required in conformity with GAAP shall have been made or
provided therefor.
4.14. ERISA. (A) Each Credit Party and its ERISA Affiliates are in
compliance with all applicable provisions of ERISA and the Code and the
regulations and published interpretations thereunder with respect to all
employee benefit plans, Pension Plans and Multiemployer Plans except for any
failures to comply which, individually or in the aggregate, would not have a
Materially Adverse Effect.
(B) No Termination Event has occurred or is reasonably expected to
occur with respect to any Pension Plan which resulted or would result in a
liability to any Credit Party or any ERISA Affiliate.
(C) The sum of the amount of unfunded benefit liabilities (determined
in accordance with Statement of Financial Accounting Standards No. 87) under all
Title IV Plans (excluding each Title IV Plan with an amount of unfunded benefit
liabilities of zero or less) is not more than $2,500,000. As of the Closing
Date, there are no unfunded benefit liabilities (within the meaning of Section
4001(a)(18) of ERISA) under any Title IV Plans.
(D) As of the Closing Date, no Credit Party nor any ERISA Affiliate has
any obligation to contribute to or any liability or potential liability
(including, but not limited to, actual or potential withdrawal liability) with
respect to any employee benefit plan of the type described in Sections 4063 and
4064 of ERISA or in Section 413(c) of the Code. Each Credit Party and its ERISA
Affiliates have complied in all material respects with the requirements of ERISA
Section 515 with respect to each Multiemployer Plan. The aggregate potential
withdrawal payments, as determined in accordance with Title IV of ERISA, of each
Credit Party and its ERISA Affiliates with respect to all Multiemployer Plans
does not exceed $2,500,000. No Credit Party nor any ERISA Affiliate has incurred
or reasonably expects to incur any withdrawal liability under Section 4201 et
seq. of ERISA to any Multiemployer Plan or any employee benefit plan of the type
described in Sections 4063 and 4064 of ERISA or in Section 413(c) of the Code.
(E) No Credit Party nor any ERISA Affiliate has incurred any
accumulated funding deficiency (whether or not waived) with respect to any
Pension Plan.
(F) No Credit Party nor any ERISA Affiliate has or reasonably expects
to become subject to a Lien in favor of any Pension Plan under Section 302(f) or
307 of ERISA or Section 401(a)(29) or 412(n) of the Code.
(G) Assuming that no portion of the Term Loan to be advanced hereunder
is attributable, directly or indirectly, to the assets of any employee benefit
plan, the execution, performance and delivery of the Credit Documents by any
party thereto will not involve any prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code for which an exemption
therefrom is not available.
As used in this Section 4.14, the term "accumulated funding deficiency"
has the meaning specified in Section 302 of ERISA and Section 412 of the Code,
and the term "employee benefit plan" has the meaning specified in Section 3(3)
of ERISA.
4.15. Subsidiaries.
Annex II hereto lists each direct and indirect Subsidiary of Holdings
existing on the Closing Date.
4.16. Patents, Etc.
Each Credit Party owns or possesses adequate licenses or other rights
to use all patents, patent applications, trademarks, trademark applications,
servicemarks, servicemark applications, trade names, copyrights, trade secrets
and know how (collectively, the "Intellectual Property") that are necessary for
the operation of their respective businesses as presently conducted and as
proposed to be conducted. No claim is pending or, to the best of Holdings' or
the Borrower's knowledge, threatened to the effect that Holdings or any of its
Subsidiaries infringes upon the asserted rights of any other person under any
Intellectual Property, and to the best of Holdings' or the Borrower's knowledge
there is no basis for any such claim (whether or not pending or threatened), in
each case where such claim could reasonably be expected to have a Materially
Adverse Effect. No claim is pending or, to the best of Holdings' or the
Borrower's knowledge, threatened to the effect that any such Intellectual
Property owned or licensed by Holdings or any of its Subsidiaries or which
Holdings or the Borrower or any of its Subsidiaries otherwise has the right to
use is invalid or unenforceable by Holdings, the Borrower or such Subsidiary,
and, to the best of Holdings' or the Borrower's knowledge, there is no basis for
any such claim (whether or not pending or threatened), in each case where such
claim could reasonably be expected to have a Materially Adverse Effect.
4.17. Compliance with Laws, Etc.
Except as set forth in Annex XIV hereto, each Credit Party is in
material compliance with all material laws and regulations, including without
limitation those relating to equal employment opportunity and employee safety
but excluding Environmental Laws (as to which Section 4.22 is applicable), in
all jurisdictions in which it is presently doing business, and each Credit Party
will comply and cause each of its Subsidiaries to comply with all such laws and
regulations which may be imposed in the future in jurisdictions in which it or
such Subsidiary may then be doing business in each such case other than those
the non-compliance with which would not have a Materially Adverse Effect.
4.18. Properties.
Holdings and each of its Subsidiaries have good and marketable title
to and beneficial ownership of all their respective properties owned by them,
including after the Closing Date all property reflected in Holdings' most recent
balance sheet described in Section 4.11 and except as sold or otherwise disposed
of since the date of such balance sheet in the ordinary course of business, free
and clear of all Liens, other than Prior Liens and Permitted Encumbrances.
Holdings and each Subsidiary thereof hold all material licenses, certificates of
occupancy or operation and similar certificates and clearances of municipal and
other authorities necessary to own and operate the Mortgaged Real Property in
the manner and for the purposes currently operated by such party which if not
obtained or maintained would have a material adverse effect upon the value of
the Mortgaged Real Property. There are no actual defaults or defaults alleged in
writing or, to the best knowledge of Holdings or the Borrower, threatened
defaults, in each case of a material nature with respect to any leases of real
property under which Holdings or any of its Subsidiaries is lessor or lessee.
4.19. Securities.
On the Closing Date, the common stock of each Subsidiary of Holdings
whose stock is being pledged as of the Closing Date will be duly authorized,
issued and delivered and will be fully paid, nonassessable and free of
preemptive rights. There are not, as of the Closing Date and thereafter, any
existing options, warrants, calls, subscriptions, convertible or exchangeable
securities, rights, agreements, commitments or arrangements for any person to
acquire any capital stock of the Borrower any other securities convertible into,
exchangeable for or evidencing the right to subscribe for any such capital
stock.
4.20. Collective Bargaining Agreements.
Set forth on Annex III hereto is a list and description (including
dates of termination) of all collective bargaining or similar agreements between
or applicable to Holdings and its Subsidiaries as of the date hereof and any
union, labor organization or other bargaining agent in respect of the employees
of Holdings and its Subsidiaries on the date indicated in Annex III hereto.
4.21. Indebtedness Outstanding.
Set forth on Annex I hereto is a complete list and description of all
Indebtedness of Holdings, the Borrower and their Subsidiaries (other than the
Term Loan) that will be outstanding immediately after the Closing Date and set
forth on Annex I hereto is a complete list and description of all Indebtedness
of Holdings, the Borrower and their Subsidiaries that will be repaid, defeased,
transferred or otherwise terminated on or prior to the Closing Date.
4.22. Environmental Matters.
(A) Except as set forth in Annex X hereto, each of Holdings and its
Subsidiaries and the properties and assets used in its businesses (including the
Real Properties) is in compliance in all material respects with all applicable
Environmental Laws, which compliance includes, without limitation, the
possession of all material licenses, permits, registrations and other
governmental authorizations (collectively, "Environmental Authorizations")
required under applicable Environmental Laws, and compliance in all material
respects with the terms and conditions thereof except as could not reasonably be
expected to result in the incurrence of costs in excess of $100,000, and there
are no circumstances of a nature which may materially prevent or interfere with
such compliance in the future. Except as set forth in Annex X hereto, neither
Holdings nor any of its Subsidiaries has been notified by any Governmental
Authority, or has any basis to believe, that any such Environmental
Authorizations will be modified, suspended or revoked or cannot be renewed or
otherwise maintained in the ordinary course of business. Except as set forth in
Annex X hereto, in the last five years, neither Holdings nor any of its
Subsidiaries has received any communication, whether from a Governmental
Authority, citizen group, employee or otherwise, that alleges that Holdings or
any of its Subsidiaries or any of the properties or assets used in their
respective businesses (including the Real Properties) is not in compliance with
Environmental Laws.
(B) Except as set forth in Annex X hereto, there is no Environmental
Notice that (i) is pending or, to the best knowledge of Holdings or the Borrower
or any of its Subsidiaries, threatened against Holdings or any of its
Subsidiaries or (ii) is pending or, to the best knowledge of Holdings or the
Borrower or any of its Subsidiaries, threatened against any Person whose
liability for such Environmental Notice may have been retained or assumed by or
could reasonably be imputed or attributed by law or contract to Holdings, the
Borrower or any of its Subsidiaries.
(C) Except as set forth in Annex X hereto, to the best knowledge of
Holdings, the Borrower and its Subsidiaries, there are no past or present
actions, activities, circumstances, conditions, events or incidents arising out
of, based upon, resulting from or relating to the operation, ownership or use of
any properties or assets (including the Real Properties) currently or formerly
owned, operated, leased or used by Holdings or any of its Subsidiaries (or any
predecessor in interest of any of them), including, without limitation, the
emission, discharge, disposal or other release of any Hazardous Materials in or
into the Environment, that (i) could reasonably be expected to result in the
incurrence of costs in excess of $100,000, individually, under Environmental
Laws or (ii) could reasonably be expected to form the basis of any Environmental
Notice against or with respect to Holdings or any of its Subsidiaries, or
against any person or entity whose liability for any Environmental Notice may
have been retained or assumed by or could be imputed or attributed by law or
contract to Holdings or any of its Subsidiaries, which Notice could reasonably
be expected to result in the incurrence of costs in excess of $100,000.
(D) Except as set forth in Annex X hereto, without in any way limiting
the generality of the foregoing, (i) there are, and to the best knowledge of
Holdings, the Borrower and its Subsidiaries, have been, no underground storage
tanks, or related piping, located on, at or under property (including the Real
Properties) owned, operated, leased or used by Holdings or any of its
Subsidiaries (or any predecessor in interest of any of them), (ii) there are,
and, to the best knowledge of Holdings, the Borrower and its Subsidiaries, have
been, no polychlorinated biphenyls used or stored by Holdings or any of its
Subsidiaries, located on, at or under property (including the Real Properties)
owned, operated, leased or used by Holdings or any of its Subsidiaries, (iii)
there are and have been no properties (including the Real Properties) currently
or formerly owned, operated, managed, leased or used by Holdings or any of its
Subsidiaries (or any predecessor in interest of any of them) at which Hazardous
Materials generated, used, owned, managed, stored or controlled by Holdings or
any of its Subsidiaries (or any predecessor in interest of any of them) may have
been disposed of or otherwise released into the Environment except such
disposals or other releases which were both (a) in compliance with Environmental
Laws and Environmental Authorizations and (b) could not result in costs in
excess of $100,000, individually, under Environmental Laws and (iv) there is no
friable asbestos contained in or forming part of any building, building
component, structure or office space owned, operated, leased or used by Holdings
or any of its Subsidiaries.
(E) Prior to the Closing Date, Holdings and each of its Subsidiaries
shall have made all notifications, registrations and filings in accordance with
all applicable State and Local Real Property Disclosure Requirements, including,
without limitation, the use of forms provided by state or local agencies, where
such forms exist, whether to the Lender or to, or with, the state or local
agency, provided, that where such notification, registration or filing was made
to, or with, a state or local agency, a copy of such notification, registration
or filing shall be provided to the Lender prior to the Closing Date.
4.23. Environmental Investigations.
All material environmental investigations, studies, audits,
assessments or reviews conducted of which Holdings or the Borrower is in
possession in relation to the current or prior business of Holdings, the
Borrower or any of its Subsidiaries or any Real Property or facility now or
previously owned, operated, leased, used or controlled by Holdings or any of its
Subsidiaries, including, without limitation, those relating to compliance with
or liability under any Environmental Law, have been delivered to the Lender
through its attorneys, Skadden, Arps, Slate, Meagher & Flom.
4.24. Fine Products Company.
As of the date of this Agreement and as of the Closing Date, Fine
Products Company, a Georgia corporation ("Fine Products"), has capital of
$145,000 and has no other assets or, to the best of the Borrower's knowledge,
liabilities of any kind (other than its rights and obligations under the
purchase agreement dated as of February 1, 1994 between Fine Products, Aminco
Delaware and Gilliam Candy Co., Inc., and certain tax attributes). There are no
actions, claims, judgments, suits or proceedings pending or, to Holdings' or the
Borrower's knowledge, threatened in any court of competent jurisdiction with
respect to Fine Products and neither Holdings nor the Borrower is aware of any
facts or circumstances which would provide the basis for the assertion against
Fine Products of any such actions, claims, suits or proceedings.
4.25. The Borrower is actively engaged in the process of attempting to
sell certain assets used in the business of selling, distributing, packaging,
manufacturing and marketing CUTEX brand nail care and lip color products in the
United States and Puerto Rico, and has engaged Merrill Lynch to act as its
financial adviser in connection with such sale.
SECTION 5. Affirmative Covenants.
Holdings and the Borrower covenant and agree that on the Closing Date
and thereafter for so long as this Agreement is in effect and until the Term
Loan together with interest, fees and all other Obligations incurred hereunder
are paid in full (except as otherwise agreed or consented to or waived, in
writing, by the Lender):
5.01. Information Covenants.
Holdings will furnish or cause to be furnished to the Lender:
(a) As soon as available and in any event within 90 days after the
close of each fiscal year of Holdings, the consolidated balance sheet of
Holdings and its Subsidiaries as at the end of such fiscal year and the related
consolidated statements of income, of shareholders' equity and of cash flows for
such fiscal year, setting forth comparative consolidated figures for the
preceding fiscal year and a report on such consolidated balance sheets and
financial statements by independent certified public accountants of recognized
national standing, which report shall not be qualified as to the scope of audit
or as to the status of Holdings and its Subsidiaries as a going concern and
shall state that such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of Holdings and its
Subsidiaries as at the dates indicated and the results of their operations and
their cash flows for the periods indicated in conformity with GAAP applied on a
basis consistent with prior years (except for such changes with which the
independent certified public accountants concur) and the examination by such
accountants was conducted in accordance with generally accepted auditing
standards.
(b) As soon as available and in any event within 45 days after the
close of each of the first three quarterly accounting periods in each fiscal
year of Holdings, the consolidated balance sheet of Holdings and its
Subsidiaries as at the end of such quarterly accounting period and the related
consolidated statements of income, of shareholders' equity and of cash flows for
such quarterly accounting period and for the elapsed portion of the fiscal year
ended with the last day of such quarterly accounting period, setting forth in
comparative form the same information for the corresponding periods of the prior
fiscal year.
(c) As soon as practicable and in any event within 30 days after the
end of the month of July, 1998 and each month thereafter, (i) the consolidated
balance sheet of Holdings and its Subsidiaries as at the end of such period and
(ii) the related consolidated statements of income and cash flows of Holdings
each in the form customarily prepared by management, in each case for such
fiscal month and for the period from the beginning of the then current fiscal
year to the end of such fiscal month, setting forth in comparative form the same
information for the corresponding periods of the prior fiscal year, together
with a brief narrative discussion and analysis prepared by management describing
Holdings' results of operations for such fiscal month.
(d) At the time of the delivery of the financial statements provided
for in Sections 5.01(a) and (b), a certificate of the chief executive officer,
chief financial officer, controller, chief accounting officer or other
Authorized Officer of Holdings to the effect that such financial statements are
true and complete in all material respects and that no Default or Event of
Default exists, or, if any Default or Event of Default does exist, specifying
the nature and extent thereof.
(e) Promptly upon their becoming available, copies of all consolidated
financial statements, reports, notices and proxy statements sent or made
available generally by Holdings or any Subsidiary of Holdings to its security
holders (other than to Holdings, the Borrower or another Subsidiary of
Holdings), of all regular and periodic reports and all registration statements
and prospectuses, if any, filed by Holdings or any of its Subsidiaries with any
securities exchange or with the SEC and of all press releases and other
statements made available generally by Holdings or any Subsidiary of Holdings to
the public concerning material developments in the business of Holdings and its
Subsidiaries.
(f) Promptly upon any Senior Officer obtaining knowledge (w) of any
condition or event which constitutes a Default or Event of Default, (x) that any
Person has given any written notice to Holdings, the Borrower or any Subsidiary
of the Borrower or taken any other action with respect to a claimed default or
event or condition of the type referred to in Section 7.04, or (y) of a material
adverse change in the business, operations, properties, assets, nature of
assets, condition (financial or otherwise) or prospects of Holdings, the
Borrower and its Subsidiaries taken as a whole, an Officers' Certificate
specifying the nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such holder or Person and the
nature of such claimed Default, Event of Default, event or condition, or
material adverse change, and what action Holdings has taken, is taking and
proposes to take with respect thereto.
(g) (i) Promptly upon any Senior Officer obtaining knowledge of the
institution of, or written threat of, any action, suit, proceeding, governmental
investigation or arbitration against or affecting Holdings, the Borrower or any
of its Subsidiaries or any property of Holdings, the Borrower or any of its
Subsidiaries not previously disclosed to the Lender, which action, suit,
proceeding, governmental investigation or arbitration seeks (or in the case of
multiple actions, suits, proceedings, governmental investigations or
arbitrations arising out of the same general allegations or circumstances which
seek) recovery from Holdings, the Borrower or any of its Subsidiaries
aggregating $500,000 or more (exclusive of claims covered by insurance policies
of Holdings, the Borrower or any of its Subsidiaries unless the insurers of such
claims have disclaimed coverage or reserved the right to disclaim coverage on
such claims), Holdings shall give notice thereof to the Lender and provide such
other information as may be reasonably available to enable the Lender and its
counsel to evaluate such matters; (ii) as soon as practicable and in any event
within 45 days after the end of each fiscal quarter, Holdings shall provide a
report to the Lender covering any institution of, or written threat of, any
action, suit, proceeding, governmental investigation or arbitration (not
previously reported) against or affecting Holdings, the Borrower or any of its
Subsidiaries or any property of Holdings, the Borrower or any of its
Subsidiaries not previously disclosed to the Lender, which action, suit,
proceeding, governmental investigation or arbitration seeks (or in the case of
multiple actions, suits, proceedings, governmental investigations or
arbitrations arising out of the same general allegations or circumstances which
seek) recovery from Holdings, the Borrower or any of its Subsidiaries
aggregating $250,000 or more (exclusive of claims covered by insurance policies
of Holdings, the Borrower or any of its Subsidiaries unless the insurers of such
claims have disclaimed coverage or reserved the right to disclaim coverage on
such claims), and shall provide such other information at such time as may be
reasonably available to enable the Lender and its counsel to evaluate such
matters; (iii) in addition to the requirements set forth in clauses (i) and (ii)
of this Section 5.01(g), Holdings upon request shall promptly give notice of the
status of any action, suit, proceeding, governmental investigation or
arbitration covered by a report delivered to the Lender pursuant to clause (i)
or (ii) above to the Lender and provide such other information as may be
reasonably available to it to enable the Lender and its counsel to evaluate such
matters and (iv) promptly upon any Senior Officer obtaining knowledge of any
material dispute in respect of or the institution of, or written threat of, any
action, suit, proceeding, governmental investigation or arbitration in respect
of any material contract of Holdings, the Borrower or any of its Subsidiaries,
Holdings shall give notice thereof to the Lender and shall provide such other
information as may be reasonably available to enable the Lender and its counsel
to evaluate such matters.
(h) With reasonable promptness, such other information and data with
respect to Holdings, the Borrower or any of its Subsidiaries or any other
similar entity in which Holdings, the Borrower or any of its Subsidiaries has an
investment, as from time to time may be reasonably requested by the Lender and
may be reasonably available to Holdings or the Borrower.
(i) Holdings shall deliver to the Lender, within 15 days after filing
with the SEC, copies of Holdings' annual report and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which is filed by Holdings
with the SEC pursuant to Section 13 or 15(d) of the Exchange Act within the time
periods prescribed under such rules and regulations. In addition, Holdings shall
file with the Lender Holdings' annual reports to shareholders and any quarterly
or other financial reports furnished by Holdings to shareholders generally.
5.02. Books, Records and Inspections.
Holdings will, and will cause each of its Subsidiaries to, keep true
books of records and accounts in which full and correct entries will be made of
all their business transactions, and will reflect in its financial statements
adequate accruals and appropriations to reserves, all in accordance with GAAP.
Holdings will, and will cause each of its Subsidiaries to, permit, upon
reasonable prior notice to the chief financial officer, controller, chief
accounting officer or any other Authorized Officer of either of Holdings or the
Borrower, officers and designated representatives of the Lender to visit and
inspect any of the properties or assets of Holdings, the Borrower and any of its
Subsidiaries in whomsoever's possession, and to examine the books of account of
Holdings, the Borrower and any of its Subsidiaries and discuss the affairs,
finances and accounts of Holdings, the Borrower and any of its Subsidiaries
with, and be advised as to the same by, its and their officers and independent
accountants (in the presence of such officers), all at such reasonable times
during regular business hours and intervals and to such reasonable extent as the
Lender may reasonably request.
5.03. Maintenance of Property; Insurance.
(a) Holdings will, and will cause each of its Subsidiaries to,
exercise commercially reasonable efforts to maintain or cause to be maintained
in good repair, working order and condition (subject to normal wear and tear)
all properties used in its businesses and from time to time will make or cause
to be made all repairs, renewals and replacements thereof which Holdings and the
Borrower deem appropriate in their commercially reasonable judgment and will
maintain and renew as necessary all licenses, permits and other clearances
necessary in their commercially reasonable judgment to use and occupy such
properties of Holdings, the Borrower and each Subsidiary of Holdings, as the
case may be.
(b) Holdings will, and will cause each of its Subsidiaries to, maintain
or cause to be maintained, with financially sound and reputable insurers,
insurance with respect to its properties and business against loss or damage of
the kinds customarily insured against by corporations of established reputation
engaged in the same or similar businesses and similarly situated, of such types
and in such amounts as are customarily carried under similar circumstances by
such other corporations to the extent that such types and such amounts of
insurance are available at commercially reasonable rates. Holdings will, and
will cause each of its Subsidiaries to, furnish to the Lender, upon reasonable
request, information as to the insurance carried.
(c) Without limiting subsection 5.03(b) above, Holdings will, and will
cause each of its Subsidiaries to, maintain in full force the insurance
coverages specified in the Mortgages and the other Security Documents.
5.04. Payment of Taxes.
Holdings will pay and discharge, and will cause each of its
Subsidiaries to pay and discharge, all material taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which material
penalties attach thereto, and all lawful claims which, if unpaid, might become a
Lien or charge upon any properties of Holdings or any of its Subsidiaries or
cause a failure or forfeiture of title thereto; provided that neither Holdings,
the Borrower nor any Subsidiary of Holdings shall be required to pay any such
tax, assessment, charge, levy or claim that is being contested in good faith and
by proper proceedings timely instituted and diligently conducted if it has
maintained adequate reserves with respect thereto in accordance with GAAP.
5.05. Corporate Franchises.
Holdings will do, and will cause each Subsidiary to do, or cause to
be done, all things necessary to preserve and keep in full force and effect its
existence, rights and authority, except where such failure to keep in full force
and effect such rights and authority would not have a Materially Adverse Effect.
5.06. Compliance with Statutes, Etc.
. Holdings will, and will cause each Subsidiary to, comply with all
applicable statutes, regulations and orders of, and all applicable restrictions
imposed by, all Governmental Authorities, in respect of the conduct of its
business and the ownership of its property, other than non-compliance which
would not have a Materially Adverse Effect; provided that with respect to
non-compliance with Environmental Laws which is disclosed in Annex X hereto,
Holdings will, and will cause each Subsidiary to, comply with such Environmental
Laws as soon as practicable.
5.07. ERISA. Holdings or the Borrower, as the case may be, will
furnish to the Lender:
(a) promptly upon Holdings' or the Borrower's knowing or having reason
to know of the occurrence of any (i) Termination Event, or (ii) "prohibited
transaction," within the meaning of Section 406 of ERISA or Section 4975 of the
Code, in connection with any Pension Plan or any trust created thereunder, which
in the case of all such events described in clause (i) or (ii) results or could
reasonably be expected to result in a liability of a Credit Party or its ERISA
Affiliates in the aggregate in excess of $200,000 or the imposition of a Lien
other than a Permitted Encumbrance on the assets of a Credit Party, a written
notice specifying the nature thereof, what action the Credit Party or its ERISA
Affiliates have taken, are taking or propose to take with respect thereto, and,
when known, any action taken or threatened by the Internal Revenue Service,
Department of Labor, PBGC or Multiemployer Plan with respect thereto.
(b) with reasonable promptness, copies of (i) all notices received by a
Credit Party or any of its ERISA Affiliates of PBGC's intent to terminate any
Title IV Plan or to have a trustee appointed to administer any Title IV Plan,
the notice of which event is required pursuant to the preceding paragraph (a);
(ii) upon the request of the Lender each Schedule B (Actuarial Information) to
the annual report (Form 5500 Series) filed by a Credit Party or any of its ERISA
Affiliates with the Internal Revenue Service with respect to each Pension Plan
for which Schedule B is required; (iii) upon the request of the Lender, the most
recent actuarial valuation report for each Title IV Plan; and (iv) all notices
received by the Credit Parties or any of their ERISA Affiliates from a
Multiemployer Plan concerning the imposition or amount of withdrawal liability
pursuant to Section 4202 of ERISA, the notice of which event is required
pursuant to the preceding paragraph (a).
5.07. Performance of Obligations. Holdings will, and will cause each of
its Subsidiaries to, perform in all material respects all of its obligations
under the terms of each mortgage, indenture, security agreement, other debt
instrument and material contract by which it is bound or to which it is a party,
except where such nonperformance would not have a Materially Adverse Effect.
5.08. Use of Proceeds.
The proceeds of the Term Loan shall be used as provided in Section
4.05.
5.09. Equal Security for Loan and Note; No Further Negative Pledges.
(a) If Holdings or any of its Subsidiaries shall create or assume any
Lien upon any of its property or assets, whether now owned or hereafter acquired
and whether or not such property or assets constitutes Collateral, other than
Permitted Encumbrances (unless prior written consent to the creation or
assumption thereof shall have been obtained from the Lender), it shall make or
cause to be made effective provisions whereby the Obligations will be secured by
such Lien equally and ratably with any and all other Indebtedness thereby
secured as long as any such Indebtedness shall be secured; provided that this
covenant shall not be construed as consent by the Lender to any violation by the
Borrower of the provisions of Section 6.02.
(b) Except with respect to prohibitions against other encumbrances on
specific property encumbered to secure payment of particular Indebtedness
permitted hereunder (which Indebtedness relates solely to the acquisition or
improvement of such specific property) neither Holdings nor any of its
Subsidiaries shall enter into any agreement prohibiting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired.
5.10. Pledge of Additional Collateral. Concurrently with the execution
and delivery by any Subsidiary of a Subsidiary Guarantee, and/or in the event
that Holdings or any such Subsidiary acquires any assets directly or indirectly
through merger or otherwise that would constitute Pledged Collateral or
Mortgaged Real Property or assets of the same type, Holdings will, or will cause
such Subsidiary to, take all necessary action to grant the Lender a perfected
first Lien in all of the real and personal property of Holdings or such
Subsidiary (to the extent permitted by applicable law) to secure the payment and
performance of the Obligations, Holdings' obligations and liabilities under its
Guarantee and such Subsidiary's obligations and liabilities under its Subsidiary
Guarantee; and promptly, and in any event within 30 days after the acquisition
of assets of a type that, but for the fact that such assets shall have been
acquired after the Closing Date, would have constituted Collateral, Holdings
will, and will cause each of its Subsidiaries to, take all necessary action to
grant the Lender a perfected first Lien in such newly acquired assets (such
personal property and assets of a Subsidiary executing a Subsidiary Guarantee
and such newly acquired assets of Holdings or any of its Subsidiaries are
referred to herein collectively as the "Additional Collateral"). Such action to
be taken by Holdings and the Subsidiaries shall include, without limitation, the
execution and delivery of security agreements, and/or supplements thereto, and
other instruments and documents, all in form and substance reasonably
satisfactory to the Lender, the filing of appropriate financing statements under
the provisions of the UCC, applicable domestic or local laws, rules or
regulations in each of the offices where such filing is necessary or
appropriate, and the delivery of such opinions of counsel with respect to the
foregoing as the Lender shall reasonably require; provided this Section 5.10
shall not apply to any assets subject to Liens permitted under Section 6.03(i).
Furthermore, promptly, and in any event within 30 days, after the acquisition of
an interest in Real Property within the United States not held as of the Closing
Date (the "Additional Real Property"), Holdings will, and will cause such of its
Subsidiaries acquiring such an interest to, take such actions and execute such
documents as the Lender shall reasonably require to confirm the Lien of a
Mortgage (including, without limitation, satisfaction of the conditions set
forth in Sections 3.01(C)(iii) and 3.01(H)), or execute a new Mortgage, with
respect to such Additional Real Property. All costs and expenses arising from
any action taken or required to be taken by Holdings or any of its Subsidiaries
in connection with the pledge of Additional Collateral or Additional Real
Property pursuant to this Section 5.10, including, without limitation, costs of
counsel to Holdings or such Subsidiary in connection with the delivery of
opinions as required by this Section 5.10, shall be payable by Holdings, the
Borrower or such Subsidiary. All agreements, instruments and documents executed
or delivered pursuant to or in furtherance of this Section 5.10, and all
amendments, modifications and supplements thereto from time to time entered
into, are and shall be within the definition of "Security Documents."
5.11. Security Interests.
Holdings will, and will cause each of its Subsidiaries to, perform
any and all acts and execute any and all documents (including, without
limitation, the execution, amendment or supplementation of any financing
statement and continuation statement) for filing in any appropriate jurisdiction
under the provisions of the UCC, local law or any statute, rule or regulation of
any applicable domestic jurisdiction which are necessary in order to maintain or
confirm in favor of the Lender a valid and perfected Lien on the Collateral as
collateral security for the payment and performance of the Obligations, subject
to no Liens except for Prior Liens and Liens permitted by the applicable
Security Documents. Holdings or the Borrower shall, as promptly as practicable
after the filing of any financing statements, deliver to the Lender
acknowledgment copies of, or copies of lien search reports confirming the filing
of, financing statements duly filed under the UCC of all jurisdictions as may be
necessary or, in the reasonable judgment of the Lender, desirable to perfect the
Lien created, or purported or intended to be created, by each Security Document.
5.12. Environmental Events.
(i) Holdings will, and will cause each of its Subsidiaries to, comply
with any and all Environmental Laws, other than non-compliance which could not
reasonably be expected to result in liability under any Environmental Laws in
excess of $250,000 individually or in the aggregate with any other liability
under any Environmental Laws; provided that, with respect to non-compliance with
Environmental Laws which is disclosed in Annex X hereto, Holdings will, and will
cause each of its Subsidiaries to, comply with such Environmental Laws as soon
as practicable.
(ii) Holdings will, and will cause each of its Subsidiaries to,
promptly give notice to the Lender upon determining the existence of (a) any
violation of any Environmental Laws, (b) any Environmental Notice or (c) any
release or threatened release of Hazardous Materials at, on, upon, under or from
any of the Real Properties or any facility or equipment thereat in excess of a
reportable quantity or allowable standard or level under any Environmental Laws,
or in a manner and/or amount which could reasonably be expected to result in
liability under any Environmental Laws, in each case in excess of $250,000
individually or in the aggregate with any other liability under any
Environmental Laws (other than any such events disclosed in Annex X hereto).
(iii) In the event of the presence of Hazardous Materials on any of the
Real Properties which is in violation of, or which could reasonably be expected
to result in liability under, any Environmental Laws, in each case in excess of
$250,000 individually or in the aggregate with any other liability under any
Environmental Laws, Holdings or any of its Subsidiaries, upon discovery thereof,
shall take appropriate steps to initiate and expeditiously complete all
response, corrective and other action required under any Environmental Laws to
mitigate and eliminate any such violation or liability.
5.13. New Subsidiaries.
In addition to its obligations with respect to Section 5.10, if, after the
date hereof, Holdings, the Borrower or any Subsidiary of Holdings shall create
or acquire any (A) domestic Subsidiary, Holdings shall, concurrently with the
creation or acquisition of such Subsidiary, (i) cause such Subsidiary to execute
and deliver to the Lender a Subsidiary Guarantee, substantially in the form of
Exhibit H annexed hereto, guaranteeing the Borrower's Obligations hereunder and
(ii) take all necessary actions and execute such agreements, instruments and
documents, including, without limitation, stock powers executed in blank, and
deliver such opinions of counsel with respect thereto, as the Lender may
reasonably require to cause all of the capital stock of such Subsidiary owned or
controlled by Holdings, the Borrower or any Subsidiary of Holdings to be pledged
to the Lender to secure the Borrower's Obligations hereunder such that the
Lender has a valid and perfected first-priority security interest in such
pledged capital stock or (B) foreign Subsidiary whose direct parent is any of
Holdings, the Borrower or a Guarantor, Holdings shall, concurrently with the
creation or acquisition of such foreign Subsidiary, (i) comply with the
requirements of clause (A)(i) above if permitted by applicable foreign law and
if such compliance would not cause such Subsidiary to hold or be deemed to hold
an obligation of a United States person or other "United States property" for
purposes of Section 956(a)(1)(A) of the Code and Treas. Reg. ss. 1.956-2 and
(ii) comply with the requirements of clause (A)(ii) above, but only to the
extent of 65% of the capital stock of such foreign Subsidiary.
5.14 Post-Closing Opinions.
Holdings and the Borrower will deliver or cause to be delivered to the Lender
an opinion of special South African counsel to Holdings, Borrower and Carson
Holdings Limited with respect to the pledge of the shares of Carson Holdings
Limited, in form and substance reasonably satisfactory to the Lender within 15
days after the Closing Date.
SECTION 6. Negative Covenants.
Holdings and the Borrower hereby covenant and agree that as of the
Closing Date and thereafter for so long as this Agreement is in effect and until
the Term Loan together with interest, fees and all other Obligations incurred
hereunder are paid in full (except as otherwise agreed or consented to or
waived, in writing, by the Lender):
6.01. Changes in Business.
Other than asset dispositions permitted under Section 6.05, the
Borrower will not, and will not permit any of its Subsidiaries to, materially
alter its businesses from that conducted by Holdings or such Subsidiary at the
Closing Date, and lines of business reasonably related thereto.
6.02. Amendments or Waivers of Certain Documents. Holdings will not,
and will not permit any of its Subsidiaries to, amend or otherwise change the
terms of any Existing Debt, including, without limitation, the interest rate,
time of payment of interest, with respect to security (if any) and the scheduled
maturity of, the Senior Subordinated Notes.
6.03. Liens.
Holdings will not, and will not permit any Subsidiary of Holdings to,
directly or indirectly, create, incur, assume or permit or suffer to exist any
Lien upon or with respect to any item constituting Collateral, whether now owned
or hereafter acquired, except for the Lien of the Security Document relating
thereto, Prior Liens applicable thereto and other Liens expressly permitted by
such Security Document. Holdings will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of Holdings or any Subsidiary of Holdings
which does not constitute Collateral whether now owned or hereafter acquired, or
sell any such property or assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets or assign any
right to receive income, or file or permit the filing of any financing statement
under the UCC or any other similar notice of Lien under any similar recording or
notice statute, except the following, which are herein collectively referred to
as "Permitted Encumbrances":
(a) Liens for taxes, assessments or governmental charges or claims not
yet delinquent or Liens for taxes, assessments or governmental charges or claims
being contested in good faith and by appropriate proceedings for which adequate
reserves, as may be required by GAAP, have been established;
(b) Liens in respect of property or assets of Holdings or any of its
Subsidiaries imposed by law (i) which were incurred in the ordinary course of
business, such as carriers', warehousemen's and mechanics' Liens and other
similar Liens arising in the ordinary course of business, and (x) which do not
in the aggregate materially detract from the value of such property or assets or
materially impair the use thereof in the operation of the business of Holdings
or any of its Subsidiaries or (y) which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing the
forfeiture or sale of the property or asset subject to such Lien or (ii) which
do not relate to material liabilities of Holdings and its Subsidiaries and do
not in the aggregate materially detract from the value of the property and
assets of Holdings and its Subsidiaries taken as a whole;
(c) Liens in connection with any attachment or judgment (including
judgment or appeal bonds) for amounts of less than $500,000 individually or less
than $1,000,000 in the aggregate (exclusive of any amount adequately covered by
insurance as to which the insurance company has acknowledged coverage) unless
the judgment it secures shall, within 60 days after the entry thereof, not have
been discharged or execution thereof not been stayed pending appeal, or shall
not have been discharged within 30 days after the expiration of any such stay;
(d) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and return-of-money bonds
and other similar obligations incurred in the ordinary course of business
(exclusive of obligations in respect of the payment for borrowed money or the
equivalent);
(e) subject to the provisions of Section 6.14 and, with respect to any
Mortgaged Real Property, to the provisions of any applicable Mortgage, (i)
Leases with respect to the assets or properties of Holdings or the Borrower
entered into in the ordinary course of Holdings' or the Borrower's business and
subordinate in all respects to the Liens granted and evidenced by the Security
Documents, (ii) foreign Leases and (iii) Existing Leases and any extensions,
renewals or replacements thereof;
(f) easements, rights of way, restrictions, minor defects or
irregularities in title not interfering in any material respect with the
business of Holdings or any of its Subsidiaries, in each case incurred in the
ordinary course of business and which do not materially impair for its intended
purposes the Real Property to which it relates;
(g) zoning and building by-laws and ordinances, municipal bylaws and
regulations, and restrictive covenants, which do not materially interfere with
the use of the subject property by Holdings or any of its Subsidiaries as such
property is used as of the Closing Date;
(h) Liens securing Indebtedness of a Subsidiary of Holdings owing to
Holdings or a Wholly Owned Subsidiary of Holdings;
(i) Liens upon real or tangible or intangible personal property
acquired or constructed by Holdings or its Subsidiaries after the date hereof or
on such property or equity securities of a Person at the time such Person
becomes a Subsidiary of Holdings or any of its Subsidiaries; provided that (i)
any such Lien is created solely for the purpose of securing Indebtedness
representing, or incurred to finance, the cost of the item of property subject
thereto or such Liens existed on the date such property or securities were
acquired and were not incurred as a result of or in anticipation of such
acquisition, (ii) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of the fair value (as determined in good faith by the board
of directors of Holdings or the Borrower, as the case may be) of the respective
property at the time it was so acquired or constructed, (iii) the Indebtedness
secured by the Lien is not created more than 180 days after the later of the
acquisition, completion of construction, repair, improvement, addition or
commencement of full operation of the property subject to the Lien, (iv) such
Lien does not extend to or cover any other property other than such item of
property and (v) the incurrence of such Indebtedness secured by such Lien is
permitted by Section 6.04;
(j) Liens on any property existing as of the date hereof securing
Existing Debt and any refinancing, extension, renewal or rearrangement thereof
provided that such Lien does not extend to or cover any other property other
than items of property encumbered as of the date hereof; and
(k) Liens on inventory and receivables and assets specifically related
thereto and proceeds thereof in connection with (i) the South African Credit
Agreement and (ii) the Revolving Credit Facility.
6.04. Indebtedness.
Holdings will not, and will not permit any of its Subsidiaries to,
contract, create, incur, assume or suffer to exist any Indebtedness, except:
(a) Indebtedness incurred pursuant to the Credit Documents;
(b) Existing Debt and any refinancing, extension, renewal,
rearrangement or replacement thereof; provided that any such refinancing,
extension, renewal, rearrangement or replacement of Existing Debt shall be on
terms which, both taken as a whole and specifically as such terms relate to the
identity of the obligors, repayments of principal, covenants, events of default
and security in property of the debtor, are in each event no less favorable to
Holdings or the Borrower than the correlative terms of the Existing Debt;
(c) $1,000,000 of Indebtedness outstanding at any time to finance the
cost of the acquisition or construction of real or personal tangible or
intangible property (including Capital Leases), and any refinancing, extension,
renewal, rearrangement or replacement thereof; provided that such Indebtedness
(or the refinancing thereof) shall not exceed 100% of the fair value of such
property; and provided, further, that such Indebtedness (or the refinancing
thereof) is not secured by any Lien other than a Lien referred to in clause (i)
of Section 6.03;
(d) other unsecured Indebtedness not exceeding $1,000,000 in the
aggregate at any time outstanding;
(e) Indebtedness owed to Morningside under the Management Agreement;
(f) Indebtedness of Holdings to any of its Wholly Owned Subsidiaries
(provided that such Indebtedness owed by Holdings is used only to fund any
amounts required for the payment of (i) interest when due on the Senior
Subordinated Notes (provided no Default or Event of Default exists under this
Agreement) and (ii) taxes payable (A) by Holdings or (B) by Holdings, the
Borrower and/or its Subsidiaries on a consolidated, combined or unitary basis)
or of any Wholly Owned Subsidiary of Holdings to Holdings or another Wholly
Owned Subsidiary of Holdings (but only so long as such Indebtedness is held by
Holdings or its Wholly Owned Subsidiary), and Indebtedness permitted under
Section 6.05(i);
(g) Indebtedness in respect of performance bonds, return-of-money
bonds, surety and appeal bonds and other similar obligations incurred by
Holdings or any of its Subsidiaries in the ordinary course of business, provided
such Indebtedness does not exceed $100,000 at any time outstanding;
(h) Indebtedness of Holdings, the Borrower or any Subsidiary of
Holdings incurred pursuant to the Revolving Credit Facility in a maximum
principal amount not to exceed $15,000,000 in the aggregate at any time
outstanding;
(i) Indebtedness of Carson Holdings Limited pursuant to the South
African Credit Agreement in an amount not exceeding the equivalent of
US$2,000,000 in the aggregate at any time outstanding; provided that such
Indebtedness is not secured by any Lien other than a Lien referred to in Section
6.03(k); and
(j) Indebtedness of any Credit Party (including pursuant to the
issuance of any guarantees) incurred pursuant to the Senior Subordinated Notes.
6.05. Advances, Investments and Loans. Holdings will not, and will not
permit any of its Subsidiaries to, lend money or credit or make advances to any
Person, or purchase or acquire any stock, obligations or securities of, or any
other interest in, or make any capital contribution to any Person, except:
(a) investments in Cash and Cash Equivalents;
(b) receivables owing to them and advances to customers and suppliers,
in each case if created, acquired or made in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms;
(c) investments (including debt obligations) received in connection
with the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(d) investments in any direct or indirect Wholly Owned Subsidiary of
Holdings;
(e) transactions between Holdings and any of its Wholly Owned
Subsidiaries and between Wholly Owned Subsidiaries, in each case permitted under
Sections 6.04(f);
(f) loans or advances made by Holdings to its officers, directors and
employees in the ordinary course of business not to exceed $500,000 in the
aggregate outstanding at any time;
(g) investments made as a result of the receipt of non-cash proceeds
from any Asset Sale made pursuant to and in compliance with Section 6.10;
(h) other investments, loans or advances not to exceed $500,000 in the
aggregate outstanding at any time;
(i) loans, advances and/or investments (in each case evidenced by notes
that shall constitute Pledged Collateral) by Holdings or the Borrower in Carson
Holdings Limited in an amount not to exceed the equivalent of US$5,000,000 in
the aggregate at any one time outstanding; and
(j) investments in one or more contract manufacturers, suppliers,
vendors and distributors that are Affiliates of Holdings in connection with the
provision by any such person of manufacturing, research and development,
outsourcing, sales, marketing and/or distribution services to Holdings and/or
one or more of its Subsidiaries in an aggregate amount at one time outstanding
not to exceed US$4,000,000.
6.06. Prepayments of Indebtedness.
(A) Other than in accordance with Section 2.01, Holdings will not,
and will not permit any of its Subsidiaries to make (or give any notice in
respect of) any voluntary or optional payment or prepayment or redemption or
acquisition for value of Indebtedness (including, without limitation, by way of
depositing with any trustee with respect thereto money or securities before such
Indebtedness is due for the purpose of paying such Indebtedness when due) or
exchange of any such Indebtedness or preferred stock, as the case may be, or (B)
other than in accordance with Section 2.02, Holdings will not, and will not
permit any of its Subsidiaries to, make (or give any notice in respect of) any
mandatory prepayment or redemption or acquisition for value of Indebtedness
(including, without limitation, by way of depositing with any trustee with
respect thereto money or securities for such purposes) or exchange of any such
Indebtedness or preferred stock, as the case may be, in each case of clauses (A)
and (B), until all Obligations under this Agreement have been satisfied in full;
provided that Holdings and any of its Subsidiaries may make such a payment,
prepayment, redemption, acquisition or exchange using the proceeds of
Indebtedness permitted to be incurred by Section 6.04 to refinance or replace
such Indebtedness.
(C) Holdings will not, and will not permit any of its Subsidiaries to:
amend, modify or change any of the Management Agreement, the Cutex Manufacturing
Agreement (other than in connection with a sale of the CUTEX business
contemplated by Section 4.25), the Certificate of Incorporation (including,
without limitation, by the filing of any certificate of designation) or By-laws
of Holdings or the Borrower, or any agreement entered into by Holdings or the
Borrower with respect to its capital stock, or enter into any new agreement with
respect to the capital stock of Holdings or the Borrower, in each case without
the prior consent of the Lender, which consent shall not be unreasonably
withheld.
6.07. Dividends, etc. Holdings will not, and will not permit any of its
Subsidiaries to, declare or pay any dividends (other than dividends or
distributions payable in shares of capital stock of Holdings or any of its
Subsidiaries, other than redeemable stock) or return any capital to, its
stockholders or authorize or make any other distribution, payment or delivery of
property or cash to its stockholders as such, or redeem, retire, purchase or
otherwise acquire, directly or indirectly, for any consideration, any shares of
any class of its capital stock now or hereafter outstanding (or any warrants for
or options or stock appreciation rights in respect of any of such shares), or
make any loans or advances to Affiliates, or set aside any funds for any of the
foregoing purposes, or permit any of its Subsidiaries to purchase or otherwise
acquire for consideration any shares of any class of the capital stock of
Holdings or any other Subsidiary, as the case may be, now or hereafter
outstanding (or any options or warrants or stock appreciation rights issued by
such Person with respect to its capital stock) (all of the foregoing,
"Dividends"), except that (i) any direct or indirect Subsidiary of Holdings may
pay Dividends to its parent corporation if such parent corporation is a Wholly
Owned Subsidiary of Holdings, (ii) the Borrower or any other Subsidiary of
Holdings may pay to Holdings any amounts required for the payment of (I)
interest when due on the Senior Subordinated Notes (provided no Default or Event
of Default exists under this Agreement) and (II) any taxes payable (A) by
Holdings or (B) by Holdings, the Borrower and/or its Subsidiaries on a
consolidated, combined or unitary basis, (iii) Holdings or any of its
Subsidiaries may purchase capital stock held by employees of Holdings or any of
its Subsidiaries pursuant to any employee stock option or other benefit plan
thereof upon the termination, retirement or death of any such employee in
accordance with the provisions of any such plan in an amount not greater than
$250,000 in any calendar year; provided that the Borrower may purchase capital
stock pursuant to the Employment Agreement with Dr. Leroy Keith dated as of
August 23, 1995, as amended, without regard to such limitation; and (iv)
Holdings or any of its Subsidiaries may make payments to Affiliates pursuant to
and in compliance with Section 6.08 hereof.
6.08. Transactions with Affiliates. Holdings will not, and will not
permit any Subsidiary to, enter into any transaction or series of transactions,
whether or not in the ordinary course of business, with any holder of 5% or more
of any class of equity securities of Holdings or with any Affiliate of Holdings
other than on terms and conditions substantially as favorable to Holdings or
such Subsidiary as would be obtainable by Holdings or such Subsidiary at the
time in a comparable arm's-length transaction with a Person other than a holder
of 5% or more of any class of equity securities of Holdings or an Affiliate;
provided that the foregoing restrictions shall not apply to (i) transactions
between Holdings and any of its Wholly Owned Subsidiaries and between Wholly
Owned Subsidiaries, (ii) payments to Morningside pursuant to the Management
Agreement for management services not to exceed $500,000, or above such amount
up to an aggregate of $750,000 with approval of the board of directors of
Holdings, in any fiscal year (provided that all such payments made commencing
January 1, 1998 will be included in the calculation for the fiscal year ending
December 31, 1998), plus reimbursement of reasonable out-of-pocket expenses,
(iii) loans and other advances made by the Borrower to its officers, directors
and employees permitted under Section 6.05(f), (iv) the payment of customary
outside directors' fees, customary indemnification arrangements and customary
director and officer liability insurance, (v) the issuance of capital stock of
Holdings or any of its Subsidiaries, pursuant to any pension, stock option,
profit sharing or other employee benefit plan or agreement of Holdings or any of
its Subsidiaries in the ordinary course of business and (vi) investments made
pursuant to Section 6.05(j) hereof.
6.09. Issuance of Subsidiary Stock. Holdings will not and will not
permit any of its Subsidiaries directly or indirectly to issue, sell, assign,
pledge or otherwise encumber or dispose of any shares of such Subsidiaries'
capital stock or other equity securities (or warrants, rights or options to
acquire capital stock or convertible securities or other equity securities) of
such Subsidiary, except to Holdings or any other Wholly Owned Subsidiary of
Holdings (in each case other than directors' or nominees' qualifying shares or
shares of capital stock required to be owned by foreign nationals under
applicable law); provided, however, that nothing contained in this Section 6.09
shall prohibit the issuance of capital stock of Carson Holdings Limited in
accordance with the terms of the Carson Holdings Limited Share Incentive Trust,
as in effect on the date hereof.
6.10. Disposition of Assets.
(A) Holdings will not, and will not permit any of its Subsidiaries
to, sell, lease or otherwise dispose of all or any part of its interest in any
asset, except that Holdings and its Subsidiaries may sell, lease or otherwise
dispose of assets so long as either (i) such sales are approved by the Lender;
(ii) such sales are for at least the fair market value of such assets and the
aggregate amount of such asset sales is less than $500,000 in any 12-month
period and, in any such case, Holdings or such Subsidiary complies with the
mandatory prepayment provisions herein and, in the case of Collateral, so long
as the conditions to the release of Collateral described herein and in the
applicable Security Documents are met; (iii) such sales are of inventory and in
the ordinary course of business; (iv) such sales or other dispositions are (A)
of equipment that has become worn out, obsolete or damaged or otherwise
unsuitable or no longer needed for use in connection with the business of
Holdings or any of its Subsidiaries or should be replaced, as the case may be,
in each case as determined in good faith by the board of directors of Holdings
or its Subsidiary, as the case may be, (B) for at least the fair market value of
such equipment, (C) not in excess of $100,000 individually or $250,000 per year
in the aggregate for sales of such equipment and (D) the proceeds of the sales
of such equipment are used within 90 days of such sales to (1) purchase
equipment used in substantially similar lines of business or (2) repay
Indebtedness under this Credit Agreement pursuant to Sections 2.01 or 2.02; (v)
such sales or other dispositions do not exceed $50,000 individually and are for
at least the fair market value of such assets or as to such other dispositions,
the likely amount of net sales proceeds that would be realized upon a sale of
such assets is such that a sale of such assets is not, in the reasonable
judgment of Holdings or the Borrower, economically practicable but such other
disposition is otherwise of commercial value to Holdings or the Borrower;
provided that in no case shall sales pursuant to this clause (v) exceed an
aggregate of $100,000 in any fiscal year, and in the case of Collateral, so long
as the conditions to the release of Collateral described herein and in the
applicable Security Documents are met; (vi) such sales consist of the licensing
or sublicensing of Holdings' or any of its Subsidiaries' Intellectual Property
in the ordinary course of business; or (vii) such sales are of equity securities
under any stock option or other benefit plan available to the employees or
directors of Holdings or any of its Subsidiaries.
The consideration received by Holdings and its Subsidiaries from each
sale of assets permitted by subsections (i) and (ii) above, other than with
respect to such sales involving consideration of not more than $100,000 in the
aggregate in any fiscal year, shall be payable by the purchaser in whole within
15 days of such sale and at least 70% of the consideration from each sale shall
consist of Cash or Cash Equivalents. Any non-cash proceeds received from the
sale of assets constituting Collateral shall be pledged pursuant to and in
accordance with the applicable Security Documents and shall constitute
Collateral.
(B) Upon compliance with the conditions in subsection (A) of this
Section 6.10, the Release Conditions and the Partial Release Conditions (each as
hereinafter defined), Holdings or its Subsidiaries shall be entitled to receive
from the Lender an instrument in form and substance reasonably satisfactory to
Holdings or such Subsidiary (each, a "Release"), releasing the Lien of the
Mortgage with respect to all or any portion of a Mortgaged Real Property (each,
a "Released Real Property"). Holdings or its Subsidiaries shall exercise their
rights under this Section by delivering to the Lender a notice (each, a "Release
Notice"), which shall refer to this Section, describe with particularity the
proposed Released Real Property and be accompanied by (i) four counterparts of
the Release fully executed and acknowledged by all necessary parties other than
the Lender, (ii) executed counterparts of UCC termination statements necessary
to terminate the Lien of the applicable Mortgage and (iii) an Officer's
Certificate certifying that no Default or Event of Default shall have occurred
and the parties executing any and all documents in connection with the Release
(other than the Lender) were duly authorized to do so (collectively, the
"Release Conditions"). In the event the proposed Released Property consists of
less than all of the Mortgaged Real Property subject to a single Mortgage, the
Partial Release Conditions must be satisfied in order for the Borrower or its
Subsidiaries to receive the Release.
(C) The Lender's obligation to deliver a Release in respect of less
than all of the Mortgaged Real Property subject to a single Mortgage shall be
contingent upon the satisfaction of the conditions in subsection (A) of this
Section 6.10 and the Release Conditions as well as the following conditions
(collectively, the "Partial Release Conditions"):
(i) following the sale, transfer or other disposition of and
release of the Lien of the applicable Mortgage with respect to the
proposed Released Real Property, the remaining Mortgaged Real Property
shall have utility services and access to public roads, rail spurs and
other transportation structures sufficient and necessary in the
reasonable opinion of Holdings or the Borrower for the continued use of
such Mortgaged Real Property in the manner utilized prior to the
Release;
(ii) following the sale, transfer or other disposition of the
proposed Released Real Property, the remaining Mortgaged Real Property
shall comply in all material respects with applicable laws, rules,
regulations and ordinances relating to environmental protection,
zoning, land use, configuration and building and workplace safety
(except for such non-compliance which has been previously consented to
by the Lender);
(iii) following the sale, transfer or other disposition of the
proposed Released Real Property, the value of the remaining Mortgaged
Real Property shall not be less than the value of such remaining
Mortgaged Real Property prior to the Release due to such sale, transfer
or other disposition;
(iv) the Title Company shall be prepared to issue an
endorsement to the Lender's title insurance policy relating to the
Mortgaged Real Property confirming that after the proposed release, the
Lien of the applicable Mortgage continues unimpaired as a first
priority Lien upon the remaining Mortgaged Real Property subject only
to Prior Liens, those Liens permitted by the Mortgage or previously
consented to by the Lender;
(v) Holdings shall cause to have been delivered to the Lender
a Survey reasonably acceptable to the Lender of the Mortgaged Real
Property remaining after the proposed Released Real Property has been
released; and
(vi) Holdings or its Subsidiaries shall cause to have been
delivered to the Lender an Officer's Certificate certifying that the
conditions set forth in subsections (i) through (v) have been
satisfied.
(D) The Lender shall execute, acknowledge (if applicable) and deliver
to the Borrower counterparts of the documents described in subsections (B)(i)
and (ii) of this Section 6.10 within 10 Business Days after receipt by the
Lender of a Release Notice provided that the Release Conditions and the Partial
Release Conditions (if applicable) have been satisfied. Holdings or the Borrower
shall (i) execute, deliver, obtain and record such instruments as the Lender may
require, including, without limitation, amendments to the Security Documents or
this Agreement and, (ii) deliver to the Lender such evidence of the satisfaction
of the Release Conditions and the Partial Release Conditions as the Lender may
require and (iii) cause the Title Company to issue the endorsement referred to
in subsection (C)(iv) of this Section 6.10. Holdings or the Borrower shall
reimburse the Lender upon demand for all reasonable costs or expenses incurred
in connection with any actions taken pursuant to this Section 6.10.
6.11. Contingent Obligations.
Holdings will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or become or be liable with respect to any
Contingent Obligation except:
(i) guarantees resulting from endorsement of instruments
for deposit or collection in the ordinary course of business;
(ii) the Guarantees;
(iii) obligations arising as a direct consequence of the
Refinancing, the Acquisition or pursuant to the Cutex Manufacturing Agreement;
(iv) obligations with respect to the Indebtedness permitted
to be incurred under Section 6.04;
(v) guarantees on a subordinated basis by the Borrower
and any of the Subsidiaries of Holdings of the obligations of Holdings pursuant
to the terms of the indenture governing the Senior Subordinated Notes; and
(vi) other Contingent Obligations not to exceed $250,000
outstanding at any one time.
6.12. ERISA. The Credit Parties will not, and will not permit any
of their ERISA Affiliates to:
(i) engage in any transaction in connection with which the
Borrower or any of its ERISA Affiliates could be subject to either a
tax imposed by Section 4975(a) of the Code or the corresponding civil
penalty assessed pursuant to Section 502(i) of ERISA, which penalties
and taxes for all such transactions could reasonably be expected to be
in an aggregate amount in excess of $500,000;
(ii) permit to exist any accumulated funding deficiency, for
which a waiver has not been obtained from the Internal Revenue Service,
with respect to any Pension Plan;
(iii) permit to exist any failure to make contributions or any
unfunded benefits liability which creates, or with the passage of time
would create, a statutory lien or requirement to provide security under
ERISA or the Code in favor of the PBGC or any Pension Plan,
Multiemployer Plan or other entity;
(iv) permit the sum of the amount of unfunded benefit
liabilities (determined in accordance with Statement of Financial
Accounting Standards No. 87) under all Title IV Plans (excluding each
Title IV Plan with an amount of unfunded benefit liabilities of zero or
less) to exceed $2,500,000 for a period in excess of twelve months; or
(v) fail to make any payment to any Multiemployer Plan that it
or any of its ERISA Affiliates may be required to make under such
Multiemployer Plan, any agreement relating to such Multiemployer Plan,
or any law pertaining thereto.
As used in this Section 6.12, the term "accumulated funding deficiency"
has the meaning specified in Section 302 of ERISA and Section 412 of the Code,
and the term "amount of unfunded benefit liabilities" has the meaning specified
in Section 4001(a)(18) of ERISA.
6.13. Merger and Consolidations.
No Credit Party will merge or consolidate with or into any other
entity; provided that any Subsidiary of Holdings may be merged or consolidated
with or into (i) Holdings, if Holdings is the continuing or surviving
corporation or (ii) any other such Subsidiary, if the continuing or surviving
corporation is a Wholly Owned Subsidiary of Holdings.
6.14. Sale and Lease-Backs. Holdings will not, and will not permit any
of its Subsidiaries to, directly or indirectly, become or thereafter remain
liable as lessee or as guarantor or other surety with respect to the lessee's
obligations under any lease, whether an Operating Lease or a Capital Lease, of
any property (whether real or personal or mixed) whether now owned or hereafter
acquired, (i) which Holdings or any of its Subsidiaries has sold or transferred
or is to sell or transfer to any other Person or (ii) which Holdings or any such
Subsidiary intends to use for substantially the same purpose as any other
property which has been or is to be sold or transferred by Holdings or any such
Subsidiary to any Person in connection with such lease, if in the case of clause
(i) or (ii) above, such sale and such lease are part of the same transaction or
a series of related transactions or such sale and such lease occur with one year
of each other or are with the same other Person.
6.15. Sale or Discount of Receivables. Holdings will not, nor will it
permit any of its Subsidiaries to, sell, with or without recourse, or discount
(other than in connection with trade discounts or arrangements necessitated by
the creditworthiness of the other party, in each case in the ordinary course of
business consistent with past practice) or otherwise sell for less than the face
value thereof, notes receivable or accounts receivable owed to it by its third
party customers or suppliers.
6.16. Fine Products Company. Holdings will not, and will not permit any
Subsidiary to, transfer any cash or other property to Fine Products, other than
transfers of cash in amounts needed to enable Fine Products to pay amounts not
to exceed $25,000 in the aggregate then required to be paid by Fine Products to
Persons that are not Affiliates of Holdings. Holdings will not permit Fine
Products to engage in any business activity.
SECTION 7. Events of Default.
Upon the occurrence and during the continuance of any of the
following specified events (each an "Event of Default"):
7.01. Payments.
The Borrower shall (i) default, and such default shall continue for
fifteen or more days, in the payment when due of any principal of the Term Loan,
(ii) default, and such default shall continue for three or more Business Days,
in the payment when due of any interest on the Term Loan or under any other
Credit Document or (iii) fail to pay any other amounts owing hereunder for ten
Business Days after receiving notice thereof; or
7.02. Representations, Etc.
Any representation, warranty or statement made or deemed made by
operation of Section 3.01 by any Credit Party herein or in any other Credit
Document or in any written statement or certificate delivered or required to be
delivered pursuant hereto or thereto shall prove to be untrue in any material
respect on the date as of which made or deemed made by operation of Section
3.01; or
7.03. Covenants.
Any Credit Party shall (a) default in the due performance or
observance by it of any term, covenant or agreement contained in Sections 5.09,
5.10, 5.11, 5.13 or Section 6 hereof or Section 1.1 of any Mortgage or (b)
default in the due performance or observance by it of any other term, covenant
or agreement contained in this Agreement or any Security Document and such
default shall continue unremedied for a period of at least 30 days (or, in the
case of Section 5.12(iii), five Business Days) after the date of such default;
or
7.04. Default Under Other Agreements.
(a) Any Credit Party shall (i) default in any payment with respect to
any Indebtedness (other than Obligations) having a principal amount of $500,000
or more individually or $1,000,000 or more in the aggregate, for all Credit
Parties and their Subsidiaries, beyond the period of grace, if any, provided in
the instrument or agreement under which such Indebtedness was created or (ii)
default in the observance or performance of any agreement or condition relating
to any such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause any such Indebtedness to become due
prior to its stated maturity; or (b) any such Indebtedness of any Credit Party
or any of its respective Subsidiaries shall be declared to be due and payable,
or required to be prepaid other than by a regularly scheduled required
prepayment, prior to the stated maturity thereof; or
7.05. Bankruptcy, Etc.
Any Credit Party shall commence a voluntary case concerning itself
under Title 11 of the United States Code entitled "Bankruptcy," as now or
hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an
involuntary case is commenced against any Credit Party or any of its
Subsidiaries and the petition is not controverted within 20 days, or is not
dismissed for a period of 60 consecutive days, after commencement of the case;
or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of any Credit Party or any
of its Subsidiaries; or any Credit Party or any of its Subsidiaries commences
any other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to any Credit Party or
any of its Subsidiaries; or there is commenced against any Credit Party or any
of its Subsidiaries any such proceeding which remains undismissed for a period
of 60 consecutive days; or any Credit Party or any of its Subsidiaries is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered and continues unstayed for a
period of 60 consecutive days; or any Credit Party or any of its Subsidiaries
suffers any appointment of any custodian or the like for it or any substantial
part of its property to continue undischarged or unstayed for a period of 60
consecutive days; or any Credit Party or any of its Subsidiaries makes a general
assignment for the benefit of creditors; or any corporate action is taken by any
Credit Party or any of its Subsidiaries for the purpose of effecting any of the
foregoing; or
7.06. ERISA. (i) Any "reportable event" as described in Section 4043 of
ERISA or the regulations thereunder (excluding those events for which the
requirement for notice has been waived by regulation by the PBGC), or any other
event or condition, which the Required Banks determine constitutes reasonable
grounds under Section 4042 of ERISA for the termination of any Title IV Plan by
the PBGC or for the appointment by the appropriate United States District Court
of a trustee to administer or liquidate any Title IV Plan shall have occurred;
or
(ii) A trustee shall be appointed by a United States District Court
to administer any Title IV Plan; or
(iii) The PBGC shall institute proceedings to terminate any Title IV
Plan or to appoint a trustee to administer any Title IV Plan; or
(iv) A Credit Party or any of its ERISA Affiliates shall become liable
to the PBGC or any other party under Section 4062, 4063, 4064 or 4069 of ERISA
with respect to any Title IV Plan; or
(v) A Credit Party or any of its ERISA Affiliates shall become liable
to any Multiemployer Plan under Section 4201 et seq. of ERISA;
if the sum of each of such Credit Party's and its ERISA Affiliates'
various liabilities (such liabilities to include, without limitation, any
liability to the PBGC or to any other party under Section 4062, 4063, 4064 or
4069 of ERISA with respect to any Title IV Plan, or to any Multiemployer Plan
under Section 4201 et seq. of ERISA) which the Required Banks determine could
reasonably be expected to be incurred as a result of such events listed in
subclauses (i) through (v) above exceeds $1,000,000; or
7.07. Security Documents.
Any Security Document shall cease to be in full force and effect, or
shall cease to give the Lender the Liens, rights, powers and privileges
purported to be created thereby, in favor of the Lender, superior to and prior
to the rights of all third Persons and subject to no Liens other than Prior
Liens and Liens expressly permitted by the applicable Security Document or any
judgment creditor having a Lien against any item of Collateral shall commence
legal action to foreclose such Lien or otherwise exercise its remedies against
any item of Collateral; or
7.08. Guarantees.
Any Guarantee or any provisions thereof shall cease to be in full
force or effect in all material respects, or the Guarantor thereunder or Person
acting by or on behalf of such Guarantor shall deny or disaffirm such
Guarantor's obligations under such Guarantee or the Guarantor shall default in
the due performance or observance of any term, covenant or agreement on its part
to be performed or observed pursuant to such Guarantee; or
7.9. Judgments.
One or more judgments or decrees shall be entered against any Credit
Party or any of its Subsidiaries involving a liability of $500,000 or more in
the case of any one such judgment or decree or $1,000,000 or more in the
aggregate for all such judgments and decrees for all Credit Parties and their
Subsidiaries (in either case in excess of the amount covered by insurance as to
which the insurance company has acknowledged coverage) and any such judgments or
decrees shall not have been vacated, discharged, stayed or bonded pending appeal
for a period of 60 consecutive days from the entry thereof;
7.10. Ownership; Board Composition. (i) Holdings shall own less than
100% (on a fully diluted basis) of the issued and outstanding capital stock of
the Borrower, other than securities issued in the ordinary course of business
under any stock option or other benefit plan available to the employees or
directors of the Borrower or any of its Subsidiaries (each of clauses (i), (ii)
and (iii) of this Section 7.10 a "Change of Control"); or
(ii)(x) DNL Partners, Limited Partnership, together with the DNL
Affiliates, in the aggregate, cease to own or control at least more than 50% of
the Total Voting Power of Holdings, or (y) in the event that DNL Partners,
Limited Partnership distributes to its partners (pursuant to the terms of its
partnership agreement) all of the capital stock of Holdings owned by DNL
Partners, Limited Partnership, if, following such distribution, DNL Partners,
Limited Partnership, together with the DNL Affiliates, in the aggregate, cease
to own or control at least 33-1/3% of the Total Voting Power of Holdings;
provided that, for purposes of the calculations made pursuant to this paragraph
(ii) (I) in the event any shares of Class B Common Stock of Holdings are
converted into either shares of Class A Common Stock or Class C Common Stock of
Holdings (in any combination), then all such shares of Class A Common Stock
and/or Class C Common Stock issued upon such conversion shall be excluded and
(II) in the event shares of capital stock of Holdings are issued by Holdings as
consideration in whole or in part for the acquisition, directly or indirectly,
of another entity and the Aggregate Market Value of such shares of stock so
issued is more than $25,000,000, then all shares of capital stock of Holdings
issued in connection with such acquisition shall be excluded. For purposes of
the foregoing proviso the term "Aggregate Market Value" means (a) the average
closing price per share of the relevant class of Holdings capital stock during
the 10 consecutive trading day period preceding the tenth trading day
immediately preceding the closing date of the acquisition transaction with
respect to which such shares are to be issued, times (b) the number of shares of
such class of capital stock issued by Holdings in such acquisition transaction.
The closing price for any day shall be the last reported sale price regular way
or, in case no such reported sale takes place on such day, the average of the
closing bid and asked prices regular way for such day, in each case (1) on The
New York Stock Exchange as reported on the NYSE composite tape as reported in
The Wall Street Journal or another newspaper of general circulation in the
Borough of Manhattan, City of New York, New York customarily published on each
business day or (2) if the relevant shares of capital stock are not listed on
The New York Stock Exchange, on the principal national securities exchange on
which the relevant shares of capital stock of Holdings are listed or to which
such shares are admitted to trading or (3) if the relevant shares of capital
stock are not listed or admitted to trading on a national securities exchange,
in the over-the-counter market as reported by NASDAQ or any comparable system or
(4) if the relevant shares of capital stock are not listed on NASDAQ or a
comparable system, or if for any other reason the current market price per share
cannot be determined pursuant to the foregoing provisions of this paragraph, the
current market price per share shall be the fair market value thereof as
determined in good faith by the Board of Directors of Holdings; or
(iii) during any consecutive two-year period, individuals who at
the beginning of such period constituted the board of directors of Holdings
(together with any new directors whose election by such board of directors or
whose nomination for election by the stockholders of Holdings was approved by a
vote of a majority of the directors then still in office who are entitled to
vote to elect such new directors and were either directors at the beginning of
such period or persons whose election as directors or nomination for election
was previously so approved) cease for any reason to constitute a majority of the
board of directors of Holdings then in office; or
7.11. Certain Transactions Involving Carson Holdings Limited. Holdings
shall consolidate with or merge into, or sell, lease,convey or otherwise dispose
of all or substantially all of its assets to, Carson Holdings Limited;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Lender shall, by written notice to Holdings and
the Borrower, take any or all of the following actions, without prejudice to the
rights of the Lender to enforce its claims against Holdings or the Borrower,
except as otherwise specifically provided for in this Agreement (provided that
if an Event of Default specified in Section 7.05 shall occur, with respect to
any Credit Party, the result which would occur upon the giving of written notice
by the Lender as specified in clause (i) below shall occur automatically without
the giving of any such notice): (i) declare the principal of and accrued
interest in respect of the Term Loan and all Obligations owing hereunder and
thereunder to be, whereupon the same shall become, forthwith due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by each Credit Party; and/or (ii) enforce any or all of the
remedies created pursuant to the Security Documents. If an Event of Default is
cured or waived in accordance with the terms of the Agreement, it ceases (or is
waived, pursuant to the terms, and to the extent, of such waiver).
SECTION 8. Definitions.
As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms in this Agreement
shall include in the singular number the plural and in the plural the singular:
"Acquisition" means the purchase of all of the outstanding shares of
Johnson Products by the Borrower pursuant to the terms of the Purchase
Agreement.
"Additional Collateral" has the meaning provided in Section 5.10.
"Additional Real Property" has the meaning provided in Section 5.10.
"Affiliate" means with respect to any Person, any other Person directly
or indirectly controlling (including but not limited to all directors and
executive officers of such Person), controlled by, or under direct or indirect
common control with such Person. A Person shall be deemed to control a
corporation for the purposes of this definition if such Person possesses,
directly or indirectly, the power (i) to vote 10% or more of the securities
having ordinary voting power for the election of directors of such corporation
or (ii) to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" means this Credit Agreement, as the same may after its
execution be amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof.
"Asset Sale" means the sale, transfer or other disposition, to the
extent consummated after the Closing Date, (x) by Holdings of the Securities of
the Borrower held by it to any Person or (y) by Holdings or any Subsidiary of
Holdings to any Person other than Holdings or any Wholly Owned Subsidiary of
Holdings of any asset of Holdings or such Subsidiary (other than, in each such
case, (i) transactions included in the definition of Net Financing Proceeds,
(ii) the issuance of equity securities under any stock option or other benefit
plan available to the employees or directors of Holdings, the Borrower or any of
its Subsidiaries, (iii) sales, transfers or other dispositions of inventory in
the ordinary course of business and/or of equipment that has become worn out,
obsolete or damaged or otherwise unsuitable or no longer needed for use in
connection with the business of Holdings or any of its Subsidiaries or should be
replaced, as the case may be, in each case as determined in good faith by the
board of directors of Holdings or its Subsidiary, as the case may be, effected
in compliance with Section 6.10(A)(iv) or (v), and (iv) sales or other
dispositions pursuant to Section 6.10(A)(v), (vi) or (vii)).
"Authorized Officer" means any senior officer of the Borrower or
Holdings, as the case may be, designated as such in writing to the Lender by the
Borrower or Holdings, as the case may be.
"Bankruptcy Code" has the meaning provided in Section 7.05.
"Borrower" means Carson Products Company, a Delaware corporation.
"Borrower General Security Agreement" means the Borrower General
Security Agreement substantially in the form of Exhibit E hereto, as the same
may after its execution be amended, supplemented or otherwise modified from time
to time in accordance with the terms thereof and hereof.
"Borrower Intellectual Property Security Agreement" means the Borrower
Intellectual Property Security Agreement substantially in the form of Exhibit D
hereto, as the same may after its execution be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof and
hereof.
"Borrower Pledge Agreement" means the Borrower Securities Pledge
Agreement substantially in the form of Exhibit C hereto, except for such changes
therein as shall have been approved by the Lender, as the same may after its
execution be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
"Business Day" means any day excluding Saturday, Sunday and any day
which shall be in The City of New York, Chicago, Illinois or Savannah, Georgia a
legal holiday or a day on which banking institutions are authorized by law or
other governmental actions to close.
"Capital Lease" of any Person means any lease of any property (whether
real, personal or mixed) by that Person as lessee which, in conformity with
GAAP, is, or is required to be, accounted for as a capital lease on the balance
sheet of that Person, together with any renewals of such leases (or entry into
new leases) on substantially similar terms.
"Capitalized Lease Obligations" of any Person means all obligations
under Capital Leases of such Person or any of its Subsidiaries in each case
taken at the amount thereof accounted for as liabilities in accordance with
GAAP.
"Carson Holdings Limited" means a South African majority owned
subsidiary of the Borrower.
"Carson Holdings Limited Share Incentive Trust" means the trust
pursuant to which certain additional shares of common stock of Carson Holdings
Limited may be issued from time to time.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than one year from the date of acquisition, (ii) marketable direct obligations
issued by any State of the United States of America or any local government or
other political subdivision thereof rated (at the time of acquisition of such
security) at least AA by Standard & Poor's Ratings Group ("S&P") or the
equivalent thereof by Moody's Investors Service, Inc. ("Moody's") having
maturities of not more than one year from the date of acquisition, (iii) U.S.
dollar denominated time deposits, certificates of deposit and bankers'
acceptances of (x) any domestic commercial bank of recognized standing having
capital and surplus in excess of $250,000,000 or (y) any bank whose short-term
commercial paper rating (at the time of acquisition of such security) by S&P is
at least A-1 or the equivalent thereof or by Moody's is at least P-1 or the
equivalent thereof (any such bank, an "Approved Bank"), in each case with
maturities of not more than six months from the date of acquisition, (iv)
commercial paper and variable or fixed rate notes issued by any Approved Bank or
by the parent company of any Approved Bank and commercial paper and variable
rate notes issued by, or guaranteed by, any industrial or financial company with
a short-term commercial paper rating (at the time of acquisition of such
security) of at least A-1 or the equivalent thereof by S&P or at least P-1 or
the equivalent thereof by Moody's, or guaranteed by any industrial company with
a long-term unsecured debt rating (at the time of acquisition of such security)
of at least AA or the equivalent thereof by S&P or the equivalent thereof by
Moody's and in each case maturing within one year after the date of acquisition,
(v) repurchase agreements with any Approved Bank or any primary dealer in U.S.
government securities maturing within one year from the date of acquisition that
are fully collateralized by investment instruments that would otherwise be Cash
Equivalents; provided that the terms of such repurchase agreements comply with
the guidelines set forth in the Federal Financial Institutions Examination
Council Supervisory Policy -- Repurchase Agreements of Depository Institutions
With Securities Dealers and Others, as adopted by the Comptroller of the
Currency on October 31, 1985, and (vi) investments in money market mutual funds,
all of the assets of which are invested in securities and instruments of the
types set forth in clauses (i) through (iv) above.
"Certificate of Incorporation" means the respective certificates of
incorporation of Holdings or the Borrower and each other Credit Party.
"Change of Control" has the meaning provided in Section 7.10.
"Closing Date" means the date on or before July 14, 1998 on which this
Agreement is signed and the consummation of the Acquisition occurs.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" means all of the Pledged Collateral, Pledged Securities
and Mortgaged Real Property and all Additional Collateral and Additional Real
Property to the extent not otherwise included in any of the foregoing.
"Contingent Obligations" means, as to any Person, without duplication,
any obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business and amounts that are permitted by Section 6.06. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the maximum
amount that such Person may be obligated to expend pursuant to the terms of such
Contingent Obligation or, if such Contingent Obligation is not so limited, the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Credit Documents" means (i) this Agreement, (ii) each Note, (iii) each
Guarantee and (iv) each Security Document.
"Credit Party" means at all times Holdings and the Borrower and each
Subsidiary of Holdings that pledges any stock, grants any Lien or issues any
Guarantee pursuant to any Credit Document.
"Cutex Manufacturing Agreement" means the manufacturing agreement dated as
of April 30, 1997 between the Borrower and CONOPCO, Inc. d/b/a
Cheseborough-Ponds USA Co., a subsidiary of Unilever plc., relating to the
manufacture by CONOPCO, Inc. of certain products for the Borrower.
"Default" means any event, act or condition which with notice or lapse of
time, or both, would constitute an Event of Default.
"Destruction" has the meaning assigned to that term in each Mortgage.
"Dividends" has the meaning provided in Section 6.07.
"DNL Affiliates" means Vincent A. Wasik, S. Garrett Stonehouse, Lawrence E.
Bathgate, II and Morningside, in each case together with Affiliates thereof, any
member of the immediate family of any of the foregoing, or any trust or
foundation for the benefit of any of the foregoing.
"Dollars" means United States Dollars.
"Effective Date" has the meaning provided in Section 9.09.
"Environment" shall mean any surface water, ground water, drinking water
supply, land surface or subsurface strata or ambient air and includes, without
limitation, any indoor location.
"Environmental Authorizations" has the meaning provided in Section 4.22.
"Environmental Laws" shall mean all federal, state, local and foreign laws,
codes, regulations, ordinances, requirements, directives, orders, common law,
and administrative or judicial interpretations thereof that may be enforced by
any Governmental Authority or court, relating to pollution, the protection of
human health, the protection of the Environment, or the emission, discharge,
disposal or other release or threatened release of Hazardous Materials in or
into the Environment.
"Environmental Notice" shall mean any written notice or claim by any
Governmental Authority or other third party alleging liability (including,
without limitation, potential liability for investigatory costs, cleanup costs,
governmental costs, compliance costs or harm, injuries or damages to any person,
property or natural resources, or any fines or penalties) arising out of, based
upon, resulting from or relating to any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" means any entity, whether or not incorporated, which is
under common control or would be considered a single employer with a Credit
Party within the meaning of Section 414(b), (c) or (m) of the Code and
regulations promulgated under those sections or within the meaning of section
4001(b) of ERISA and regulations promulgated under that section.
"Event of Default" has the meaning provided in Section 7.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Debt" means the Indebtedness of Holdings and its Subsidiaries set
forth on Annex I.
"Existing Leases" means the Leases of Holdings and its Subsidiaries set
forth on Annex XIII.
"Federal Funds Rate" means on any one day the weighted average of the rate
on overnight Federal funds transactions with members of the Federal Reserve
System only arranged by Federal funds brokers as published as of such day by the
Federal Reserve Bank of New York, or if not so published, the rate then used by
leading banks in extending overnight loans to other leading banks.
"Financing Proceeds" means the cash (other than Net Cash Proceeds or
proceeds of any sale, transfer or other disposition of assets excluded from the
definition of "Asset Sale" by the exceptions contained therein) received by
Holdings, the Borrower and/or any of its Subsidiaries, directly or indirectly,
from any financing transaction of whatever kind or nature, including without
limitation from any incurrence of Indebtedness, any mortgage or pledge of an
asset or interest therein (including a transaction which is the substantial
equivalent of a mortgage or pledge), from the sale of tax benefits, from a lease
to a third party and a pledge of the lease payments due thereunder to secure
Indebtedness, from a joint venture arrangement, from an exchange of assets and a
sale of the assets received in such exchange, or any other similar arrangement
or technique whereby Holdings or any of its Subsidiaries obtains Cash in respect
of an asset, net of direct costs associated therewith. Financing Proceeds shall
not include any amounts with respect to (i) the incurrence or refinancing of the
Revolving Credit Facility, (ii) the incurrence or refinancing of Indebtedness
permitted by Sections 6.04(a), (b), (c) and (d) effected in accordance with the
applicable provisions of such Sections, or (iii) transactions between any of the
Borrower, Holdings and any Wholly Owned Subsidiaries of Holdings.
"Fine Products" has the meaning provided in Section 4.24.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the Effective Date.
"General Security Agreements" means and includes the Borrower General
Security Agreement, the Johnson Products General Security Agreement and any
other general security agreements delivered pursuant to Section 5.10.
"Governmental Authority" means any federal, state, local, foreign or other
governmental or administrative (including self-regulatory) body,
instrumentality, department or agency or any court, tribunal, administrative
hearing body, arbitration panel, commission, or other similar dispute-resolving
panel or body including, without limitation, those governing the regulation and
protection of the Environment, whether now or hereafter in existence, or any
officer or official thereof.
"Guarantee" means and includes, once executed and delivered, each of the
Holdings Guarantee, the Johnson Products Guarantee and each Subsidiary Guarantee
delivered pursuant to Section 5.13.
"Guarantor" for purposes of this Agreement means, individually, each of
Holdings and each Subsidiary which executes a Subsidiary Guarantee.
"Hazardous Materials" means all pollutants, contaminants, or chemical,
industrial, hazardous or toxic materials, substances, constituents or wastes,
including, without limitation, asbestos or asbestos-containing materials,
polychlorinated biphenyls and petroleum, oil, or petroleum or oil products,
derivatives or constituents, including, without limitation, crude oil or any
fraction thereof.
"Holdings" means Carson, Inc., a Delaware corporation.
"Holdings Guarantee" means the Holdings Guarantee substantially in the form
of Exhibit G hereto, as the same may after its execution be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
"Holdings Pledge Agreement" means the Holdings Securities Pledge Agreement
substantially in the form of Exhibit C hereto, as the same may after its
execution be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
"Indebtedness" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, other than current
liabilities in respect of the foregoing, liabilities for accumulated
post-retirement benefit obligations and liabilities for deferred compensation,
(iii) the face amount of all letters of credit issued for the account of such
Person and, without duplication, all drafts drawn and unpaid thereunder, (iv)
all Indebtedness of a second Person secured by any Lien on any property owned by
such first Person, whether or not such Indebtedness has been assumed by such
first Person, (v) all Capitalized Lease Obligations of such Person, (vi) all
obligations of such Person to pay a specified purchase price for goods or
services whether or not delivered or accepted, i.e., take-or-pay and similar
obligations, (vii) all obligations of such Person under Interest Rate Agreements
and (viii) all Contingent Obligations of such Person; provided that Indebtedness
shall not include trade payables, accrued expenses, accrued dividends and
accrued income taxes, in each case arising in the ordinary course of business.
"Intellectual Property" has the meaning provided in Section 4.16.
"Intellectual Property Security Agreements" means and includes the Borrower
Intellectual Property Security Agreement, the Johnson Products Intellectual
Property Security Agreement and any other intellectual property security
agreements delivered pursuant to Section 5.10.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement, interest rate futures
contract, interest rate option contract or other similar agreement or
arrangement to which the Borrower is a party, designed to protect the Borrower
or any of its Subsidiaries against fluctuations in interest rates.
"Inventory" means all of the inventory of the Borrower and its Subsidiaries
(on a consolidated basis) including without limitation: (i) all raw materials,
work in process, parts, components, assemblies, supplies and materials used or
consumed in the business of the Borrower and its Subsidiaries; (ii) all goods,
wares and merchandise, finished or unfinished, held for sale or lease or leased
or furnished or to be furnished under contracts of service; and (iii) all goods
returned or repossessed by the Borrower or any of its Subsidiaries.
"Johnson Products" means Johnson Products Co., Inc., a Florida corporation,
the outstanding shares of which are being purchased by the Borrower from the
Lender in the Acquisition pursuant to the Purchase Agreement.
"Johnson Products General Security Agreement" means the General Security
Agreement executed by Johnson Products substantially in the form of Exhibit E
hereto, as the same may after its execution be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof and
hereof.
"Johnson Products Guarantee" means the Subsidiary Guarantee executed by
Johnson Products substantially in the form of Exhibit G hereto, as the same may
after its execution be amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof and hereof.
"Johnson Products Intellectual Property Security Agreement" means the
Intellectual Property Security Agreement executed by Johnson Products
substantially in the form of Exhibit D hereto, as the same may after its
execution be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
"Landlord Lien Assurance" means, with respect to any Real Property leased
by Holdings or any of its Subsidiaries for use as a retail facility or for the
storage of Inventory, either (i) an agreement executed by the landlord of such
Real Property substantially in the form of Exhibit F hereto or (ii) a legal
opinion or other evidence, in each case reasonably satisfactory to the Lender,
that the laws of the jurisdiction or jurisdictions applicable to the lease and
the retail or storage facility do not give rise to any Lien in favor of the
landlord with respect to Inventory located at such facility.
"Lease" means any lease, sublease, franchise agreement, license, occupancy
or concession agreement.
"Lender's Office" means the office of the Lender located at 4400 Biscayne
Boulevard, Miami, FL 33137, or such other office as the Lender may hereafter
designate in writing to the Borrower.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien,
claim, hypothecation, assignment for security or charge of any kind (including
any agreement to give any of the foregoing, any conditional sale or other title
retention agreement or any lease in the nature thereof).
"Loss Proceeds" has the meaning provided in Section 2.02(A)(c).
"Management Agreement" means the management assistance agreement between
Morningside and the Borrower dated as of August 23, 1995, as amended.
"Materially Adverse Effect" means, (i) with respect to Holdings and the
Borrower and its Subsidiaries, any materially adverse effect (both before and
after giving effect to the Refinancing and the Acquisition and the other
transactions contemplated hereby) with respect to the operations, business,
properties, assets, liabilities (contingent or otherwise) or financial condition
or prospects of Holdings and the Borrower and its Subsidiaries, taken as a
whole, or (ii) any fact or circumstance (whether or not the result thereof would
be covered by insurance) as to which singly or in the aggregate there is a
reasonable likelihood of (w) a materially adverse change described in clause (i)
with respect to Holdings and the Borrower and its Subsidiaries, taken as a
whole, (x) the inability of any Credit Party to perform in any material respect
its Obligations or the inability of the Lender to enforce in any material
respect its rights purported to be granted hereunder or the Obligations
(including realizing on the Collateral), or (y) a materially adverse effect on
the ability to effect (including hindering or unduly delaying) the Acquisition,
the Refinancing and the other transactions contemplated hereby on the terms
contemplated hereby and thereby.
"Maturity Date" means November 30, 1998.
"Morningside" means Morningside Capital Group, L.L.C., a Connecticut
limited liability company.
"Mortgage" means a term loan mortgage (or deed of trust or deed to secure
debt, as the case may be), assignment of rents, security agreement and fixture
filing creating and evidencing a Lien on a Mortgaged Real Property, which shall
be substantially in the form of Exhibit B hereto, containing such schedules and
including such additional provisions and other deviations from such Exhibit as
shall be necessary to conform such document to applicable or local law or as
shall be customary under applicable or local law and which shall be dated the
date of delivery thereof and made by the owner (fee or leasehold, as the case
may be) of the Mortgaged Real Property described therein for the benefit of the
Lender, as mortgagee (or beneficiary, as the case may be), assignee and secured
party, as the same may after its execution be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof and hereof.
"Mortgaged Real Property" means each Real Property designated on Annex VI
which shall be subject to a Mortgage.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA with respect to which any Credit Party or any of their
respective ERISA Affiliates is or has been required to contribute or otherwise
may have liability.
"Net Award" has the meaning assigned to that term in each Mortgage.
"Net Cash Proceeds" means:
(a) with respect to any Asset Sale, the aggregate cash payments
received by Holdings, the Borrower and/or any of the Borrower's Subsidiaries, as
the case may be, from such Asset Sale, net of direct expenses of sale paid to
Persons who are not Affiliates; and
(b) with respect to any Taking or Destruction, the Net Award or Net
Proceeds, as applicable, resulting therefrom, to be applied as Net Cash Proceeds
under this Agreement pursuant to the provisions of Sections 1.13.3 and 1.13.4 of
the Mortgages;
provided, further, that Net Cash Proceeds shall not include any amounts or items
included in the definition of Financing Proceeds or Net Financing Proceeds
(including in any proviso appearing therein).
"Net Financing Proceeds" means Financing Proceeds, net of direct expenses
of the transaction paid to Persons who are not Affiliates.
"Net Proceeds" has the meaning assigned to that term in each Mortgage.
"Obligations" means all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing to the
Lender pursuant to the terms of this Agreement or any other Credit Document or
secured by any of the Security Documents.
"Officers' Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its Chairman of the Board (if an
officer) or its President or one of its Vice Presidents and by its Chief
Financial Officer or its Treasurer or any Assistant Treasurer; provided that
every Officers' Certificate with respect to compliance with a condition
precedent to the making of any Loan hereunder shall include (i) a statement that
the officers making or giving such Officers' Certificate have read such
condition and any definitions or other provisions contained in this Agreement
relating thereto, (ii) a statement that, in the opinion of the signers, they
have made or have caused to be made such examination or investigation as is
necessary to enable them to express an informed opinion as to whether or not
such condition has been complied with, and (iii) a statement as to whether, in
the opinion of the signers, such condition has been complied with.
"Operating Lease" of any Person, shall mean any lease (including, without
limitation, leases which may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) by such Person as Lessee which is not
a Capital Lease.
"Partial Release Conditions" has the meaning provided in Section 6.05(C).
"PBGC" means the Pension Benefit Guaranty Corporation established pursuant
to Section 4002 of ERISA, or any successor thereto.
"Pension Plan" means any pension plan as defined in Section 3(2) of ERISA
(other than a Multiemployer Plan) which is or has been maintained by or to which
contributions are or have been made by any Credit Party or their respective
ERISA Affiliates or as to which any Credit Party or their respective ERISA
Affiliates may have liability.
"Permitted Encumbrances" has the meaning provided in Section 6.03.
"Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
or any Governmental Authority.
"Pledge Agreements" means and includes the Holdings Pledge Agreement, the
Borrower Pledge Agreement, and any other securities pledge agreements
(including, without limitation, any supplements or amendments to any of the
foregoing) delivered pursuant to Section 5.10.
"Pledged Collateral" means all the Pledged Collateral as defined in each of
the General Security Agreements and in the Intellectual Property Security
Agreements.
"Pledged Securities" means all the securities and other collateral in which
a security interest is purported to be granted to the Lender by each of the
Pledge Agreements, including, without limitation, all Pledged Collateral as
defined therein.
"Prior Liens" means (i) Liens which, pursuant to the provisions of any
Security Document, are or may be superior to the Lien of such Security Document
and (ii) Liens on inventory, receivables, assets specifically related thereto
and proceeds thereof and of Holdings, the Borrower and their Subsidiaries to the
extent required by Section 9.15 which secure or will secure the obligations of
Holdings, the Borrower or their Subsidiaries under the Revolving Credit
Facility, which Liens shall be prior to the Lien of the Lender on such
inventory, receivables, assets specifically related thereto and proceeds
thereof.
"Purchase Agreement" means the Purchase Agreement dated as of June 16, 1998
by and between the Lender, as seller, and the Borrower, as buyer, as the same
may be amended from time to time.
"Real Property" means all right, title and interest of Holdings or any of
its Subsidiaries (including, without limitation, any leasehold estate) in and to
a parcel of real property owned, leased or operated by Holdings or any of its
Subsidiaries together with, in each case, all of Holdings' or such Subsidiaries'
right, title and interest in and to all improvements and appurtenant fixtures,
equipment, personal property, easements and other property and rights incidental
to the ownership, lease or operation thereof.
"Refinancing" has the meaning set forth in the recitals hereto.
"Release" has the meaning provided in Section 6.10(B).
"Release Conditions" has the meaning provided in Section 6.10(B).
"Released Real Property" has the meaning provided in Section 6.10(B).
"Regulation T" means Regulation T of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing margin requirements.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing margin requirements.
"Regulation X" means Regulation X of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing margin requirements.
"Restoration" has the meaning assigned to that term in each Mortgage.
"Revolving Credit Facility" means a credit facility or facilities to be
entered into on or after the Closing Date by Holdings, the Borrower and/or any
of their Subsidiaries with one or more lenders providing for revolving loans to
Holdings, the Borrower and/or their Subsidiaries, as the same may after its
execution be amended, supplemented, modified, restated, refinanced or replaced
from time to time.
"SEC" means the Securities and Exchange Commission or any successor
thereto.
"Securities" means any stock, shares, voting trust certificates, bonds,
debentures, options, warrants, notes, or other evidences of indebtedness,
secured or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of interest,
shares or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Documents" means each of the Mortgages, the Pledge Agreements,
the General Security Agreements, the Intellectual Property Security Agreements
and any other documents utilized to pledge as Collateral for the Obligations any
property or assets of whatever kind or nature.
"Senior Officer" means any of the chief executive officer, chief financial
officer, controller, chief accounting officer, chief operating officer,
treasurer or any executive vice president of Holdings or the Borrower.
"Senior Subordinated Notes" means the 10-3/8% Senior Subordinated Notes due
2007 of Holdings in an aggregate principal amount of $100,000,000 issued in
November 1997 (and any notes issued in exchange therefor pursuant to an
effective exchange offer registration statement under the Securities Act).
"South African Credit Agreement" means a South African inventory and
receivables facility between Carson Holdings Limited and a South African bank of
up to the equivalent of US$2,000,000 dollars, which shall be nonrecourse to
Holdings and its Subsidiaries other than Carson Holdings Limited and Carson
Products (Proprietary) Limited.
"State and Local Real Property Disclosure Requirements" means any state or
local laws requiring notification of the buyer of real property, or
notification, registration, or filing to or with any state or local agency,
prior to, concurrent with or following the sale of any real property or transfer
of control of an establishment, of the actual or threatened presence or release
into the environment, or the use, disposal, or handling of Hazardous Materials
on, at, under, or near the real property to be sold or the establishment for
which control is to be transferred.
"Subsidiary" of any Person means and includes (i) any corporation more than
50% of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries has more than a 50% equity interest at the time.
"Subsidiary Guarantee" means each guarantee substantially in the form of
Exhibit H hereto, executed and delivered by a Subsidiary in accordance with the
terms hereof, as the same may after its execution be amended, supplemented or
otherwise modified from time to time in accordance with the terms hereof and
thereof; provided, however, that (subject to change if applicable law is
modified from that in effect on the Closing Date), Carson Holdings Limited and
its subsidiaries, Carson U.K., Ltd., Carson Products do Brasil and any other
direct or indirect subsidiaries of Holdings organized or incorporated in a
jurisdiction other than the United States, any state of the United States or the
District of Columbia shall not be required to execute a Subsidiary Guarantee.
"Survey" means a survey of any Mortgaged Real Property (and all
improvements thereon): (i) prepared by a surveyor or engineer licensed to
perform surveys in the state where such Mortgaged Real Property is located, (ii)
certified by the surveyor (in a manner reasonably acceptable to the Lender) to
the Lender and the Title Company and (iii) complying in all respects with the
minimum detail requirements of the American Land Title Association as such
requirements are in effect on the date of preparation of such survey.
"Taking" has the meaning assigned to that term in each Mortgage.
"Term Loan" has the meaning provided in Section 1.01.
"Termination Event" means (i) a "reportable event" described in Section
4043 of ERISA or in the regulations thereunder (excluding events for which the
requirement for notice of such reportable event has been waived by the PBGC)
with respect to a Title IV Plan, or (ii) the withdrawal of any Credit Party or
any of their respective ERISA Affiliates from a Title IV Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, or (iii) the filing of a notice of intent to terminate a Title IV Plan or
the treatment of a Title IV Plan amendment as a termination under Section 4041
of ERISA, or (iv) the institution of proceedings by the PBGC to terminate a
Title IV Plan or to appoint a trustee to administer a Title IV Plan, or (v) any
other event or condition which might constitute reasonable grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Title IV Plan, or (vi) the complete or partial withdrawal
(within the meaning of Sections 4203 and 4205, respectively, of ERISA) of any
Credit Party or any of their respective ERISA Affiliates from a Multiemployer
Plan, or (vii) the insolvency or reorganization (within the meaning of Sections
4245 and 4241, respectively, of ERISA) or termination of any Multiemployer Plan,
or (viii) the failure to make any payment or contribution to any Pension Plan or
Multiemployer Plan or the making of any amendment to any Pension Plan which
could result in the imposition of a lien or the posting of a bond or other
security.
"Title Company" means Ticor Title Insurance or such other title insurance
or abstract company as shall be selected by Holdings or the Borrower and
reasonably acceptable to the Lender.
"Title IV Plan" means any Pension Plan described in Section 4021(a) of
ERISA, and not excluded under Section 4021(b) of ERISA.
"Total Voting Power" means the total combined voting power in the election
of directors of all shares of capital stock then outstanding.
"UCC" means the Uniform Commercial Code as in effect in the State of New
York or any other applicable jurisdiction in the United States.
"Wholly Owned Subsidiary" of any Person means any Subsidiary of such Person
to the extent all of the capital stock or other ownership interests in such
Subsidiary, other than directors' or nominees' qualifying shares or shares of
capital stock required to be owned by foreign nationals under applicable law, is
owned directly or indirectly by such Person.
"Written" or "in writing" means any form of written communication or a
communication by means of telex, telecopier device, telegraph or cable.
SECTION 9. Miscellaneous.
9.01. Payment of Expenses, Etc.
Holdings and the Borrower agree to: (i) pay all reasonable
out-of-pocket costs and expenses of the Lender in connection with the
negotiation, preparation, execution and delivery of any amendment, waiver or
consent relating to the Credit Documents and the documents and instruments
referred to therein and in connection with the enforcement of the Credit
Documents and the documents and instruments referred to therein (including,
without limitation, in each case, the reasonable fees and disbursements of
counsel for the Lender with prior notice to Holdings and the Borrower of the
engagement of any counsel); (ii) pay and hold the Lender harmless from and
against any and all present and future stamp and other similar taxes with
respect to the foregoing matters and save the Lender harmless from and against
any and all liabilities with respect to or resulting from any delay or omission
(other than to the extent attributable to the Lender) to pay such taxes; and
(iii) indemnify the Lender, its officers, directors, employees, representatives
and agents from and hold each of them harmless against any and all losses,
liabilities, claims, damages or expenses (including, without limitation, any and
all losses, liabilities, claims, damages or expenses arising under Environmental
Laws except with regard to any losses, costs, damages or expenses under
Environmental Laws arising from or relating to acts or omissions occurring after
the Lender takes possession of, uses, operates, manages, controls or sells the
Mortgaged Property provided, however, that such exception shall apply only to
the extent such losses, costs, damages or expenses arise solely from the gross
negligence, bad faith or willful misconduct of the Lender or of the agents of
the Lender) incurred by any of them as a result of, or arising out of, or in any
way related to, or by reason of, any investigation, litigation or other
proceeding (whether or not the Lender is a party thereto) related to the
entering into and/or performance of any Credit Document or the use of the
proceeds of the Term Loan hereunder or the Refinancing or the consummation of
any other transactions contemplated in any Credit Document, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any such losses, liabilities, claims, damages or expenses to the
extent incurred by reason of the gross negligence, bad faith or willful
misconduct of the Person to be indemnified).
9.02. Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and during the continuance of an Event of
Default, the Lender is hereby authorized at any time or from time to time,
without presentment, demand, protest or other notice of any kind to any Credit
Party or to any other Person, any such notice being hereby expressly waived, to
set off and to appropriate and apply any and all deposits (general or special)
and any other Indebtedness at any time held or owing by the Lender to or for the
credit or the account of any Credit Party against and on account of the
Obligations and liabilities of such Credit Party to the Lender under this
Agreement or under any of the other Credit Documents, and all other claims of
any nature or description arising out of or connected with this Agreement or any
other Credit Document, irrespective of whether or not the Lender shall have made
any demand hereunder.
9.03. Notices.
Except as otherwise expressly provided herein, all notices and other
communications provided for hereunder shall be in writing (including
telegraphic, telex, telecopier or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered, if to Holdings or the Borrower at 64
Ross Road, Savannah Industrial Park, Savannah, GA 31405, Attention: Chief
Financial Officer, with a copy to Morningside Capital Group, L.L.C., 1
Morningside Drive, North, Suite 200, Westport, CT 06880, Attention: President,
or if to another Credit Party, to its address specified in the other relevant
Credit Documents, as the case may be; if to the Lender, at the Lender's Office;
or, at such other address as shall be designated by any party in a written
notice to the other parties hereto. All such notices and communications shall,
when mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight
courier, be effective two days after being deposited in the mails, when
delivered to the telegraph company, cable company or overnight courier, as the
case may be, or when sent by telex or telecopier.
9.04. Benefit of Agreement. (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto, all future
holders of the Term Note evidencing the Term Loan, and their respective
successors and assigns; provided that no Credit Party may assign or transfer any
of its interests hereunder without the prior written consent of the Lender; and
provided, further, that the Lender may not assign or transfer any of its
interests hereunder without the prior written consent of Holdings and the
Borrower, which consent shall not be unreasonably withheld; provided, that if an
Event of Default occurs, no consent of Holdings or the Borrower shall be
required.
(b) The Lender agrees to keep confidential (and to cause its officers,
directors, employees, agents and representatives to keep confidential) all
information, materials and documents furnished to the Lender (the
"Information"). Notwithstanding the foregoing, the Lender shall be permitted to
disclose Information (i) to such of its officers, directors, employees, agents
and representatives as need to know such Information in connection with its
participation in any of the transactions contemplated hereby or the
administration of this Agreement; (ii) to the extent required by applicable laws
and regulations or by any subpoena or similar legal process, or requested by any
governmental agency or authority; (iii) to the extent such Information (A)
becomes publicly available other than as a result of a breach of this Agreement
or any other confidentiality agreement with respect thereto, (B) becomes
available to the Lender on a non-confidential basis from a source other than
Holdings, the Borrower, or any of their respective subsidiaries, officers,
directors, employees, agents or representatives or (C) was available to the
Lender on a non-confidential basis prior to its disclosure to the Lender by the
Borrower, Holdings or any of their respective subsidiaries; (iv) to the extent
the Borrower, Holdings or any of their respective subsidiaries shall have
consented to such disclosure in writing; or (v) in connection with the sale of
any Collateral pursuant to the provisions of any of the Security Documents; or
(vi) to a prospective transferee so long as such prospective transferee shall
enter into a written agreement with the Lender to preserve the confidentiality
of any Information to the extent set forth in this Section 9.04(b).
9.05. No Waiver; Remedies Cumulative.
No failure or delay on the part of the Lender in exercising any
right, power or privilege hereunder or under any other Credit Document and no
course of dealing between any Credit Party and the Lender shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power, or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Lender would
otherwise have. No notice to or demand on any Credit Party in any case shall
entitle any Credit Party to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Lender to any
other or further action in any circumstances without notice or demand.
9.06. Calculations; Computations.
(a) The financial statements to be furnished to the Lender pursuant
hereto shall be made and prepared in accordance with GAAP consistently applied
throughout the periods involved (except as set forth in the notes thereto or as
otherwise disclosed in writing by Holdings to the Lender).
(b) All computations of interest and fees hereunder shall be made on
the actual number of days elapsed over a year of 365 days.
9.07. Governing Law; Submission to Jurisdiction; Venue.
(a) This Agreement and the rights and obligations of the parties
hereunder shall be construed and enforced in accordance with and be governed by
the laws of the State of New York applicable to contracts made and to be
performed wholly therein. Any legal action or proceeding with respect to this
Agreement or any other Credit Document may be brought in the courts of the State
of New York or of the United States for the Southern District of New York, and,
by execution and delivery of this Agreement, each party hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts. Each
party further irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to the respective
party at its address for notices pursuant to Section 9.02, such service to
become effective 15 days after such mailing. Each Credit Party hereby
irrevocably appoints the Borrower and such other persons as may hereafter be
selected by the Borrower irrevocably agreeing in writing to serve as its agent
for service of process in respect of any such action or proceeding. Nothing
herein shall affect the right of any party to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
any party in any other jurisdiction.
(b) Each party hereby irrevocably waives any objection which it may now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Credit Document brought in the courts referred to in clause (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum.
9.08. Counterparts.
. This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. A set of counterparts executed by all
the parties hereto shall be lodged with Holdings, the Borrower and the Lender.
9.09. Effectiveness
This Agreement shall become effective on the date (the "Effective
Date") on which Holdings, the Borrower and the Lender shall have signed a copy
hereof (whether the same or different copies).
9.10. Headings Descriptive.
The headings of the several sections and subsections of this
Agreement are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.
9.11. Amendment or Waiver.
Neither this Agreement nor any other Credit Document nor any terms
hereof or thereof may be changed, waived, discharged or terminated unless such
change, waiver, discharge or termination is in writing signed by the Borrower
and the Lender.
9.12. Survival.
All indemnities set forth herein including, without limitation, in
Section 9.01 shall survive the execution and delivery of this Agreement and the
making of the Term Loan and the repayment of the Obligations.
9.13. WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
9.14. Independence of Covenants.
All covenants hereunder shall be given independent effect so that if
a particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or be otherwise within the
limitation of, another covenant shall not avoid the occurrence of a Default or
an Event of Default if such action is taken or condition exists.
9.15. Intercreditor Agreement with respect to Revolving Credit Facility
The Lender hereby covenants and agrees to negotiate in good faith and
execute in a timely manner an intercreditor agreement, in form and substance
reasonably satisfactory to the Lender, with the agent and/or the lenders under
the Revolving Credit Facility with respect to the priority of the Liens of such
lenders on the inventory, receivables, assets specifically related thereto and
proceeds thereof of Holdings, the Borrower and their Subsidiaries to the extent
reasonably necessary to facilitate the execution of the Revolving Credit
Facility.
[signature pages follow]
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Agreement to be duly executed and delivered as of the date first above
written.
CARSON PRODUCTS COMPANY
By: __________________________
Name:
Title:
CARSON, INC.
By: __________________________
Name:
Title:
Credit Agreement among Carson Products Company,Carson,Inc. and IVAX Corporation.
IVAX CORPORATION
By:
Name:
Title:
ANNEX I
Existing Debt
Debt Repaid on or prior to Closing Date
ANNEX II
Subsidiaries
ANNEX III
Collective Bargaining Agreements
ANNEX IV
INSURANCE
ANNEX V
Liens
ANNEX VI
Mortgaged Real Property
ANNEX VII
Litigation
ANNEX VIII
Consents
ANNEX IX
Restrictions
ANNEX X
Environmental Matters
ANNEX XI
Taxes
ANNEX XII
Schedule of Intellectual Property
ANNEX XIII
Schedule of Existing Leases
ANNEX XIV
Compliance with Laws
Carson, Inc. Completes Acquisition
of
Johnson Products Company
July 14, 1998 - Carson, Inc., a leading international manufacturer and marketer
of hair care products for people of African descent, announced today that it has
completed the previously announced acquisition of Johnson Products Company, a
major manufacturer of personal care products for the ethnic market, from IVX
Bioscience Inc.
Johnson Products' hair care products include brand names such as Gentle
Treatment(R), Ultra Sheen(R), Precise(R), Bantu(R), and Afro Sheen(R). Its
cosmetics are sold under the Posner name. Also included in the acquisition was
the Dermablend(R) corrective cosmetics line. The purchase price was
approximately $85 million.
"Johnson Products Co. provides a major strategic addition to our company. It
fits perfectly with Carson's focus on the worldwide ethnic personal care
business," said Gregory J. Andrews, Chief Executive Officer of Carson. "Our
products now have leading positions in virtually every category of the U.S.
ethnic hair care business. Johnson provides us with additional highly recognized
brands to strengthen our position internationally, where we expect to be a
growing presence."
Mr. Andrews, who joined Carson as CEO this month after a 9-year career as a
senior executive with Colgate-Palmolive Company, had prior to that been General
Manager and Executive Vice President of Johnson Products Co. "My experience with
Johnson Products should help hasten the smooth integration of these two fine
companies," said Mr. Andrews.
Initial financing for the acquisition was a combination of $35 million in cash
and a short term $50 million seller note. The Company has said that the
acquisition will be funded in part by proceeds of the Company's recent sale of a
portion of its ownership of Carson Holdings, its publicly traded South African
subsidiary, and in part from proceeds expected to be generated by the previously
announced divestiture of the Cutex line of nail polish and nail polish removers.
The Company also announced it intends to divest Dermablend(R) immediately, as it
does not fit with Carson's strategic focus on the worldwide ethnic personal care
business.
Carson, Inc. is a leading global manufacturer and marketer of ethnic hair care
products which are specifically formulated to address the unique hair
characteristics of people of African descent, including hair relaxers and
texturizers, hair color, shaving products, and hair care maintenance products.
Carson sells its products in the U.S. and in over 60 countries around the world
under the brand names Dark & Lovely, Excelle, Beautiful Beginnings, Dark &
Natural, Magic and Let's Jam.
Statements in this press release concerning the Company's business outlook or
future economic performance, anticipated profitability, revenues, expenses, or
other financial items, together with other statements that are not historical
facts, are "forward-looking statements" as that term is defined under Federal
Securities Laws. "Forward-looking statements" are subject to risks,
uncertainties and other factors which could cause actual results to differ
materially from those stated in such statements. Such risks, uncertainties and
factors include, but are not limited to, industry cyclicality, fluctuations in
customer demand and order patterns, the seasonal nature of the business, changes
in pricing, and general economic conditions, as well as other risks detailed in
the Company's filings with the Securities and Exchange Commission.
