SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
To Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): December 9, 1998
CARSON, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-2271 06-1428605
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
64 Ross Road, Savannah Industrial Park, Savannah, Georgia 31405
(Address of Principal Executive Offices) (Zip Code)
(912) 651-3400
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition or Disposition of Assets
On December 9, 1998, Carson, Inc., a Delaware corporation (the "Company"),
sold substantially all the assets of the CUTEX nail polish remover and nail
implements business to The Cutex Company, a Delaware corporation newly-created
by the investment firm The Shansby Group ("Cutex Co."), for $30 million in cash
pursuant to an Asset Purchase Agreement (the "Asset Purchase Agreement") by and
between Cutex Co. and Carson Products Company, a Delaware corporation and
wholly-owned subsidiary of the Company ("CPC"). As a result of this sale, the
Company expects to report a loss on the sale of CUTEX of approximately $14.1
million ($8.5 million, or $.57 per share, net of tax) in the forth quarter of
1998.
The assets sold include certain intellectual property including and
relating to the CUTEX name, together with inventory, contracts, equipment and
other assets used by CPC in connection with its business of selling,
distributing, packaging, manufacturing and marketing of CUTEX nail polish
remover and nail implement products in the United States and Puerto Rico (the
"Territory"), but excluding inventory, contracts and other assets used in the
business of selling, distributing, packaging, manufacturing and marketing of
CUTEX nail enamel and treatment products in the Territory. In connection with
the Asset Purchase Agreement, Cutex Co. and CPC entered into (i) an exclusive
royalty-free license agreement pursuant to which Cutex Co. agreed to license to
CPC the CUTEX name and certain related intellectual property to enable CPC to
continue selling CUTEX nail enamel and treatment products and (ii) an option
agreement pursuant to which Cutex Co. has the option to purchase from CPC at any
time on or before June 9, 1999 the inventory, contracts and other assets
relating to the CUTEX nail enamel and treatment business, which were retained by
CPC under the Asset Purchase Agreement.
Although the Company has retained the CUTEX nail enamel business,
management does not view it as a strategic part of the Company and intends to
sell it as soon as possible, subject to the option agreement discussed above. In
the fourth quarter of 1998, the Company expects to record a $6 million charge to
cost of sales to write down the value of remaining nail enamel inventory on hand
and for costs associated with the disposal of customer merchandise already in
retail outlets.
The foregoing discussion is a summary of the provisions of the Asset
Purchase Agreement and the other agreements referred to therein, which are
attached to this Current Report on Form 8-K and are incorporated herein by
reference. Such summary does not purport to be complete and is qualified in its
entirety by reference to such agreements.
The net proceeds from the sale were used to prepay the Company's $8
million unsecured term loan in its entirety and to reduce the outstanding
principal balance of the Company's $75 million secured term loan. See "Item 5.
Other Events" below.
Item 5. Other Events
On December 8, 1998 the Company entered into (i) a Secured Term Loan
Agreement with CPC, Quantum Partners LDC, as administrative agent for the
lenders (the "Administrative Agent"), Norwest Bank Minnesota, N.A., as
collateral agent (the "Collateral Agent"), and the lenders party thereto
relating to a secured $75 million term loan (the "Secured Term Loan") and (ii)
an Unsecured Term Loan Agreement with CPC, the Administrative Agent and the
lenders party thereto relating to an unsecured $8 million term loan (the
"Unsecured Term Loan"; and together with the Secured Term Loan, the "Term
Loans"). The proceeds of the Term Loans were used to repay the Company's
existing $50 million term loan and to purchase and retire $27 million of Senior
Subordinated Notes due 2007 for $23 million in cash. The remaining net proceeds
(after expenses) from the refinancing will be used by the Company as working
capital.
The net proceeds from the sale of the CUTEX business described above were
used to prepay the Unsecured Term Loan in full and to reduce the outstanding
principal balance of the Secured Term Loan to approximately $60 million.
As a result of the refinancing transactions discussed above, the Company
expects to record a net extraordinary gain of $1.1 million (net of tax expense)
in the forth quarter of 1998 related to the prepayment of long-term debt.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information:
(1) Carson, Inc. Pro Forma Consolidated Balance Sheet(unaudited
as of September 30,1998
(2) Carson, Inc. Pro Forma Consolidated Statement of Operations
for the Year Ended December 31, 1997
(3) Carson, Inc. Pro Forma Consolidated Statement of Operations
for the Nine Months Ended September 30, 1998
(4) Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
(c) Exhibits. The following documents are being filed herewith by the
Company as exhibits to this Current Report on Form 8-K:
2.1 Asset Purchase Agreement dated December 9,1998 by and between
Cutex Co. and CPC.
2.2 License Agreement dated December 9, 1998 by and between Cutex
Co. and CPC.
2.3 Option Agreement dated December 9, 1998 by and between Cutex Co.
and CPC.
4.1 Secured Term Loan Agreement dated December 8, 1998 by and
between the Company, CPC, the Administrative Agent, the
Collateral Agent and the lenders party thereto
99.1 Press Release of the Company dated December 10, 1998.
99.2 Press Release of the Company dated December 11, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized this 23 day of December, 1998.
CARSON, INC.
By: /s/Robert W. Pierce
Executive Vice President, Chief Financial Officer
and Secretary
(Principal Financial Officer)
<PAGE>
(B) Pro Forma Financial Information -
The following pro forma summary financial data has been prepared giving
effect to the following transactions as if they had taken place at January 1,
1997:
(1) Acquisition of Johnson Products Company
(2) Issuance of the $50 million Short-term Loan
(3) Disposition of the CUTEX nail polish remover and nail
implements business
(4) Issuance of the $75 million Secured Term Loan and the $8
million Unsecured Term Loan
(5) Purchase and retirement of $27 million of the Senior
Subordinated Notes
(6) Repayment of the $50 million Short-term Loan
(7) Repayment of 22.7 million of the Secured and Unsecured
Term Loans
For purposes of this pro forma information, transactions (4) through (7) above
are referred to collectively as the "Refinancing". Pro forma information giving
effect to the acquisition of Johnson Products Company at January 1, 1997 and
issuance of the $50 million short-term loan was previously provided by the
Company in a Form 8-K/A dated July 14, 1998 and filed on September 28, 1998.
This 8-K provides pro forma information regarding the CUTEX disposal, the
Refinancing and the Johnson Products acquisition because all of these
transactions are so closely related that the pro forma information is less
meaningful viewed independently.
Immediately prior to the Company's acquisition of Johnson Products, Johnson
Products sold Flori Roberts, Inc., to an outside third party. Therefore, the
operating results of Flori Roberts, Inc., have been deducted from the pro forma
statements of operations. The Dermablend line of corrective cosmetics which are
sold in department and specialty stores was purchased by the Company as part of
the Johnson Products acquisition. Originally, management intended to dispose of
the Dermablend line. The results of operations related to Dermablend were
therefore excluded from the pro forma statements of operations presented in the
Form 8-K/A dated July 14, 1998. The Company recently announced its intent to
operate Dermablend on a longer-term basis and will, therefore, begin reporting
the operating results of Dermablend in the Company's consolidated statement of
operations. The pro forma statements of operations have therefore been revised
to include the results of operations related to Dermablend and to include
additional amortization expense for the $15 million of goodwill originally
assigned to Dermablend. The assets and liabilities related to Dermablend are
included in the Company's consolidated balance sheet since its acquisition and,
therefore, in the accompanying pro forma balance sheet
Historical operating results for both CUTEX nail polish remover and nail enamel
have been deducted from the pro forma statements of operations. Although the
nail enamel business has been retained by the Company, management does not view
it as a strategic part of the Company and intends to sell it as soon as
possible, subject to the option agreement with Cutex Company. The pro forma
statements of operations for the year ended December 31, 1997 include a $6
million charge to cost of sales to write down the value of remaining nail enamel
inventory on hand and for costs associated with disposing of customer
merchandise already in retail outlets. The pro forma statements of operations
for the year ended December 31, 1997 also include a $14.1 million loss on the
sale of the CUTEX nail polish remover business.
The pro forma financial information is not necessarily indicative of the results
of operations or the financial position which would have been obtained had the
above transactions been consummated at January 1, 1997. The pro forma financial
information should be read in conjunction with the historical financial
statements of the Company.
<PAGE>
<TABLE>
Carson, Inc.
Pro Forma Consolidated Balance Sheets (Unaudited)
As of September 30, 1998
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Retirement Repayment Repayment
of $27 of $50 of 22.7
Carson, Inc. Issuance of Million Million Sale of Million Carson, Inc.
(historical) of New Debt Senior Note Term Loan CUTEX New Debt (pro forma)
- ------------------------------------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 21,509 $ 78,892(1) $ (23,238)(2) $ (50,190)(5) $ 28,151(6) $ (22,692)8) $ 32,432
Accounts receivable, net 35,907 -- -- -- -- -- 35,907
Inventories, net 31,704 -- -- -- (2,147)(6) -- 27,557
(2,000)(7)
Other current assets 4,048 -- -- -- -- -- 4,048
Property, plant and equipment, net 34,282 -- -- -- -- -- 34,282
Intangible assets, net, and other assets 173,412 4,108(1) (1,135)(4) -- (39,815)(6) (1,123)(9) 135,447
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $300,862 $ 83,000 $ (24,373) $ (50,190) $ (15,811) $ (23,815) $269,673
Liabilities and stockholders' equity
Current liabilities:
Notes payable $ 50,000 $ -- $ -- $ (50,000)(5) $ -- $ -- $ --
Accounts payable 12,168 -- -- -- -- -- 12,168
Due for A&J Cosmetics 3,275 -- -- -- -- -- 3,275
Accrued expenses 19,847 -- (288)(2) (190)(5) 308(6) (16)(8) 23,661
4,000(7)
Income taxes payable 10,940 -- 1,620 (3) -- (5,648)(6) (449)(9) 3,609
(454)(4) (2,400)(7)
Long-term debt 100,377 83,000(1) (27,000)(2) -- -- (22,676)(8) 133,701
Deferred income taxes and other liabilities 1,655 -- -- -- -- -- 1,655
Minority interest in subsidiary 19,547 -- -- -- -- -- 19,547
Common stock 150 -- -- -- -- -- 150
Paid in capital 80,650 -- -- -- -- -- 80,650
Accumulated earnings (deficit) 9,607 -- 2,430 (3) -- (8,471)(6) (674)(9) (1,389)
(681)(4) (3,600)(7)
Accumulated other comprehensive losses (6,301) -- -- -- -- -- (6,301)
Note receivable from employee shareholders,net (716) -- -- -- -- -- (716)
Treasury stock (337) -- -- -- -- -- (337)
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $300,862 $ 83,000 $ (24,373) $ (50,190) $ (15,811) $ (23,815) $269,673
</TABLE>
<PAGE>
<TABLE>
Carson, Inc.
Pro Forma Consolidated Statements of Operations (Unaudited)
Year Ended December 31, 1997
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C>
Less
Johnson ---------- Pro forma
Products Flori Adjustments
Carson, Inc. Company Roberts, Increase/
(historical) (consolidated) Inc. (decrease) Subtotal
- -----------------------------------------------------------------------------------------------------------------------
Net sales $ 109,631 $ 80,217 $ 18,806 $ -- $ 171,042
Cost of goods sold 50,510 35,285 7,851 -- 77,944
- -----------------------------------------------------------------------------------------------------------------------
Gross profit 59,121 44,932 10,955 -- 93,098
Marketing and selling expenses 28,158 32,301 13,710 -- 46,749
General and administrative expenses 14,921 8,673 2,285 -- 21,309
Depreciation and amortization 3,793 1,615 1,375 2,045 (10) 6,078
- -----------------------------------------------------------------------------------------------------------------------
Operating income 12,249 2,343 (6,415) (2,045) 18,962
- -----------------------------------------------------------------------------------------------------------------------
Interest expense (6,444) -- -- (4,500)(11) (10,944)
Loss on sale of CUTEX -- -- -- -- --
Other income (expense) 1,680 (451) (179) -- 1,408
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes and
minority interest 7,485 1,892 (6,594) (6,545) 9,426
(Provision for) benefit from income taxes (2,779) (880) 1,748 2,618 (14) (2,798)
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) before minority interest 4,706 1,012 (4,846) (3,927) 6,637
Minority interest in earnings of subsidiary (952) -- -- -- (952)
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ 3,754 $ 1,012 $ (4,846) $ (3,927) $ 5,685
Earnings (loss) per share from continuing
operations $ 0.25 $ 0.38
Weighted average common shares outstanding 15,003 15,003
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Less
------- CUTEX Carson, Inc.
Subtotal CUTEX Adjustments Refinancing (pro forma)
- -----------------------------------------------------------------------------------------------------------------------
Net sales $ 171,042 $ 17,800 $ -- $ -- $ 153,242
Cost of goods sold 77,944 7,971 6,000 (7) -- 75,973
- -----------------------------------------------------------------------------------------------------------------------
Gross profit 93,098 9,829 (6,000) -- 77,269
Marketing and selling expenses 46,749 2,334 -- -- 44,415
General and administrative expenses 21,309 130 -- -- 21,179
Depreciation and amortization 6,078 683 -- -- 5,395
- -----------------------------------------------------------------------------------------------------------------------
Operating income 18,962 6,682 (6,000) -- 6,280
- -----------------------------------------------------------------------------------------------------------------------
Interest expense (10,944) -- -- 4,500 (12) (12,757)
(6,313)(13)
Loss on sale of CUTEX -- -- (14,119)(6) -- (14,119)
Other income (expense) 1,408 -- -- -- 1,408
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes
and minority interest 9,426 6,682 (20,119) (1,813) (19,188)
(Provision for) benefit from income taxes (2,789) (2,673) 8,048(14) 725 (14) 8,657
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) before minority interest 6,637 4,009 (12,071) (1,088) (10,531)
Minority interest in earnings of subsidiary (952) -- -- -- (952)
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ 5,685 $ 4,009 $ (12,071) $ (1,088) $ (11,483)
Earnings (loss) per share from continuing
operations $ 0.38 $ (0.77)
Weighted average common shares outstanding 15,003 15,003
</TABLE>
<PAGE>
<TABLE>
Carson, Inc.
Pro Forma Consolidated Statements of Operations (Unaudited)
Nine Months Ended September 30, 1998
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C>
Less
Johnson --------------Pro forma
Products Flori Adjustments
Carson, Inc. Company Roberts, Increase/
(historical) (consolidated) Inc. (decrease) Subtotal
- ---------------------------------------------------------------------------------------------------------------------
Net sales $ 105,534 $ 42,583 $ 9,308 $ -- $ 138,809
Cost of goods sold 58,436 16,528 1,334 -- 73,630
- ---------------------------------------------------------------------------------------------------------------------
Gross profit 47,098 26,055 7,974 -- 65,179
Marketing and selling expenses 30,225 12,030 5,074 -- 37,181
General and administrative expenses 19,983 7,118 1,766 -- 25,335
Depreciation and amortization 2,421 867 723 1,534 (10) 4,099
Restructuring charges 5,751 -- -- -- 5,751
- ---------------------------------------------------------------------------------------------------------------------
Operating income (loss) (11,282) 6,040 411 (1,534) (7,187)
- ---------------------------------------------------------------------------------------------------------------------
Interest expense (9,633) -- -- (3,375)(11) (13,008)
Gain on sale of subsidiary stock 49,140 -- -- -- 49,140
Loss on write-off of investment (3,768) -- -- -- (3,768)
Other income, net 2,761 45 (234) -- 3,040
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes and
minority interest 27,218 6,085 177 (4,909) 28,217
Provision for income taxes (11,015) (2,312) (67) 1,964 (14) (11,297)
- ----------------------------------------------------------------------------------------------------------------------
Income before minority interest 16,203 3,773 110 (2,945) 16,921
Minority interest in earnings of subsidiary (1,652) -- -- -- (1,652)
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ 14,551 $ 3,773 $ 110 $ (2,945) $ 15,269
Earnings (loss) per share from continuing
operations $ 0.97 $ 1.02
Weighted average common shares outstanding 14,990 14,990
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Less
------- Carson, Inc.
Subtotal CUTEX Refinancing (pro forma)
- ---------------------------------------------------------------------------------------------------------
Net sales $ 138,809 $ 16,514 $ -- $ 122,295
Cost of goods sold 73,630 8,397 -- 65,233
- ---------------------------------------------------------------------------------------------------------
Gross profit 65,179 8,117 -- 57,062
Marketing and selling expenses 37,181 4,788 -- 32,393
General and administrative expenses 25,335 136 -- 25,199
Depreciation and amortization 4,099 773 3,326
Restructuring charges 5,751 -- -- 5,751
- ---------------------------------------------------------------------------------------------------------
Operating income (loss) (7,187) 2,420 -- (9,607)
- ---------------------------------------------------------------------------------------------------------
Interest expense (13,008) -- 3,375 (12) (14,368)
(4,735)(13)
Gain on sale of subsidiary stock 49,140 -- -- 49,140
Loss on write-off of investment (3,768) -- -- (3,768)
Other income, net 3,040 -- -- 3,040
- ---------------------------------------------------------------------------------------------------------
Income before income taxes
and minority interest 28,217 2,420 (1,360) 24,437
Provision for income taxes (11,297) (968) 544 (14) (9,785)
- ---------------------------------------------------------------------------------------------------------
Income before minority interest 16,921 1,452 (816) 14,653
Minority interest in earnings of subsidiary (1,652) -- -- (1,652)
- ---------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ 15,269 $ 1,452 $ (816) $ 13,001
Earnings (loss) per share from continuing
operations $ 1.02 $ .87
Weighted average common shares outstanding 14,990 14,990
</TABLE>
<PAGE>
Carson, Inc.
Notes to Pro Forma Consolidated Financial Statements (Unaudited)
1. The Company received cash proceeds of $78.9 million, net of investment
banking and other fees of $4.1 million, from issuance of the $75
million Secured Term Loan and the $8 million Unsecured Term Loan.
2. The Company used $23.2 million of the proceeds of the Secured Term Loan
and Unsecured Term Loan to purchase and retire $27 million principal of
its Senior Subordinated Notes for 85% of the face amount, or $22.95
million, plus accrued interest of $288,000.
3. As a result of the purchase and retirement of $27 million of the Senior
Subordinated Notes for $22.95 million in cash, the Company recognized
an extraordinary gain of $2.4 million, net of tax expense of $1.6
million.
4. Also as a result of the purchase and retirement of $27 million of the
Senior Subordinated Notes, the Company recognized an extraordinary loss
of $0.7 million, net of a tax benefit of $0.5 million, for the
write-off of 27% of the unamortized debt acquisition fees related to
issuance of the original $100 million of these notes.
5. The Company used $50.2 million of the proceeds of the Secured Term Loan
and Unsecured Term Loan to repay its existing $50 million term loan,
which was used to purchase Johnson Products Company, plus accrued
interest.
6. The Company sold the CUTEX nail polish remover business, including $2.1
million of remover inventory, for net cash proceeds of $28.2 million,
including investment banking and other fees of approximately $1.8
million. The Company has accrued another $308,000 of fees related to
the sale. The Company wrote off the remaining $39.8 million of goodwill
related to CUTEX, resulting in a loss on the sale of the CUTEX remover
business of $14.1 million ($8.5 million, net of a tax benefit of $5.6
million). This loss appears only on the pro forma statements of
operations for the year ended December 31, 1997 because the statements
are presented as though the sale occurred on January 1, 1997.
7. In connection with the sale of the CUTEX nail polish remover business,
the Company has provided a reserve of $6.0 million against its CUTEX
nail enamel and treatment products inventory on hand and remaining in
retail outlets. This loss appears only on the pro forma statements of
operations for the year ended December 31, 1997 because the statements
are presented as though the sale of the CUTEX nail polish business
occurred on January 1, 1997.
8. Net cash proceeds of $22.7 million from the sale of the CUTEX nail
polish remover business were used to pay off the $8 million Unsecured
Term Loan and to prepay $14.7 million of the Secured Term Loan as well
as a small amount of accrued interest on these loans.
9. As a result of the prepayment of $22.7 million of the Secured and
Unsecured Term Loans, the Company recognized an extraordinary loss of
$0.7 million, net of a tax benefit of $0.4 million, for the write-off
of approximately 27% of the $4.1 million debt acquisition fees related
to these loans.
10. A pro forma adjustment has been included to record additional
depreciation expense based on the new cost bases and useful lives of
the fixed assets acquired and additional amortization expense based on
the goodwill recorded as a result of the Johnson Products acquisition.
11. A pro forma adjustment has been included to record additional interest
expense at 9% on the $50 million short-term debt used to finance the
Johnson Products acquisition.
12. A pro forma adjustment has been included to reverse the interest
expense recorded on the $50 million short-term debt used initially to
finance the Johnson Products acquisition.
13. A pro forma adjustment has been included to record interest expense at
14.5% on the approximately $60 million of new debt outstanding on the
Secured Term Loan. Interest expense has been reduced for the $27
million of Senior Subordinated Notes that have been retired. In
addition, interest expense has been increased to reflect higher
amortization expense for the new debt acquisition costs.
14. The net effects of the pro forma adjustments, the CUTEX adjustments and
the Refinancing have been taxed at the Company's historical effective
tax rate.
ASSET PURCHASE AGREEMENT
between
CARSON PRODUCTS COMPANY
Seller
and
THE CUTEX COMPANY
Buyer
dated as of December 9, 1998
<PAGE>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE 1 Transfer of Assets, Assumption of Liabilities and Purchase Price.....1
1.1 Transfer of Assets and Business..........................1
1.2 Excluded Assets..........................................3
1.3 Assumption of Certain Liabilities........................4
1.4 Consents to Certain Assignments..........................5
1.5 Purchase Price...........................................5
ARTICLE 2 Closing and Post Closing Adjustment..................................6
2.1 Closing..................................................6
2.2 Payment of Purchase Price................................6
2.3 Deliveries by the Seller.................................6
2.4 Deliveries by the Buyer..................................7
2.5 Purchase Price Adjustment................................8
ARTICLE 3 Representations and Warranties of the Seller.........................9
3.1 Organization.............................................9
3.2 Authorization............................................9
3.3 No Violations; No Consents or Approvals Required........10
3.4 Financial Statements....................................10
3.5 Title to Transferred Assets.............................10
3.6 Transferred Contracts...................................10
3.7 Absence of Change.......................................11
3.8 Compliance with Law.....................................12
3.9 Litigation..............................................13
3.10 Intellectual Property...................................13
3.11 Taxes...................................................14
3.12 Inventories.............................................14
3.13 Customers and Suppliers.................................14
3.14 Sales Representatives, Dealers and Distributors.........15
3.15 Sufficiency of Transferred Assets.......................15
3.16 Transactions with Affiliates............................15
3.17 Disclosure..............................................15
3.18 Insurance...............................................15
3.19 Sales and Promotional Activities........................15
3.20 Brokers and Finders.....................................16
ARTICLE 4 Representations and Warranties of the Buyer.........................16
4.1 Organization............................................16
4.2 Authorization...........................................16
4.3 Consents or Approvals...................................16
4.4 Resale of Inventories...................................16
4.5 Financing...............................................16
4.6 Investigation by Buyer..................................16
4.7 Hart-Scott-Rodino Compliance............................17
4.8 Brokers and Finders.....................................17
ARTICLE 5 Covenants: Additional Agreements....................................17
5.1 Conduct of the Transferred Business Pending Closing.....17
5.2 Access..................................................18
5.3 Intentionally Omitted...................................18
5.4 Reasonable Efforts; Cooperation.........................18
5.5 Regulatory Filings......................................19
5.6 Public Announcements....................................19
5.7 Confidentiality.........................................19
5.8 Post-Closing Confidentiality............................19
5.9 Need for Insurance......................................20
5.10 Use of Name.............................................20
5.11 License to Use Certain Trademarks and Trade Names.......20
5.12 Delivery of Certain Documentation Relating to Intellectual
Property................................................20
5.13 Delivery of Permits.....................................20
5.14 Shipment of the Inventories.............................21
5.15 Allocation of the Purchase Price........................21
5.16 Exclusivity.............................................21
5.17 Employee Matters........................................21
5.18 Agreement Not To Compete................................22
5.19 Returns.................................................22
ARTICLE 6 Conditions to Closing...............................................23
6.1 Conditions to Obligations of Both Parties to Close......23
6.2 Conditions to Obligation of the Buyer to Close..........23
6.3 Conditions to Obligations of the Seller to Close........24
ARTICLE 7 Termination, Amendment and Waiver...................................25
7.1 Termination.............................................25
7.2 Amendment...............................................25
7.3 Waiver..................................................25
ARTICLE 8 Indemnification.....................................................25
8.1 Agreement to Indemnify..................................25
8.2 Procedure for Indemnification...........................27
8.3 Limitations on Indemnification..........................28
8.4 Exclusivity.............................................29
8.5 California Air Resources Board Matter...................29
ARTICLE 9 Miscellaneous...........................................30
9.1 Expenses, Taxes.........................................30
9.2 Further Assurances......................................30
9.3 Notices.................................................30
9.4 Headings................................................32
9.5 Applicable Law..........................................32
9.6 Assignment; No Third Party Beneficiaries................32
9.7 Counterparts............................................32
9.8 Entire Agreement........................................32
9.9 Severability............................................33
9.10 Bulk Sales..............................................33
9.11 Refunds and Remittances.................................33
9.12 No Waiver Relating to Claims for Fraud..................33
9.13 Director and Officer Liability..........................33
9.14 Specific Performance....................................34
9.15 Assistance..............................................34
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT ("Agreement"), dated as of December 9, 1998,
between Carson Products Company, a Delaware corporation (the "Seller"), and The
Cutex Company, a Delaware corporation (the "Buyer").
WHEREAS, the Seller wishes to sell, and the Buyer wishes to purchase,
all of the Seller's right, title and interest in and to (I) all intellectual
property relating to the CUTEX name for use in the United States and Puerto Rico
(the "Territory") and certain related assets (including without limitation the
intellectual property and certain related assets relating to the sale,
distribution, packaging, manufacture and marketing of the Enamel/Treatment
Products (as defined below) (the "Enamel/Treatment Business"), which
intellectual property relating to the Enamel/Treatment Business shall be
licensed by the Buyer to the Seller pursuant to the Enamel/Treatment Business
License Agreement (as defined below)), and (II) the assets used in the business
of selling, distributing, packaging, manufacturing and marketing CUTEX products
in the Territory, including, without limiting the foregoing, the nail polish
remover products and nail care implement products listed on Schedule I under the
heading "Transferred Products" individually by SKU (all CUTEX products,
excluding the Enamel/Treatment Products, are referred to as the "Transferred
Products"), but excluding the nail enamel products and nail care treatment
products listed on Schedule I under the heading "Enamel/Treatment Products"
individually by SKU, which shall be retained by the Seller (together, the
"Enamel/Treatment Products"), as more fully described in Section 1.1 (all such
intellectual property and such business, insofar as it relates to the
Transferred Products, the "Transferred Business"), and the Buyer will assume
certain liabilities and obligations relating to the Transferred Business, as
more fully described in Section 1.3, all upon the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Seller and the Buyer, intending to be legally
bound, hereby agree as follows:
ARTICLE 1
Transfer of Assets, Assumption
of Liabilities and Purchase Price
1.1 Transfer of Assets and Business. On the terms and subject
to the conditions of this Agreement, at the Closing (as defined in Section 2.1),
the Seller shall sell, transfer, assign and deliver to the Buyer, and the Buyer
shall purchase, acquire and accept from the Seller all the right, title and
interest of Seller in, to and under the Transferred Assets (as defined below).
The "Transferred Assets" means and shall include the following assets that are
used, held for use or intended to be used primarily in connection with the
Transferred Business or, to the extent specified below, the Enamel/Treatment
Business, and owned by the Seller as such assets and rights shall exist on the
Closing Date (as defined in Section 2.1) subject, however, to the Seller's
covenants, representations and warranties contained in this Agreement including,
without limitation, those set forth in Articles 3 and 5:
(i) all inventories of finished Transferred Products (the
"Inventories");
(ii) subject to Section 1.4, all contracts, binding commitments,
purchase or sales orders, licenses, and other agreements of any kind, oral
or written ("Contracts"), to which the Seller is a party or by which Seller
is bound that are used, held for use or intended to be used primarily in,
or that arise primarily out of, the operation or conduct of the Transferred
Business, all of which are set forth on Schedule 1.1(ii) hereto and
Schedule 3.10 hereto (the "Transferred Contracts") other than the Contracts
specifically referred to in Section 1.2(xiii);
(iii) all customer lists, sales and pricing information,
advertising and promotional materials, and other marketing information,
credit information, general intangibles, files, books of account, ledgers,
general, financial and accounting records, invoices, suppliers' lists,
other distribution lists, billing records, manuals, customer and supplier
correspondence, computer data (in all cases, in any form or medium), and
other books and records that are used, held for use or intended to be used
primarily in, or that arise primarily out of, the conduct or operation of
the Transferred Business, other than records kept for the Seller's
financial reporting or Tax (as defined in Section 3.11) purposes (copies of
which will be provided to Buyer at Closing) (the "Records");
(iv) all trademarks, servicemarks, registrations and renewals
thereof and applications therefor, trade names and logos and all goodwill
associated therewith (the "Trademarks"), inventions, patents, design
patents and patent applications (including renewals, reissues, divisions
and continuations thereof) (the "Patents"), copyrights, manufacturing
procedures and specifications, formulae, processes, quality control
procedures, proprietary knowledge, trade secrets, trade dress, know-how,
business names, brand names, copyright registrations, research records,
records of inventions, test information, market surveys and all other
intellectual property rights in the Territory, that are used, held for use
or intended to be used primarily in the operation or conduct of the
Transferred Business or the Enamel/Treatment Business including, without
limiting the foregoing, those set forth on Schedule 3.10 (all of the above
collectively referred to as the "Intellectual Property");
(v) all goodwill of the Transferred Business and the Enamel/
Treatment Business, including the exclusive right in the Territory to
represent oneself as the successor to the Transferred Business;
(vi) to the extent transfer is permitted by law, all governmental
licenses, permits, approvals and applications therefor relating to the
Transferred Assets or the Enamel/Treatment Products;
(vii) all tools, dies and molds owned and used, or held for use
(whether by the Seller or on its behalf) in connection with the manufacture
of the Transferred Products or the Enamel/Treatment Products, including
those set forth on Schedule 1.1(vii).
(viii) all specifications for the Transferred Products and the
Enamel/Treatment Products and components and ingredients as set forth in
Schedule 1.1(viii);
(ix) subject to Section 5.19, all rights in and to products sold
or leased (including products returned after the Closing and rights of
rescission, replevin and reclamation) in the operation or conduct of the
Transferred Business;
(x) all prepaid expenses, security deposits and prepaid items
that are used, held for use or intended to be used primarily in, or that
arise primarily out of, the operation or conduct of the Transferred
Business; and
(xi) all rights, claims and credits to the extent relating to any
other Transferred Asset or any Assumed Liability, including any such items
arising under insurance policies and all guarantees, warranties,
indemnities and similar rights in favor of Seller in respect of any other
Transferred Asset or any Assumed Liability.
1.2 Excluded Assets. Notwithstanding anything to the contrary
herein; the parties understand and hereby agree that the Seller and its
Affiliates shall not sell, transfer or assign to the Buyer those assets,
properties and rights of the Seller or its Affiliates listed below:
(i) any cash, cash equivalents, investments and bank accounts;
(ii) any accounts receivable existing as of the close of business on
the Closing Date;
(iii) any rights to the name "Carson" or any variants or derivatives
thereof;
(iv) any assets related to any employee benefit plan of the Seller or
its Affiliates in which any employees of the Seller or its Affiliates
participate, including without limitation the right to receive refunds or
or credits for any contributions to any such plan made by the Seller or its
Affiliates;
(v) any refunds or claims for refunds from Federal, state or local
Taxing authorities with respect to Taxes paid or to be paid by the Seller
or its Affiliates;
(vi) refunds and rebates by insurers in respect of any insurance
policies of the Seller or its Affiliates canceled as of the Closing Date;
(vii) all corporate charter documents, minute books, stockholder
records, stock transfer records, corporate seals and similar corporate
records of the Seller and its Affiliates;
(viii) records related to (A) Excluded Assets (as defined in this
Section 1.2), (B) Retained Liabilities (as defined in Section 1.3), and (C)
the negotiation and consummation of the transactions contemplated by this
Agreement, including without limitation confidential communications with
legal counsel representing the Seller and its Affiliates;
(ix) all Tax and other deposits or prepayments made in respect of
any Retained Liabilities;
(x) any claims against governmental entities or third parties
(including pursuant to Transferred Contracts) to the extent relating
to the operation of the Transferred Business prior to or on the Closing
Date, as set forth on Schedule 1.2(x) or to the extent any such claim
relates to any Retained Liability (including the matters described in
Sections 8.1(a)(viii) and (ix));
(xi) the right to assert the attorney-client privilege with respect to
any confidential communications between the Seller and its Affiliates and
any legal counsel representing the Seller and its Affiliates in connection
with the sale of the Transferred Business;
(xii) any Contracts, assets, properties and rights of the Seller or
its Affiliates not listed in Section 1.1 relating exclusively to the
Enamel/Treatment Business, including, without limitation, the Manufacturing
Agreement dated April 30, 1997, between the Seller and AM Cosmetics, Inc.;
(xiii) any other Contracts, assets, properties and rights of the Seller
or its Affiliates not listed in Section 1.1 unless provided for elsewhere
in this Agreement, including, without limitation, the Asset Purchase
Agreement dated March 27, 1997 by and between Conopco, Inc. d/b/a
Chesebrough-Pond's USA Co. ("C-P") and Carson, Inc., and the exhibits
thereto, the Asset Purchase Agreement dated March 27, 1997 by and between
Jean Philippe Fragrances, Inc. and Carson, Inc., and the exhibits thereto,
and the Broker Agreement dated as of the 19th day of September, 1997
between the Seller and AM Cosmetics, Inc.; and
(xiv) the two trailer loads of damaged nail enamel remover products
that are located on Arthur Wells' property.
All of the Contracts, assets, properties and rights of the Seller and
its Affiliates referred to in this Section 1.2 are hereinafter collectively
referred to as the "Excluded Assets".
The Buyer acknowledges that the Seller is not conveying, pursuant to
this Agreement, any rights to use the Intellectual Property in any country other
than the United States and Puerto Rico.
For purposes of this Agreement, "Affiliate" or "Affiliates" shall mean
any person or entity that directly or indirectly controls, is controlled by or
is under common control with another person or entity and shall include, without
limitation, any direct or indirect parent or subsidiary of the foregoing and
their successors and assigns, and "control", "controlled" and "common control"
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or the policies of such person or entity
to the extent permitted by any law, rule or regulation, whether through the
ownership of voting interests, by contract, employment relationship or
otherwise.
1.3 Assumption of Certain Liabilities.
(a) On the terms and subject to the conditions of this Agreement, the
Buyer shall assume effective as of the Closing and thereafter pay, perform and
discharge as and when due the following obligations and liabilities of the
Seller with respect to the Transferred Business:
(i) all liabilities and obligations to the extent accruing with
respect to periods after the Closing Date under the Transferred Contracts
(exclusive, however, of any liabilities or obligations arising thereunder
as a result of any breach, default or failure of the Seller to perform any
covenants or obligations required to be performed by the Seller during any
periods prior to the close of business on the Closing Date);
(ii) subject to Section 5.19, all returns of Transferred Products after the
close of business on the Closing Date; and
(iii) all liabilities and obligations arising out of Buyer's ownership or
use of the Transferred Assets or the operation of the Transferred Business
after the close of business on the Closing Date.
(b) The liabilities and obligations of the Seller to be assumed by the
Buyer pursuant to Section 1.3(a) are hereinafter referred to as the "Assumed
Liabilities". Notwithstanding any other provision of this Agreement and
regardless of any disclosure to the Buyer, the Buyer shall not assume any
liabilities and obligations of the Seller not specifically referred to as being
assumed by the Buyer in Section 1.3(a), all of which shall remain the sole
responsibility of, and shall be paid, performed and discharged when due by, the
Seller and are hereinafter referred to as the "Retained Liabilities". After the
Closing Date, Seller shall retain all liabilities related to the Transferred
Business not specifically assumed by the Buyer pursuant to Section 1.3.
1.4 Consents to Certain Assignments. If the Seller is unable to obtain a
consent, which is required, to the assignment of any Transferred Contract
despite the use of commercially reasonable efforts, the Closing shall
nonetheless take place and the Seller shall continue to use all commercially
reasonable efforts to secure such consent after the Closing or otherwise to
transfer or provide to the Buyer the same economic benefits of such Contract
as if it had been assigned to the Buyer, provided, however, that to the extent,
and only to the extent, Buyer is able to receive the economic benefits under
such Contract, Buyer shall be responsible for the costs and expenses and
Assumed Liabilities with respect to such contracts for all periods after the
close of business on the Closing Date. In no event shall the use of commercially
reasonable efforts require the payment of any consideration by the Seller.
However, if the failure to obtain such consent will materially adversely affect
Buyer or its ability to consummate this Agreement or operate the Transferred
Business, Buyer may terminate this Agreement with no further liability to
either party.
1.5 Purchase Price. The purchase price for the Transferred Assets and
the Transition Services Agreement is Thirty Million United States Dollars
(U.S.$30,000,000) payable in cash at the Closing (the "Purchase Price").
ARTICLE 2
Closing and Post Closing Adjustment
2.1 Closing. Subject to the satisfaction of the conditions set forth
in Article 6, the closing of the transactions contemplated hereby (the
"Closing") shall occur at the offices of Milbank, Tweed, Hadley & McCloy, One
Chase Manhattan Plaza, New York, New York at 10:00 o'clock a.m. (local time)
on December 9, 1998 or such other time and date as the parties may agree upon.
The date on which the Closing takes place is herein called the "Closing Date".
2.2 Payment of Purchase Price. On the Closing Date, the Buyer shall pay,
by wire transfer of immediately available funds to the Seller's account at the
bank and account number which Seller will provide to Buyer prior to Closing,
an amount equal to the Purchase Price.
2.3 Deliveries by the Seller. At the Closing, the Seller shall execute
and deliver to the Buyer the following:
(i) a Bill of Sale, substantially in the form of Exhibit A;
(ii) Assignment and Assumption Agreements substantially in the form of
Exhibit B for the Transferred Contracts, including, without limitation:
(A) an Assignment and Assumption Agreement with respect to the
Manufacturing Agreement dated as of April 30, 1997 between C-P
and the Seller (the "C-P Manufacturing Agreement"), substantially
in the form of Exhibit C;
(B) an Assignment and Assumption Agreement with respect to the
royalty-free, non-exclusive License Agreement, dated as of April
30, 1997, between the Seller and C-P, with a term for the life of
the patent, including any renewals, continuations, revisions or
reissues thereof, under U.S. Patent No. 4,829,092 to permit the
Buyer to continue to sell the CUTEX nail polish remover products
utilizing the technology claimed in U.S. Patent No. 4,829,092,
substantially in the form of Exhibit D;
(C) an Assignment and Assumption Agreement with respect to the
royalty-free, non-exclusive License Agreement, dated as of April
30, 1997, between Seller and C-P, which permits C-P to use
certain patents owned by the Seller to the extent necessary to
supply nail polish remover products under the CUTEX Trademark to
the Seller in the Territory and to Unilever PLC and N.V. or their
successors and assigns outside the Territory, substantially in
the form of Exhibit E; and
(D) an Assignment and Assumption Agreement with respect to the
royalty-free License Agreement, dated as of October 25, 1990,
between Thomas J. Lipton, Inc. and C-P, substantially in the form
of Exhibit F;
(iii) the Consents (as defined in Section 3.3);
(iv) Assignments for the Patents, Trademarks and other Intellectual
Property including, without limiting the foregoing, those set forth on
Schedule 3.10 substantially in the forms set forth in Exhibits G1-G4;
(v) a Copyright Assignment, substantially in the form of Exhibit H,
for the copyrights included in the Intellectual Property;
(vi) the certificates and documents required pursuant to Section 6.2;
(vii) such other assignments, agreements, documents and instruments as
Buyer or its counsel may reasonably request to demonstrate satisfaction of
the conditions and compliance with the covenants set forth in this
Agreement and to vest in Buyer the good and valid title to the Transferred
Assets and the Transferred Business free and clear of any mortgage, pledge,
assessment, security interest, lease, lien, adverse claim, levy, charge or
other encumbrance of any kind, or any condition sale contract, title
retention contract or other contract to give any of the foregoing
("Liens");
(viii) a good standing certificate of Seller, an incumbency certificate
and a certified copy of resolutions duly adopted by the board of directors
of the Seller or an authorized committee thereof authorizing and approving
the execution and delivery of this Agreement (and the other documents and
instruments contemplated hereby) by the Seller and the performance by the
Seller of its obligations hereunder and thereunder;
(ix) a transition services agreement (the "Transition Services
Agreement") with respect to the operation of the Transferred Business after
the Closing, substantially in the form of Exhibit I; and
(x) an Option Agreement relating to the Enamel/Treatment Business,
substantially in the form of Exhibit J (the "Option Agreement").
2.4 Deliveries by the Buyer. At the Closing, the Buyer shall execute and
deliver or cause to be executed and delivered to the Seller the following:
(i) the Bill of Sale referred to in Section 2.3(i);
(ii) the Assignment and Assumption Agreements referred to in Section
2.3(ii);
(iii) a perpetual, royalty-free, exclusive License Agreement between
the Seller and the Buyer, which permits the Seller to use the CUTEX
Trademarks set forth on Exhibit A to the License Agreement in connection
with the manufacture, packaging, distribution, sale and marketing of nail
enamel products and nail care treatment products for application directly
on the nails or cuticles in the Territory, substantially in the form of
Exhibit K (the "Enamel/Treatment Business License Agreement");
(iv) the Option Agreement;
(v) the Transition Services Agreement;
(vi) such other instruments of assumption as shall be reasonably
necessary to vest in the Buyer, as of the close of business on the Closing
Date, the Assumed Liabilities, and the certificates and documents required
pursuant to Section 6.3; and
(vii) a good standing certificate of Buyer, an incumbency certificate
and a certified copy of resolutions duly adopted by the board of directors
of the Buyer or an authorized committee thereof authorizing and approving
the execution and delivery of this Agreement (and the other documents and
instruments contemplated hereby) by the Buyer and the performance by the
Buyer of its obligations hereunder and thereunder.
2.5 Purchase Price Adjustment. (a)Within three (3) business days following
the Closing, the Seller shall deliver to the Buyer a statement (the "Closing
Date Inventory Statement") of the Inventory Cost (as defined below) of the
Inventories as of the Closing Date (the "Closing Date Inventory Amount"). The
Closing Date Inventory Amount shall reflect a physical count of the Inventories
conducted by the Seller and its representatives at the opening of business on
the second business day following the Closing Date. The Buyer and its
representatives shall have the right to observe the physical count of the
Inventories, review all books, work papers and procedures in connection with the
preparation of the Closing Date Inventory Statement and perform any other
reasonable procedures necessary to verify the accuracy thereof.
(b) Unless the Buyer notifies the Seller in writing within thirty (30) days
after receipt of the Closing Date Inventory Statement that the Buyer objects to
the Seller's calculation of the Closing Date Inventory Amount on the grounds
that the Closing Date Inventory Statement (i) was not prepared in accordance
with this Section 2.5 and/or (ii) contained arithmetic or counting errors and
specifies in reasonable detail the basis for such objection, the Closing Date
Inventory Statement shall become final and binding upon the parties for purposes
of the adjustment to the Purchase Price pursuant to Section 2.5(c). If the Buyer
submits written objections to the Seller within such period, the Buyer and the
Seller shall negotiate in good faith to resolve such objections during the
thirty (30) day period after the Seller's receipt of the Buyer's notice of
objections. During such thirty (30) day period, the Seller and its
representatives shall have the right to review all books and work papers and
procedures related to such notice of objections, the calculation thereof and
basis therefor. If the Buyer and the Seller are unable in good faith to resolve
such objections within such thirty (30) day period, the disputed matters shall
be submitted to a nationally recognized public accounting firm mutually agreed
upon by the Buyer and the Seller to determine the Closing Date Inventory Amount
in accordance with this Section 2.5 (or, if the Buyer and the Seller are unable
to agree upon a firm within ten (10) days after the end of such thirty (30) day
period, then the Buyer and the Seller shall each select a nationally recognized
public accounting firm and such firms shall jointly select a third nationally
recognized independent accounting firm to resolve the disputed matters). The
accounting firm selected in accordance with the previous sentence is referred to
herein as the "Independent Accounting Firm". The decision of the Independent
Accounting Firm shall be final and binding on the parties. The fees, costs and
expenses of the Independent Accounting Firm shall be borne by the Buyer and the
Seller in the inverse proportion as they may prevail on matters resolved by the
Independent Accounting Firm, which proportionate allocations shall also be
determined by the Independent Accounting Firm at the time the determination of
the Independent Accounting Firm is rendered on the merits of the matters
submitted. After final determination of any disputes with respect to the Closing
Date Inventory Amount as set forth on the Closing Date Inventory Statement, the
parties shall have no further right to make any claims against each other with
respect to any element of the calculation of the Closing Date Inventory Amount.
(c) The Purchase Price shall be decreased by the amount by which the
Closing Date Inventory Amount is less than $1,856,102.55. The Purchase Price
shall be increased by the amount by which the Closing Date Inventory Amount is
greater than $1,856,102.55 and less than $2,500,000. If the Closing Date
Inventory Amount is greater than $2,500,000, the Purchase Price shall be
increased by $643,897.45 and the Buyer shall purchase the Inventory in excess of
$2,500,000 (which, notwithstanding anything to the contrary contained in this
Agreement, shall be retained by Seller as an Excluded Asset) from the Seller
from time to time on an as needed basis at the Inventory Cost. The Seller will
not sell such excess Inventory to any other party without the consent of the
Buyer. Within five business days after the Closing Date Inventory Statement has
been finally determined in accordance with this Section 2.5, the adjustment
payable by the Buyer or the Seller, as the case may be, shall be paid by the
Seller or the Buyer, as the case may be, together with interest thereon at a
rate equal to the rate of interest from time to time announced publicly by
Citibank N.A. as its prime rate, calculated on the basis of the actual number of
days elapsed divided by 365, from and including the Closing Date to but
excluding the date of payment. Such payment shall be made by wire transfer of
immediately available funds by the Buyer or the Seller, as the case may be.
(d) Notwithstanding anything in this Agreement to the contrary, Inventory
shall be valued at the standard cost as established in the C-P Manufacturing
Agreement as currently in effect ("Standard Cost") less an amount attributable
to appropriate reserves and allowances established in accordance with generally
accepted accounting principles consistently applied ("Inventory Cost").
ARTICLE 3
Representations and Warranties of the Seller
The Seller represents and warrants to the Buyer as follows:
3.1 Organization. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Seller is duly qualified to do business as a foreign corporation and is in good
standing in all jurisdictions in which the nature of the Transferred Business
currently conducted requires such qualification, except where the failure to so
qualify would not have a material adverse effect on the Transferred Business.
3.2 Authorization. The Seller has full corporate power and authority to
carry on the Transferred Business as now conducted and to own or lease the
Transferred Assets. The Seller has full corporate power and authority to execute
and deliver this Agreement and all other documents contemplated hereby to be
executed and delivered by the Seller and to consummate the transactions
contemplated hereby and thereby. The Seller has taken all corporate action
required to authorize the execution and delivery of this Agreement and all other
documents contemplated hereby to be executed and delivered by the Seller and to
authorize the consummation of the transactions contemplated hereby and thereby.
This Agreement has been, and on the Closing Date the other documents to be
executed by the Seller hereunder will be, duly executed and delivered by the
Seller and this Agreement is, and on the Closing Date each of such other
documents will be, legal, valid and binding obligations of the Seller,
enforceable against the Seller in accordance with their terms.
3.3 No Violations; No Consents or Approvals Required. Neither the execution
and delivery of this Agreement or the other documents to be executed on the
Closing Date by the Seller nor the consummation of the transactions contemplated
hereby or thereby will: (i) conflict with or violate any provision of the
certificate or articles of incorporation or by-laws of the Seller, (ii) conflict
with or violate any statute, law, rule, regulation, ordinance, order, writ,
injunction, judgment or decree applicable to the Seller, or (iii) conflict with
or result in any breach of or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, or result in the
creation of any Lien (as such term is defined in Section 3.5) pursuant to, any
agreement or other instrument to which the Seller is a party or by which any of
its assets are bound. Except for the consents of third parties specified in
Schedule 3.3 (collectively, the "Consents"), no notice, declaration, report or
other filing or registration with, and no waiver, consent, approval or
authorization of, any governmental or regulatory authority or instrumentality or
any other person is required to be given, made or obtained by the Seller in
connection with the execution, delivery or performance of this Agreement.
3.4 Financial Statements. Attached hereto as Schedule 3.4(i) are the
Unaudited Statements of Sales and Profit Before Indirects of the Transferred
Business as operated by the Seller's predecessor for each of the calendar years
1995 and 1996, which statements were previously provided to the Seller by the
predecessor. Attached hereto as Schedule 3.4(ii) are the Unaudited Statements of
Sales and Profit Before Indirects of the Transferred Business (together with the
Interim Financial Statements, the "Financial Statements") for the portion of
calendar year 1997 during which the Seller owned the Transferred Business and
interim monthly unaudited statements of sales and profit before indirects of the
Transferred Business for the period January 1, 1998 through October 31, 1998
(the "Interim Financial Statements"). The Financial Statements: (i) were
prepared in accordance with U.S. generally accepted accounting principles,
subject to the applications and the exceptions set forth on Schedule 3.4(iii),
consistently applied (the "Seller's Accounting Principles"), and (ii) are true,
accurate, complete and fairly present, in accordance with Seller's Accounting
Principles, the sales and profit before indirects of the Transferred Business
for the periods indicated.
3.5 Title to Transferred Assets. Except as set forth in Schedule 3.5, the
Seller has good title to the Transferred Assets, free and clear of all Liens.
3.6 Transferred Contracts. (a) Schedule 1.1(ii), together with Schedule
3.10, contains a complete and correct list of all Transferred Contracts.
(b) The Seller has delivered or made available to the Buyer complete and
correct copies of all written Transferred Contracts on Schedules 1.1(ii) and
3.10. The Transferred Contracts are in full force and effect and enforceable in
accordance with their terms, and there does not exist thereunder any material
default or event or condition that, after notice or lapse of time or both, would
constitute a material default thereunder by the Seller or, to the best of the
Seller's knowledge, by any other party thereto. The Seller has not received any
written notice that any party to any of the Transferred Contracts intends to
cancel or terminate such agreement.
(c) Except for the Consents identified on Schedule 3.3, all Transferred
Contracts listed on Schedules 1.1(ii) and 3.10 are assignable by the Seller to
the Buyer without the consent of any other person or entity. Schedule 3.3 sets
forth each Transferred Contract with respect to which the consent of the other
party or parties thereto must be obtained by virtue of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby to avoid the invalidity of the transfer of such Contract, the termination
thereof, a breach, violation or default thereunder or any other change or
modification to the terms thereof.
3.7 Absence of Change. Except as disclosed in Schedule 3.7, since December
31, 1997 (the "Financial Statement Date"), the Transferred Business has been
operated only in the ordinary course in a manner consistent with Seller's past
practice ("in the ordinary course of business"), there has been no material
adverse change in the Transferred Business or the Transferred Assets and the
Seller has not, with respect to the Transferred Business:
(a) incurred any damage, destruction or similar loss, whether or not
covered by insurance, materially adversely affecting the Transferred Business or
the Transferred Assets;
(b) sold, assigned, transferred, leased or otherwise disposed of any of the
tangible or intangible assets of the Transferred Business (except for Inventory
in the ordinary course of business), including the Intellectual Property;
(c) mortgaged, pledged, granted or suffered to exist any Lien on the
Transferred Assets;
(d) other than in the ordinary course of business, entered into, made any
amendment of or terminated any lease, contract, license or other agreement of
the Transferred Business;
(e) effected any material change in the accounting practices, procedures or
methods of the Transferred Business;
(f) entered into any other transaction other than in the ordinary course of
business, or changed in any material respects the policies or practices of the
Transferred Business;
(g) written down or written up the value of any inventories or receivables
or revalued any assets of the Seller other than in the ordinary course of
business;
(h) other than in the ordinary course of business, amended, terminated,
canceled or compromised any claims of the Seller or waived any other rights of
value to the Transferred Business or any of the Transferred Assets;
(i) merged with, entered into a consolidation with,or acquired an interest
in any person or entity or acquired a substantial portion of the assets or
business of any person or entity or any division or line of business thereof, or
otherwise acquired any material assets;
(j) except in the ordinary course of business, incurred or assumed any
indebtedness or liability;
(k) made any loan to, guaranteed any indebtedness of, or otherwise incurred
any indebtedness on behalf of any person or entity whether or not an
Affiliate of Seller;
(l) failed to pay any creditor any amount owed to such creditor when due;
(m) failed to prosecute any Trademark application or failed to maintain
any registration for a Trademark used by Seller or permitted to lapse any Patent
application or Patent by failing to respond to any Patent Office actions or by
failing to pay any renewal fees respectively, which or under which, Seller has
any right or license;
(n) allowed any permit or license material to the operations of the
Transferred Business that was issued or relates to Seller or otherwise relates
to the Transferred Business or Transferred Assets to lapse or terminate or
failed to renew any insurance policy, permit or license that is scheduled to
terminate or expire within 45 calendar days of the Closing Date;
(o) other than in the ordinary course of business, amended, modified or
consented to the termination of, or entered into, any Transferred Contract, or
Seller's rights thereunder;
(p) suffered any unusual buildup of its Inventories;
(q) taken any action that, if taken after the date of this Agreement, would
constitute a breach of any of the covenants set forth in Section 5.1;
(r) modified its pricing, promotional or shipping practices or taken any
other actions within thirty (30) days prior to Closing intended to accelerate
sales;
(s) permitted any Affiliate or any other person to appropriate or use any
tangible or intangible asset of the Transferred Business; or
(t) entered into any agreement to take any of the types of action described
in subsections (a) through (s) above.
3.8 Compliance with Law. The Transferred Business and Transferred Assets
are in compliance with all applicable statutes, laws, rules, regulations,
orders, ordinances, judgments and decrees of all governmental authorities,
including without limitation those relating to health and safety, toxic
substances, thc Food, Drug and Cosmetics Act and Good Manufacturing Practices
and also with the terms of all governmental authorizations and approvals
("Permits"), except as set forth in Schedule 3.8 or where the failure to so
comply would not have a material adverse effect on the Transferred Business or
the Transferred Assets. Schedule 3.8 sets forth a list of all Permits that are
required for the Seller to conduct the Transferred Business as currently
conducted. All such Permits are in full force and effect and no proceedings are
pending or, to the Seller's knowledge, threatened that may result in the
revocation, cancellation or suspension thereof. Except as set forth in Schedule
3.8, none of such Permits will be subject to suspension, modification,
revocation or nonrenewal as a result of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
3.9 Litigation. Except as set forth in Schedule 3.9, there are no claims,
actions, suits, proceedings (including administrative proceedings) or
investigations pending or, to the best of the Seller's knowledge, threatened
before any court, arbitrator or governmental agency to which the Seller is a
party and that relate to the Transferred Assets or the Transferred Business or
in which any person or entity seeks to prevent, enjoin or restrain the
consummation of the transactions contemplated by this Agreement.
3.10 Intellectual Property. Schedule 3.10 sets forth a true and complete
list of all Trademarks, Copyrights and Patents registrations and applications,
owned, used, filed by or licensed to Seller and used, held for use or intended
to be used primarily in the operation or conduct of the Transferred Business. As
of the Closing, Buyer will have obtained all title to or license rights in the
Intellectual Property necessary to conduct the Transferred Business in the
Territory as presently constituted or conducted. With respect to all
Intellectual Property that is registered or subject to an application for
registration, Schedule 3.10 sets forth a list of all jurisdictions in the
Territory in which such Intellectual Property is registered or registrations
applied for and all registration and application numbers. Except as set forth in
Schedule 3.10, all the Intellectual Property has been duly registered in, filed
in or issued by the appropriate governmental entity where such registration,
filing or issuance is necessary or appropriate for the conduct of the
Transferred Business as presently conducted. Except as set forth in Schedule
3.10, Seller is the sole and exclusive owner of the Intellectual Property, and
Seller has the right to use, reproduce, display, distribute and license, without
payment to any other person, all the Intellectual Property and the consummation
of the transactions contemplated hereby does not and will not conflict with,
alter or impair any such rights, and Seller has not received any written
communication from any person asserting that Seller's use of the Intellectual
Property is infringing upon any proprietary rights of any other person. Except
as set forth in Schedule 3.10, the Seller has not granted to or received a grant
from any third party any of license or other right to any of the Intellectual
Property. Except as set forth in Schedule 3.10, there is no claim pending or, to
the best of the Seller's knowledge, threatened alleging that the Seller's use or
ownership of the Intellectual Property infringes or has infringed the rights of
any third party and, to the best of the Seller's knowledge, such use of the
Intellectual Property by the Transferred Business as currently conducted does
not infringe upon any such rights. To the best of the Seller's knowledge, except
as set forth on Schedule 3.10, no third party is infringing upon the Seller's
rights in the Intellectual Property. The Seller does not own or use any other
item of Intellectual Property except as described in the above referenced list,
which is material to the Transferred Business. The Patents and registrations for
the Trademarks have not been revoked or cancelled due to the failure to pay any
Taxes or maintenance fees. Seller, as set forth in Schedule 3.10, has good and
valid title to the Intellectual Property free and clear of all Liens. The
Patents and registrations for the Trademarks have been properly maintained and
renewed in accordance with all applicable laws and in all applicable
governmental offices, and are freely transferable.
3.11 Taxes. All material federal, state and local Tax returns, reports and
declarations of every kind required to be filed by or on behalf of the Seller
with respect to the Transferred Business prior to the Closing Date have been or
will be timely filed, and all material Taxes required to be paid with respect to
the periods covered by such returns have been paid or will be timely paid and no
material Tax Liens have been filed and no material claims are being asserted in
writing with respect to Taxes. The Seller has timely paid or will timely pay all
material Taxes imposed on them with respect to the Transferred Business,
including with respect to the transactions contemplated by this Agreement except
as provided in Section 9.1, that are due and payable for each period ending on
or prior to the Closing Date and the portion ending on the Closing Date of any
period that includes but ends after the Closing Date. For purposes of this
Agreement, "Taxes" shall mean any tax, including, but not limited to, levies,
duties, charges, charges for use of municipal properties and services,
assessments, deductions, withholdings or liabilities imposed by any federal,
state, provincial, municipal or foreign authority and any other taxes of any
nature imposed by any federal, state, provincial, municipal or foreign authority
in any name and under any form, including, without limitation, income tax, tax
on assets, value added tax, turnover tax, excise tax and social security
withholdings and contributions, as well as any other charges imposed similar to
Taxes, and all penalties, interest, fines and other additions to Taxes.
3.12 Inventories. The Inventories to be reflected on the Closing Date
Inventory Statement will be manufactured in conformity in all material respects
with applicable specifications, except as described on Schedule 3.12. Since the
Financial Statement Date, there have been no material changes in the Inventories
except in the ordinary course of business. Seller has good and valid title to
the Inventories free and clear of all Liens. The Inventories are accounted for
using the first-in, first-out method. The Inventories do not consist of any
items held on consignment. Seller is not under any obligation or liability with
respect to accepting returns of items of inventory or merchandise in the
possession of its customers other than in the ordinary course of business. No
clearance or extraordinary sale of the Inventories has been conducted since
December 31, 1997. Schedule 3.12 sets forth a complete list of the addresses of
the warehouses and other facilities in which the Inventories (controlled by
Seller in the Territory) are located. The Inventories are not in excess of the
normal purchasing patterns of the Seller. Since the Financial Statement Date,
there has not been any write-down of the value of, or establishment of any
reserves against, any Inventory of the Transferred Business, except for
write-downs and reserves in the ordinary course of business and consistent with
past practice.
3.13 Customers and Suppliers. Schedule 3.13 sets forth the names of the ten
(10) largest customers and suppliers (in dollar volume) of the Transferred
Business for the eleven-month period ended November 30, 1998. Except as set
forth in Schedule 3.13, no customer or supplier represented more than 5% of the
sales or purchases, respectively, of the Transferred Business during its most
recent full fiscal year. Except as set forth on Schedule 3.13, no such customer
or supplier has ceased, materially reduced or materially changed its method of
doing business with the Seller (including without limitation the terms thereof)
nor has Seller received any notice or information, orally or in writing, that
any such customer or supplier intends to cease, materially reduce or materially
change its method of doing business with Seller for any reason, including,
without limitation, as a result of the consummation of the transactions
contemplated hereby. Seller's relationship with each customer and supplier is a
good commercial working relationship. Except as disclosed on Schedule 3.13,
Seller has not any direct or indirect interest in any competitor, customer or
supplier of the Transferred Business or Seller.
3.14 Sales Representatives, Dealers and Distributors. Except as set forth
in Schedule 3.14, Seller, with respect to the Transferred Business, is not a
party to any contract or agreement with any person or entity under which such
other person or entity is a sales agent, representative, dealer or distributor
of any of the products of Seller or the Transferred Business which by its terms
cannot be terminated at will or on not more than 30 days' prior notice without
penalty or further payment and there has been no change in the rate of
compensation paid or payable to any such person or entity since December 31,
1997.
3.15 Sufficiency of Transferred Assets. As a result of the transfers, sales
and assignments contemplated by this Agreement, subsequent to Closing Buyer will
have obtained all necessary technology, know-how, patents, trademarks,
copyrights, licenses, permits, consents or other property rights necessary to
the conduct of the Transferred Business as presently constituted in all material
respects.
3.16 Transactions with Affiliates. No Contract between the Transferred
Business, on the one hand, and Seller or any of its Affiliates, on the other
hand, will continue in effect subsequent to the Closing. After the Closing none
of Seller's Affiliates will have any interest in any property (real or personal,
tangible or intangible) or Contract used in or pertaining to the Transferred
Business.
3.17 Disclosure. No representation or warranty of Seller contained in this
Agreement, and no statement contained in any document, certificate or Schedule
furnished or to be furnished by or on behalf of Seller to Buyer or any of its
representatives pursuant to this Agreement, contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
necessary, in light of the circumstances under which it was or will be made, in
order to make the statements herein or therein not misleading or necessary in
order to fully and fairly provide the information required to be provided in any
such document, certificate or Schedule.
3.18 Insurance. Seller maintains policies of fire and casualty, liability
and other forms of insurance which cover the Transferred Business as well as
Seller's other businesses in such amounts, with such deductibles and against
such risks and losses as are, in Seller's judgment, reasonable for the
Transferred Business, and all premiums due and payable thereon have been paid
with respect to any period ending prior to the Closing Date.
3.19 Sales and Promotional Activities. Schedule 3.19 is a true and complete
list of all sales and promotional activities performed or conducted by Seller
since September 1, 1998 relating to the Transferred Business, including all
sales or promotional activities scheduled to be performed or conducted by Seller
prior to the Closing.
3.20 Brokers and Finders. Except for Merrill Lynch & Co., whose fees are
the sole responsibility of Seller, neither the Seller nor any of its Affiliates
have dealt with any finders, brokers, agents or others in connection with the
transactions contemplated by this Agreement.
As a material inducement to Buyer to consummate this Agreement, at the time
of the Closing each of the specific representations and warranties of the Seller
set forth in this Article 3 will be deemed to be remade by the Seller as of the
time of the Closing.
ARTICLE 4
Representations and Warranties of the Buyer
The Buyer hereby represents and warrants to the Seller as follows:
4.1 Organization. The Buyer is duly organized, validly existing and in good
standing under the laws of the State of Delaware.
4.2 Authorization. The Buyer has the corporate power to execute and deliver
this Agreement and all other documents contemplated hereby to be executed and
delivered by the Buyer, and to consummate the transactions contemplated hereby
and thereby. The Buyer has taken all corporate or other action required to
authorize the execution and delivery of this Agreement and all other documents
contemplated hereby and to authorize the consummation of the transactions
contemplated hereby and thereby. This Agreement has been and, on the Closing
Date the other documents will be, duly executed and delivered by the Buyer and
this Agreement is, and on the Closing Date such other documents will be, legal,
valid and binding obligations of the Buyer, enforceable against the Buyer in
accordance with their terms.
4.3 Consents or Approvals. Except as set forth on Schedule 4.3, no notice,
declaration, report or other filing or registration with, and no waiver,
consent, approval or authorization of, any governmental or regulatory authority
or instrumentality or any third party is required to be given, made or obtained
by the Buyer in connection with the execution, delivery or performance of this
Agreement.
4.4 Resale of Inventories. The Inventories are being acquired by the Buyer
solely for the purpose of resale.
4.5 Financing. Schedule 4.5 hereto sets forth the financing commitments
obtained by Buyer in connection with the transactions contemplated by this
Agreement. Buyer has provided Sellers with a true and complete copy of any such
written commitment prior to the execution and delivery of this Agreement.
4.6 Investigation by Buyer. In entering into this Agreement, Buyer
acknowledges that, except for the specific representations and warranties of the
Seller contained in this Agreement, neither the Seller, any of its Affiliates
nor any of their respective directors, officers, employees, 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,
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).
4.7 Hart-Scott-Rodino Compliance. For purposes of determining whether a
filing will be required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, in connection with the transactions contemplated by this
Agreement, Buyer, as the "acquiring person", (i) is newly formed and does not
have a regularly prepared balance sheet and (ii) excluding cash being used for
payment of the Purchase Price and other expenses incidental to this acquisition,
does not have total assets or annual net sales of $10 million or more.
4.8 Brokers and Finders. Neither the Buyer nor any of its Affiliates has
dealt with any broker, finder, agent or others in connection with the
transactions contemplated hereby.
ARTICLE 5
Covenants: Additional Agreements
5.1 Conduct of the Transferred Business Pending Closing. From and after the
date of this Agreement until the Closing Date, the Seller shall, with respect to
the Transferred Business and the Transferred Assets, except as otherwise agreed
or approved by the Buyer:
(a) carry on the Transferred Business in the ordinary course in
substantially the same manner as heretofore conducted;
(b) keep in full force and effect insurance comparable in amount and scope
of coverage to that now maintained;
(c) perform in all material respects their obligations under the
Transferred Contracts;
(d) comply in all material respects with applicable requirements of laws,
rules, regulations, orders, ordinances and directives, whether federal, state or
local or otherwise;
(e) not amend, modify, cancel or waive compliance with any provision of any
Transferred Contracts listed on Schedules 1.1(ii) or 3.10;
(f) use commercially reasonable efforts to preserve the current
relationships of the Transferred Business with its customers, suppliers and
distributors;
(g) not sell, assign, transfer or lease any of the Transferred Assets
(except for Inventory in the ordinary course of business);
(h) other than in the ordinary course of business, not waive any rights of
material value or cancel, discharge, satisfy or pay any debt, claim, lien,
liability or obligation, whether absolute, accrued, contingent or otherwise and
whether due or to become due;
(i) not effect any material change in the accounting practices, procedures
or methods of the Transferred Business;
(j) not enter into any transaction other than in the ordinary course of
business, or change in any material respects any of the business policies or
practices of the Transferred Business;
(k) not do or fail to do anything which would make any representations or
warranties in the Agreement or any certificate or other document contemplated
thereby, untrue;
(l) give written notice to the Buyer promptly after the Seller becomes
aware of the occurrence of any event or series of events that materially
adversely affects the Transferred Business; and
(m) not pay, loan or advance any amount to, or sell, transfer or lease any
of its assets to, or enter into any agreement or arrangement with, Seller or any
of its Affiliates, except for intercompany transactions in the ordinary course
of business.
5.2 Access. (a) From the date of execution of this Agreement to the Closing
Date, the Seller shall give to the Buyer and its representatives and agents
reasonable access during normal business hours upon reasonable prior notice to
the assets, books and records of the Transferred Business and furnish to the
Buyer such documents and information concerning the Transferred Business as the
Buyer from time to time may reasonably request, provided, however, that the
Seller may preclude access to trade secrets and formulas.
(b) Following the Closing Date, the Buyer and the Seller shall make
available on a reasonable basis to each other, and to each other's
representatives and agents, any financial data and other information that the
Seller or the Buyer have relating to the Transferred Business: (i) to permit the
preparation of any Tax returns; (ii) in connection with any governmental
examination of Tax returns relating to the Transferred Business; (iii) to defend
or prosecute any claims relating to the Transferred Business; or (iv) for any
other proper purpose. A party's reasonable out-of-pocket expenses in connection
with responding to any such request shall be reimbursed by the requesting party.
5.3 Intentionally Omitted.
5.4 Reasonable Efforts; Cooperation. Each party will use commercially
reasonable efforts to take or cause to be taken all actions and to do or cause
to be done all things necessary, proper or advisable to perform its obligations
hereunder and to satisfy the conditions to the Closing and to consummate the
transactions contemplated by this Agreement and shall use commercially
reasonable efforts to obtain all necessary waivers, consents and approvals, to
effect all necessary registrations and filings, and to cause all waiting periods
thereunder to expire or terminate.
5.5 Regulatory Filings. Each of the parties hereto will furnish to the
other party hereto such necessary information and reasonable assistance as the
other party may reasonably request in connection with its preparation of
necessary filings or submissions to any governmental agency.
5.6 Public Announcements. Prior to the Closing, none of the parties hereto
shall issue any press release or otherwise make any public statements to the
media with respect to this Agreement or the transactions contemplated hereby,
and after the Closing none of the parties hereto shall issue any press release
or otherwise make any public statements to the media with respect to this
Agreement and the other documents to be executed and delivered in connection
herewith, except in each case with the prior written approval of all of the
other parties hereto, unless required by law; provided, however, that after the
Closing the Buyer may make public statements regarding the Transferred Assets
that do not mention the Seller without the Seller's prior consent.
5.7 Confidentiality. The Buyer and the Seller shall not disclose, use or
permit their officers, employees, counsel, accountants or other representatives
or agents to disclose or use, directly or indirectly, any information about the
Buyer, Seller or their Affiliates, or the Transferred Business, other than
information in the public domain, information required by Buyer's lenders, and
information they knew (and which was not restricted from disclosing or using)
before they were first contacted by the Buyer, Seller or their representatives
in connection with the sale of the Transferred Assets, provided that such
confidentiality obligation of the Buyer shall expire, but only with respect to
information about the Transferred Business and not with respect to information
about the Seller, upon the Closing Date. If the transaction contemplated hereby
is not consummated, the parties, upon the request of each other, shall return
all written information and documents received in connection with the proposed
sale of Transferred Assets (other than drafts of this Agreement) and shall
destroy and cause their officers, employees, counsel, accountants and other
representatives and agents to destroy any copies of such information and
documents and any notes or abstracts of information in their possession
reflecting such information and documents or other confidential information
received in connection with this transaction about the parties, their Affiliates
or the Transferred Business. The provisions of this Section 5.7 supplement and
are in addition to, not in lieu of, the provisions of any and all other
agreements between the parties and their Affiliates respecting confidentiality
of information. The provisions of any such other agreements shall remain in full
force and effect, provided that in the event of an inconsistency or conflict
between the provisions of such other agreements and this Section 5.7, the
provisions of this Section 5.7 shall control (except for Section 21 of the
Manufacturing Agreement and Section 5.8 below).
5.8 Post-Closing Confidentiality. The Seller, for a period of five (5)
years from the Closing Date, shall maintain and cause its Affiliates to maintain
the confidentiality of information regarding the Transferred Business, the
Transferred Assets, the Buyer and its Affiliates ("Confidential Information")
unless disclosure of such information is required by law or in connection with a
proceeding arising out of or relating to this Agreement. Confidential
Information is understood not to include (i) information which is currently in
the public domain, or (ii) information which falls into the public domain
through no fault of the Seller, or (iii) information which comes to the Seller
through a third party unrelated to Buyer or its Affiliates who has the right to
receive and disclose the same. The Seller and its Affiliates agree that damages
at law for violation of any of the foregoing covenants may not be an adequate
remedy and that if Seller or its Affiliates violate any of the provisions
hereof, in addition to any other available rights or remedies, Buyer, its
Affiliates and their successors and assigns, shall be entitled to seek temporary
or permanent injunctive relief with regard to such violation.
5.9 Need for Insurance. The Buyer acknowledges that as of the Closing it
shall be Buyer's obligation to obtain products liability coverage for the
Transferred Business. Seller shall maintain insurance coverage for the
Transferred Business as to inventory produced by or for Seller and for
Transferred Products sold by Seller prior to the Closing Date.
5.10 Use of Name. From and after the Closing Date, except as and to the
extent provided on the Enamel/Treatment Business License Agreement, the Seller
shall cease and desist from using the Trademarks of the Transferred Business
including "CUTEX", any variation thereof and any name confusingly similar
thereto. Notwithstanding the foregoing, Buyer shall permit the Seller to sell
damaged or obsolete Inventories not purchased by the Buyer to any account other
than to the normal, usual or customary (including, without limitation, those
referred to in Schedule 3.13 of this Agreement) accounts.
5.11 License to Use Certain Trademarks and Trade Names. (a) After the
Closing Date, the Seller hereby permits and gives the Buyer a royalty-free,
non-exclusive right and license in the Territory, solely in connection with the
sale of Inventories, to use any name, logo, design, UPC Code and any other
trademarks or service marks owned and used by the Seller which appear on
Transferred Products which have been sold prior to the Closing Date and which
are not part of the Intellectual Property ("Retained Trade Names"). The Seller
hereby permits and gives the Buyer a royalty-free, non-exclusive right and
license in the Territory to use the Retained Trade Names on new packaging
materials produced by Buyer during the six-month period following the Closing
Date for use in connection with the Transferred Products. The Seller hereby
permits and gives the Buyer a royalty-free, perpetual, non-exclusive right and
license in the Territory to use the Retained Trade Names on (i) any Inventory
transferred to the Buyer pursuant to this Agreement, whenever produced, and (ii)
any Inventory produced by Buyer during the six-month period following the
Closing Date in accordance with the previous sentence.
(b) Except to the extent permitted pursuant to Section 5.11(a), the Buyer
shall not use or permit the use of any of the Retained Trade Names in any
manner. Following the Closing, the Seller will use commercially reasonable
efforts to modify the equipment used to produce such packaging materials as soon
as reasonably practicable so as to produce packaging materials without the
Retained Trade Names.
5.12 Delivery of Certain Documentation Relating to Intellectual Property.
True copies of the registrations, applications and other relevant documentation
for the Trademarks, Patents and other Intellectual Property including, without
limiting the foregoing, listed on Schedule 3.10 shall be delivered to the Buyer,
at the Seller's expense, at the Closing.
5.13 Delivery of Permits. True and complete copies of all Permits listed in
Schedule 3.8 shall be furnished by the Seller to the Buyer within five (5) days
prior to the Closing Date to the extent not previously furnished to the Buyer.
5.14 Shipment of the Inventories. Within thirty (30) days after the Closing
Date, the Buyer shall arrange for, at Buyer's expense, the shipment of the
Inventories from the Seller's facilities to the Buyer's facilities. In
accordance with Sections 1.1 and 2.1, title and risk of loss with respect to the
Inventories shall pass to the Buyer effective as of the close of business on the
Closing Date.
5.15 Allocation of the Purchase Price. The Purchase Price shall be
allocated as follows: $29,000,000 for the Transferred Assets (the "Transferred
Assets Allocation") and $1,000,000 for the Transition Services Agreement. Within
one hundred twenty (120) days after the Closing Date, Buyer shall prepare and
submit to Seller for its approval (which shall not be unreasonably withheld,
conditioned or delayed) Buyer's proposed allocation of the Transferred Assets
Allocation among the Transferred Assets. All Tax returns and reports filed by
Buyer and Seller with respect to the transactions contemplated by this Agreement
shall be consistent with the allocation agreed upon pursuant to this Section
5.15. Each of Buyer and Seller shall timely complete a Form 8594 Asset
Acquisition Statement of Allocation consistent with that allocation, shall
provide a copy to the other party and shall file a copy of such form with its
Federal income Tax return for the period that included the Closing Date.
5.16 Exclusivity. From and after the date of this Agreement until the
Closing Date the Seller will not, nor will it permit any of its Affiliates (or
authorize or permit any of their respective officers, employees, legal counsel,
accountants, investment brokers, financial advisers or other representatives
(together, "representatives")) to take, directly or indirectly, any action to
solicit, facilitate, negotiate, permit access with regard to, encourage or
accept any offer or inquiry in respect of the acquisition of the Transferred
Business or the Transferred Assets from, enter into any agreement or
understanding for the sale of the Transferred Business or the Transferred Assets
to, or furnish or cause to be furnished any information with respect to the
Transferred Business or the Transferred Assets, to any other person or entity.
5.17 Employee Matters. Buyer and Seller hereby acknowledge and agree that
Buyer shall not have any obligation or liability whatsoever to or with regard to
any employees of the Seller or its Affiliates ("Employees"), or with regard to
matters or liabilities relating to such Employees including, but not limited to,
obligations or liabilities concerning employee compensation and benefits,
severance payments, occupational safety matters, health matters, ERISA matters,
workers' compensation matters, and other employee matters, all of which shall be
Retained Liabilities of Seller and their Affiliates. For a period of one year
from the Closing Date Buyer will not solicit to employ any of Seller's current
employees so long as they are employed by Seller, without obtaining Seller's
consent; provided, however, that this covenant shall not be deemed breached by
general solicitations not specifically targeted to the employees of Seller or
discussions or negotiations with employees of Seller who contact Buyer on an
unsolicited basis.
5.18 Agreement Not To Compete. (a) Seller understands that Buyer shall be
entitled to protect and preserve the going concern value of the Transferred
Business to the extent permitted by law and that Buyer would not have entered
into this Agreement absent the provisions of this Section 5.18 and, therefore,
for a period of five (5) years from the Closing Date, except as otherwise
provided in the Enamel/Treatment Business License Agreement, Seller shall not,
and shall cause each of its Affiliates not to, directly or indirectly:
(i) 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 that engages in the sale,
distribution, packaging, manufacture or marketing of any nail polish
remover products within the Territory ("Competitive Activities"), solicit
any customer or prospective customer of the Transferred Business to
purchase any nail polish remover products sold by the Transferred Business
from anyone other than Buyer and its Affiliates or assist any person in any
way to do, or attempt to do, anything prohibited by the foregoing; or
(ii) perform any action, activity or course of conduct ("Detrimental
Activities") that is substantially detrimental to the Transferred Business
or business reputation, including (A) soliciting, recruiting or hiring any
employees of the Transferred Business or persons who have worked for the
Transferred Business, (B) soliciting or encouraging any employee of the
Transferred Business to leave the employment of the Transferred Business
and (C) disclosing or furnishing to anyone any confidential information
relating to the Transferred Business or otherwise using such confidential
information for its own benefit or the benefit of any other person.
(b) Section 5.18(a) shall be deemed not breached as a result of the
ownership by Seller or any of its Affiliates of: (i) less than an aggregate of
5% of any class of stock of a person engaged, directly or indirectly, in
Competitive Activities; provided, however, that such stock is listed on a
national securities exchange; (ii) less than 10% in value of any instrument of
indebtedness of a person engaged, directly or indirectly, in Competitive
Activities; or (iii) a person that engages, directly or indirectly, in
Competitive Activities if such Competitive Activities account for less than 10%
of such person's consolidated annual revenues.
(c) Notwithstanding any other provision of this Agreement, it is understood
and agreed that the remedy of indemnity payments and other remedies at law would
be inadequate in the case of any breach of the covenants contained in Section
5.18(a). Buyer shall be entitled to equitable relief, including the remedy of
specific performance, with respect to any breach or attempted breach of such
covenants.
5.19 Returns. (a) From and after the Closing Date, Buyer shall assume, and
hold Seller harmless from and against, the liability forall amounts payable
(including customer credit) with respect to returns (whether to Buyer or Seller)
of Transferred Products ("Returns"); provided, however, if (i) the aggregate of
all amounts payable with respect to Returns during the six-month period
following the Closing Date (the "Returns Period") less (ii) the Standard Cost of
any such Returns which are in salvageable, resalable condition, as determined in
good faith by the Buyer, exceeds 4% of gross sales of Transferred Products
during the period (the "Return Excess"), the Seller shall pay to the Buyer on
demand an amount equal to the Return Excess.
(b) Neither party shall take any action, including, without limitation,
making any public statements to the trade, that is likely to have the effect of
encouraging or causing any Returns. The Seller shall deliver to the Buyer any
Returns that are received by the Seller. Within five business days following the
end of each calendar month during the Returns Period, the Buyer will provide the
Seller with a statement which sets forth a summary of the aggregate of all
amounts payable with respect to Returns and the value of such Returns which are
in salvageable, resalable condition for the previous month.
(c) Seller shall not change its current return policy with respect to
Transferred Products, which policy provides for the acceptance only of damaged,
discontinued and obsolete Inventories for return.
ARTICLE 6
Conditions to Closing
6.1 Conditions to Obligations of Both Parties to Close. The obligation of
each party hereto to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction, at or prior to the Closing, of the
following conditions:
(a) No law, rule, regulation, order, decree, injunction, stay or
restraining order shall have been enacted, entered, promulgated or enforced by
any court of competent jurisdiction or governmental or regulatory authority or
instrumentality that prohibits the consummation of all or any part of the
transactions contemplated hereby, and no action or proceeding shall be pending
by any governmental or regulatory authority seeking any of the foregoing or
seeking to recover any damages or obtain other relief as a result of the
consummation of such transactions.
(b) All required registrations and filings with any Federal, state or local
government or regulatory authority shall have been made and any waiting period
or approval applicable to the transactions contemplated hereby pursuant to any
law, rule, regulation, order or decree of any Federal, state or local government
or instrumentality or agency thereof having jurisdiction with respect to the
transactions contemplated hereby shall have expired, been terminated or been
obtained, as the case may be.
6.2 Conditions to Obligation of the Buyer to Close. The obligation of the
Buyer to purchase the Transferred Assets and Transferred Business, to assume the
Assumed Liabilities and otherwise to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction, at or before the Closing,
of the following conditions:
(a) The Seller shall have performed in all material respects its
obligations required under this Agreement to be performed at or prior to the
Closing.
(b) The representations and warranties of the Seller contained herein
qualified as to materiality shall be true and correct, and those not so
qualified shall be true and correct in all material respects, as of the date
hereof and as of the Closing Date.
(c) The Seller shall have delivered to the Buyer a certificate, dated the
Closing Date and signed by an officer of the Seller, as to the satisfaction of
the conditions set forth in clauses (a) and (b) above.
(d) The Seller shall have delivered to the Buyer a good standing
certificate of Seller and a certified copy of resolutions duly adopted by the
board of directors of the Seller authorizing and approving the execution of this
Agreement (and other documents and instruments contemplated thereby) by the
Seller and the performance by the Seller of its obligations hereunder.
(e) The Seller shall have executed and delivered the Transition Services
Agreement and the Option Agreement.
(f) All actions required to be taken or documents required to be delivered
by the Seller hereunder or in connection with the consummation of the
transactions contemplated by this Agreement (including without limitation the
Consents specified in Schedule 3.3 and consents to the assignment of each
Transferred Contract not listed on Schedule 4.6) shall be delivered to and be
reasonably satisfactory to the Buyer and the Buyer shall have received any
additional documents reasonably requested by the Buyer effectively to vest title
to the Transferred Assets in the Buyer or to consummate the transactions
contemplated by the Agreement.
6.3 Conditions to Obligations of the Seller to Close. The obligation of the
Seller to sell, transfer and assign the Transferred Assets and the Transferred
Business and otherwise to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction, at or before the Closing, of the
following conditions:
(a) The Buyer shall have performed in all material respects its obligations
required under this Agreement to be performed at or prior to the Closing.
(b) The representations and warranties of the Buyer contained herein shall
have been true and correct in all material respects when made and shall be true
and correct in all material respects at and as of the Closing Date.
(c) The Buyer shall have delivered to the Seller a certificate, dated the
Closing Date and signed by an officer of the Buyer, as to the satisfaction of
the conditions set forth in clauses (a) and (b) above.
(d) The Buyer shall have delivered to the Seller a good standing
certificate of Buyer and a certified copy of resolutions duly adopted by the
board of directors of the Buyer authorizing and approving the execution of this
Agreement (and other documents and instruments contemplated thereby) by the
Buyer and the performance by the Buyer of its obligations hereunder.
(e) Buyer shall have executed and delivered the Enamel/Treatment Business
License Agreement.
(f) All actions required to be taken or documents required to be delivered
by the Buyer hereunder or in connection with the consummation of the
transactions contemplated by this Agreement shall be reasonably satisfactory to
the Seller and the Seller shall have received any additional documents
reasonably requested by the Seller effectively to transfer to the Buyer the
Assumed Liabilities.
ARTICLE 7
Termination, Amendment and Waiver
7.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:
(a) By mutual consent of the Buyer and the Seller;
(b) By the Seller if the Buyer is in breach in any material respects of its
representations, warranties or covenants set forth in this Agreement;
(c) By the Buyer if the Seller is in breach in any material respects of its
representations, warranties or covenants set forth in this Agreement; or
(d) By the Seller if it is not in breach of this Agreement, or by the Buyer
if it is not in breach of this Agreement, and in either case if the Closing has
not occurred by December 31, 1998.
Sections 5.7 and 9.1 and any rights and remedies for breaches of this
Agreement prior to its termination shall survive any such termination.
Otherwise, upon its termination, this Agreement shall forthwith become of no
further force and effect.
7.2 Amendment. This Agreement may not be amended except by an instrument in
writing signed by all parties.
7.3 Waiver. Any party hereto may: (a) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (b) waive
any inaccuracies or breaches in the representations and warranties contained
herein or in any document delivered by the other parties pursuant hereto, or (c)
waive compliance with any of the agreements or covenants or satisfaction of any
of the conditions to be performed by the other parties that are contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
such party.
ARTICLE 8
Indemnification
8.1 Agreement to Indemnify. (a) Subject to the limitations set forth in
Section 8.3, the Seller shall indemnify, defend and hold harmless the Buyer
Group (as defined in Section 8.1(c)) against any and all claims, losses,
damages, liabilities, deficiencies, obligations, assessments, judgments, costs
or expenses of any kind, including without limitation reasonable attorney's fees
and expenses reasonably incurred in investigating, preparing for, defending
against or prosecuting any claim, litigation or proceeding (collectively,
"Losses"), but net of any insurance recoveries or Tax benefits actually received
by the Buyer Group because of such Losses, arising out of or resulting from, in
connection with or otherwise with respect to the following:
(i) the failure of the Seller or its Affiliates to pay or otherwise
discharge the Retained Liabilities, or any other liabilities or obligations
of any kind to the extent arising out of or resulting from the operation or
conduct of the Transferred Business through the Closing Date except for the
Assumed Liabilities;
(ii) the nonfulfillment by the Seller of any agreement or covenant of
the Seller hereunder or in any instrument or document delivered pursuant to
Section 2.3 or 6.2 hereof;
(iii) the inaccuracy of any representation or breach of any warranty
made by the Seller herein or in any certificate or document delivered
pursuant to Section 2.3 or 6.2(c) (it being agreed and acknowledged by the
parties that for purposes of Buyer's right to indemnification pursuant to
this Section 8.1 the representations and warranties of Seller shall not be
deemed qualified by any references herein to materiality generally or to
whether or not any such breach results or may result in a material adverse
effect);
(iv) any fees, expenses or other payments incurred or owed by Seller
to any brokers, financial advisors or comparable other persons retained or
employed by it in connection with the transactions contemplated by this
Agreement and any payments or amounts described in Section 5.17;
(v) the failure to comply with statutory provisions relating to bulk
sales and transfers, if applicable;
(vi) the taking of any credit by any customer of the Buyer in respect
of returns of nail enamel products sold by the Seller either prior to or
after the Closing; provided that the Buyer shall not have encouraged or
induced the taking of any such credit;
(vii) except with regard to Buyer's Assumed Liabilities, the conduct or
operation of the Transferred Business prior to the Closing Date;
(viii) without limiting the generality of the term "Retained
Liabilities", all Losses arising out of or relating to the litigation
referred to on Schedule 3.9; and
(ix) without limiting the generality of the term "Retained
Liabilities", all Losses arising out of or relating to the termination of,
or the failure of Carson to terminate, (I) the Manufacturing Agreement,
dated April 30, 1997, by and between AM Cosmetics Inc. and Seller and (II)
the Broker Agreement, dated September 19, 1997, by and between AM Cosmetics
Inc. and Seller.
(b) Subject to the limitations set forth in Section 8.3, the Buyer shall
indemnify, defend and hold harmless the Seller Group (as defined in Section 8.
l(c)) against any and all Losses, but net of any insurance recoveries or Tax
benefits actually received by the Seller Group because of such Losses, arising
out of or resulting from, in connection with or otherwise with respect to the
following:
(i) the failure of the Buyer to pay or otherwise discharge the
Assumed Liabilities;
(ii) the non-fulfillment by the Buyer of any agreement or covenant
of the Buyer hereunder or in any instrument or document delivered pursuant
to Section 2.4 or 6.3;
(iii) the inaccuracy of any representation or the breach of any
warranty made by the Buyer herein or in any certificate or document
delivered pursuant to Section 2.4 or 6.3(c); and
(iv) the conduct or operation of the Transferred Business after the
Closing Date, including without limitation the sale by the Buyer or its
Affiliates after the Closing Date of any finished products included in
the Inventories, subject, however, to the limitations set forth in Section
1.3(a)(iii).
(c) The term "Buyer Group" shall include the Buyer, its Affiliates,
subsidiaries and successors and the directors, officers, employees and
shareholders thereof, and the term "Seller Group" shall include the Seller, its
Affiliates and successors and the directors, officers, employees and
shareholders thereof.
(d) Notwithstanding the provisions of this Article 8, neither Buyer Group
nor Seller Group shall be required to alter any positions or elections it would
otherwise take or make with respect to Taxes or insurance in order to reduce the
amount of indemnifiable Losses under Section 8.1(a) or Section 8.1(b), as the
case may be.
8.2 Procedure for Indemnification. (a) In the event that any of the Buyer
Group or Seller Group as the case may be (the "indemnified party") receives
written notice of the commencement of any action or proceeding, the assertion of
any claim by a third party or the imposition of any penalty or assessment for
which indemnity may be sought pursuant to this Article 8 (a "Third Party
Claim"), and the indemnified party intends to seek indemnity pursuant to this
Article 8, the indemnified party shall promptly provide the other of the Buyer
Group or Seller Group as the case may be (the "indemnifying party") with notice
of such Third Party Claims, provided, however, that failure to give such
notification shall not affect the indemnification provided hereunder except to
the extent that indemnifying party shall have been materially prejudiced as a
result of such failure (except that the indemnifying party shall not be liable
for any expenses incurred during the period in which the indemnified party
failed to give such notice). Thereafter, the indemnified party shall deliver to
the indemnifying party, promptly following the indemnified party's receipt
thereof, copies of all notices and documents (including court papers) received
by the indemnified party relating to the Third Party Claim. Except for claims
seeking equitable relief from the indemnified party, the indemnifying party
shall, upon receipt of such notice, be entitled to participate in or, at the
indemnifying party's option, assume the defense, appeal or settlement of such
Third Party Claim with respect to which such indemnity has been invoked with
counsel selected by it and approved by the indemnified party (such approval not
to be unreasonably withheld or delayed), and the indemnified party shall fully
cooperate with the indemnifying party in connection therewith upon such
indemnifying party's reasonable request. Should the indemnifying party so elect
to assume the defense of a Third Party Claim, the indemnifying party shall not
be liable to the indemnified party for any legal expenses subsequently incurred
by the indemnified party in connection with the defense thereof. If the
indemnifying party assumes such defense, the indemnified party shall have the
right to participate in the defense thereof and to employ counsel (not
reasonably objected to by the indemnifying party), at its own expense, separate
from the counsel employed by the indemnifying party, it being understood that
the indemnifying party shall control such defense. In the event that the
indemnifying party fails to assume the defense, appeal or settlement of such
Third Party Claim within forty-five (45) days after receipt of written notice
thereof from the indemnified party, the indemnified party shall have the right
to undertake the defense, appeal or settlement of such Third Party Claim at the
expense and for the account of the indemnifying party; provided that the
Indemnified Party shall not settle or compromise any such Third Party Claim
without the indemnifying party's written consent, which shall not be
unreasonably withheld. The indemnifying party shall not settle or compromise any
such Third Party Claim without the indemnified party's prior written consent,
unless the terms of such settlement or compromise release the indemnified party
from any and all liability with respect to such Third Party Claim. However, if
such settlement or compromise would have a material adverse effect on the
indemnified party notwithstanding such release, its prior written consent shall
still be required, which consent will not be unreasonably withheld. The
indemnifying party shall pay the amount of the Loss arising out of such Third
Party Claim to and upon demand of the indemnified party in immediately available
funds.
(b) In the event any of the Buyer Group or Seller Group as the case may be
(also referred to as "indemnified party") should have a claim for
indemnification against the other of the Buyer Group or the Seller Group as the
case may be (also referred to as "indemnifying party") that does not involve a
Third Party Claim, the indemnified party shall deliver a notice of such claim
with reasonable promptness to the indemnifying party. The failure to give such
notice shall not affect whether an indemnifying party is liable for
indemnification unless such failure has resulted in the loss of substantive
rights with respect to the indemnifying party's ability to defend such claim,
and then only to the extent of such loss. If the indemnifying party notifies the
indemnified party that it does not dispute the claim described in such notice or
fails to notify the indemnified party within forty-five (45) days after delivery
of such notice by the indemnified party whether the indemnifying party disputes
the claim described in such notice ("dispute notice"), the Loss in the amount
specified in the indemnified party's notice will be conclusively deemed a
liability of the indemnifying party and the indemnifying party shall pay the
amount of such Loss to the indemnified party on demand in immediately available
funds. If the indemnifying party timely disputes the claim within such
forty-five (45) day period, the indemnifying party and indemnified party will
proceed in good faith to negotiate and resolve the dispute within forty-five
(45) days after indemnified party receives the dispute notice. If such dispute
is not so resolved, then either party may have the dispute resolved by a court
of competent jurisdiction.
8.3 Limitations on Indemnification. Notwithstanding Sections 8.1(a)(iii)
and 8.1(b)(iii) of this Article 8, neither the Seller nor the Buyer shall be
responsible for any Losses arising or resulting from inaccuracies in
representations or breaches of warranties made by such party unless the
aggregate amount of any such Losses exceeds, on a cumulative basis, $625,000,
and then only to the extent of any such excess, and in no event shall the
aggregate liability for such Losses exceed $3,000,000. All representations and
warranties made by the Seller and the Buyer hereunder shall survive the Closing,
provided, however, that any claim for such Losses arising out of or resulting
from the inaccuracy of any such representation or the breach of any such
warranty must be asserted on or before April 30, 2000, failing which any such
claim shall be waived and extinguished, excluding, however, claims for Losses
with respect to the inaccuracy of representations and breach of warranties
contained in (i) Section 3.1 (Organization), Section 3.2 (Authorization),
Section 3.5 (Title to Transferred Assets) or Section 3.11 (Taxes), which may be
asserted at any time under the applicable statute of limitations, failing which
any such claims shall be waived and extinguished. In addition, any claim for
Losses arising out of or resulting from the matters described in Section
8.1(a)(viii) must be asserted on or before April 30, 2000, failing which any
such claim shall be waived and extinguished. For purposes of this Section 8.3, a
claim has been asserted when written notice thereof, including reasonable
supporting documentation, if available, has been given by the indemnified party
to the indemnifying party in accordance with Section 9.3.
8.4 Exclusivity. After the Closing, to the extent permitted by law, the
indemnities set forth in this Article 8 shall be the exclusive monetary remedies
of the Buyer Group and the Seller Group after the Closing for any breach of or
inaccuracy in any representation or warranty contained in or made pursuant to
this Agreement or any breach, nonfulfillment or failure to be performed of any
covenant or agreement, other than Section 5.18, contained in or made pursuant to
this Agreement, and the parties shall not be entitled to a rescission of this
Agreement or to any further indemnification rights or claims of any nature
whatsoever in respect thereof, all of which the parties hereto hereby waive
(other than claims of, or causes of action arising from, fraud).
8.5 California Air Resources Board Matter. Notwithstanding any other
provision of this Agreement to the contrary, the responsibility for any Losses
arising out of or relating to the matter that is referred to on Schedule 3.8
(the "CARB Matter") shall be allocated between the Buyer and the Seller in
accordance with this Section 8.5. To the extent that any Losses arising out of
or relating to the CARB Matter are in the nature of one-time fines, assessments,
penalties or similar administrative actions imposed as a result of the sale of
Transferred Products manufactured prior to the Closing Date, such Losses shall
be deemed to be "Retained Liabilities" in respect of which the Buyer shall be
entitled to make a claim under Section 8.1(a)(i). To the extent that any Losses
arising out of or relating to the CARB Matter are in the nature of ongoing
requirements which impact the operation of the Transferred Business or the
manufacture of the Transferred Products after the Closing, such Losses shall be
deemed to have arisen as a result of the breach of a representation and warranty
by the Seller in respect of which the Buyer shall be entitled to make a claim
under Section 8.1(a)(iii). The Buyer and the Seller shall cooperate in good
faith to resolve any Third Party Claim and mitigate any Losses arising out of or
relating to the CARB Matter, including by providing and sharing information
reasonably related to the settlement of such claim, cooperating in any
appearances to be made before or reports to be delivered to governmental
authorities and pursuing any rights and remedies that the parties may have under
the C-P Manufacturing Agreement; provided that neither party shall settle or
compromise any such Third Party Claim or any claim under the C-P Manufacturing
Agreement which in any way adversely affects the other party without such other
party's prior written consent, which consent shall not be unreasonably withheld
or delayed. Neither party to this Agreement shall seek to pursue any right or
remedy under any other provision of this Agreement in respect of the CARB Matter
which would be inconsistent with the provisions of this Section 8.5, which shall
exclusively govern resolution of claims in respect of Losses arising out of or
relating to the CARB Matter.
ARTICLE 9
Miscellaneous
9.1 Expenses, Taxes. Except as otherwise provided herein, each party hereto
shall pay all fees and expenses incurred by it in connection with this Agreement
and the consummation of the transactions contemplated hereby. Any excise, sales,
use or transfer Taxes or any other such Taxes (other than income Taxes) that are
payable or arise as a result of execution of this Agreement or the transfer of
the Transferred Assets and the Transferred Business to the Buyer pursuant to
this Agreement shall be borne equally by the Buyer and the Seller.
9.2 Further Assurances. From time to time after the Closing, the Seller and
the Buyer shall execute and deliver such documents and instruments as any other
party may reasonably request in order to consummate more effectively the
transactions contemplated by this Agreement.
9.3 Notices. Any notice or other communication required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly given:
(i) on the date of delivery, if delivered personally, (ii) on the business day
after dispatch by documented overnight delivery service such as Federal Express,
if sent in such manner, (iii) on the date of transmission by telecopy or telex
or other means of electronic transmission, if so transmitted, provided that a
confirmation copy of any such electronic transmission is sent no later than the
business day following the day of electronic transmission by documented
overnight delivery service or registered mail, postage prepaid (return receipt
requested), or (iv) on the fifth business day after deposit in the United States
mail and sent by registered mail, postage prepaid (return receipt requested).
Notices or other communications shall be directed to the following addresses:
If to the Seller to:
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.
If to the Buyer to:
The Shansby Group
250 Montgomery Street
San Francisco, CA 94104
Telephone No.: (415) 398-2500
Telecopy No.: (415) 421-5120
Attention: Charles Esserman
and Don Stanners
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Telephone No.: (713) 758-3820
Telecopy No.: (713) 615-5605
Attention: Mark Metts, Esq.
and to:
Medtech Laboratories, Inc.
P.O. Box 1108
Jackson, WY 83001
Telephone No.: (307) 739-8222
Telecopy No.: (307) 739-8225
Attention: Gary Downing
with a copy to:
Chambliss, Bahner & Stophel, P.C.
1000 Tallan Building
Two Union Square
Chattanooga, TN 37402-2500
Telephone No.: (423) 756-3000
Telecopy No.: (423) 265-9574
Attention: Charles N. Jolly, Esq.
Any party may, by notice given in accordance with this Section 9.3, specify a
new address for notices under this Agreement.
9.4 Headings. The descriptive headings of the several Articles and Sections
of this Agreement and the table of contents are inserted for convenience only,
do not constitute a part of this Agreement, and shall not affect the
interpretation hereof.
9.5 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York regardless of the laws that
might otherwise govern under applicable principles of conflict of laws except
Section 5.1401 of the New York General Obligations Law.
9.6 Assignment; No Third Party Beneficiaries. This Agreement and all the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither this
Agreement nor any rights hereunder shall be assigned by either of the parties
hereto without the prior written consent of the other party, except that Buyer
may assign such Agreement and rights to its Affiliates, subsidiaries or
successors without Seller's consent (provided that in the event Buyer assigns an
obligation hereunder, it shall be responsible for such obligation if its
assignee fails to perform such obligation). In the event of any such assignment
for which consent has been obtained, the assigning party shall nevertheless
remain responsible for compliance with the terms of this Agreement. This
Agreement shall not confer upon any person other than the parties hereto any
rights or remedies hereunder except as otherwise provided in this Section 9.6.
9.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.8 Entire Agreement. This Agreement (including thc documents and
instruments referred to herein), the Transition Services Agreement, the
Enamel/Treatment Business License Agreement and the Option Agreement constitute
the entire agreement between the parties with respect to the subject matter
hereof, and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect thereto, except the
Confidentiality Agreement, dated July 27, 1998 between the Buyer and Carson,
Inc., which Confidentiality Agreement is also binding on the Buyer until
Closing, after which the provisions of Section 5.7 shall govern. All of the
covenants and agreements contained in this Agreement (including the documents
and instruments referred to herein) shall survive Closing, subject to the
provisions of Section 8.3.
9.9 Severability. In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect in any jurisdiction, such invalidity, illegality
or unenforceability shall not affect any other provision of this Agreement in
any other jurisdiction, but this Agreement shall be reformed and construed in
any such jurisdiction as if such invalid or illegal or unenforceable provision
had never been contained herein and such provision shall be reformed so that it
would be valid, legal and enforceable to the maximum extent permitted in such
jurisdiction.
9.10 Bulk Sales. The Buyer hereby waives compliance by the Seller with any
applicable bulk sales transfer laws, including without limitation, the bulk
transfer provisions of the Uniform Commercial Code, or any similar statute, with
respect to the transaction contemplated hereby.
9.11 Refunds and Remittances. After the Closing, if the Buyer receives any
refund amount or other monetary benefit related to claims, litigation,
insurance, accounts receivable or other matters that is properly due and owing
to the Seller in accordance with this Agreement, the Buyer shall promptly (but
in no event later than seven (7) business days after the end of the calendar
month within which such benefit is received) cause same to be remitted to the
Seller at the applicable address specified in Section 9.3. Similarly, in the
event that the Seller receives any such refund, amount or other monetary benefit
that is properly due and owing to the Buyer in accordance with this Agreement,
the Seller shall promptly (but in no event later than seven (7) business days
after the end of the calendar month within which such benefit is received) cause
same to be remitted to the Buyer at the applicable address specified in Section
9.3.
9.12 No Waiver Relating to Claims for Fraud. The liability of any party
under Article 8 shall be in addition to, and not exclusive of, any other
liability that such party may have at law or equity based on such party's
fraudulent acts or omissions. None of the provisions set forth in this
Agreement, including but not limited to the provisions set forth in Article 8,
shall be deemed a waiver by any party to this Agreement of any right or remedy
that such party may have at law or equity based on any other party's fraudulent
acts or omissions, nor shall any such provisions limit, or be deemed to limit,
(a) the amounts of recovery sought or awarded in any such claim for fraud, (b)
the time period during which a claim for fraud may be brought or (c) the
recourse that any such party may seek against another party with respect to a
claim for fraud; provided, that with respect to such rights and remedies at law
or equity, the parties further acknowledge and agree that none of the provisions
of this Section 9.12, nor any reference to this Section throughout this
Agreement, shall be deemed a waiver of any defenses that may be available in
respect of actions or claims for fraud, including, but not limited to, defenses
of statutes of limitations or limitations of damages.
9.13 Director and Officer Liability. The directors, officers and
stockholders of the parties to this Agreement and their Affiliates shall not
have any personal liability or obligations arising under this Agreement
(including any claims that another party may assert) other than as an assignee
of this Agreement or pursuant to a written guarantee.
9.14 Specific Performance. Each party recognizes that in the event such
party should refuse to perform under the provisions of this Agreement, monetary
damages alone will not be adequate. Each party shall therefore be entitled, in
addition to any other remedies that may be available, including money damages,
to obtain specific performance of the terms of this Agreement. In the event of
any action to enforce this Agreement specifically, each party hereby waives the
defense that there is an adequate remedy at law.
9.15 Assistance. (a) If the Buyer requests, the Seller shall cooperate, and
shall cause its accountants to cooperate, in all reasonable respects in
connection with any financing efforts of the Buyer or its Affiliates (either in
connection with the transaction contemplated hereby or otherwise) (including
providing reasonable assistance in the preparation of one or more offering
circulars, private placement memoranda, registration statements or other
offering documents relating to debt and/or equity financing) and any other
filings that may be made by the Buyer or its Affiliates with the Securities and
Exchange Commission, all at the sole expense of the Buyer. The Seller shall (i)
furnish to its independent accountants (or, if required by the Buyer, to the
Buyer's independent public accountants) such customary management representation
letters as its accountants may reasonably require as a condition to its
execution of any required accountants' consents necessary in connection with the
delivery of any "comfort" letters requested by financing sources of the Buyer or
its Affiliates and (ii) furnish to the Buyer all financial statements (audited
and unaudited) and other information in the possession of the Seller or their
representatives or agents as the Buyer shall reasonably determine are required
in connection with such financing; provided, however, that nothing in this
Section 9.15 shall require the Seller to cause its independent accountants to
deliver any letters or consents that such accountants are not otherwise prepared
to deliver or to prepare any financial statements that are not otherwise in the
Seller's possession as of the Closing Date.
(b) The Buyer shall indemnify and hold harmless the Seller and its
officers, directors and controlling persons against any and all claims, losses,
liabilities, damages, costs, or expenses (including reasonable legal fees and
expenses) that may arise out of or with respect to any actions requested by the
Buyer pursuant to paragraph (a) above.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Asset
Purchase Agreement to be duly executed as delivered as of the day and year first
above written.
CARSON PRODUCTS COMPANY, Seller
By: ___________________________
Name:
Title:
THE CUTEX COMPANY, Buyer
By: ____________________________
Name:
Title:
LICENSE AGREEMENT
THIS LICENSE AGREEMENT is dated as of the 9th day of December,
1998 between Carson Products Company, a Delaware corporation, of 64 Ross Road,
Savannah, Georgia 31405 ("Carson"), and The Cutex Company, a Delaware
corporation, of 3510 North Lake Creek Drive, P.O. Box 1108, Jackson, Wyoming
83001 ("Cutex Co.") (each individually a "Party" and, collectively, the
"Parties").
WHEREAS, Carson and Cutex Co. have entered into the asset
purchase agreement dated as of December 9, 1998 (the "Purchase Agreement")
pursuant to which Carson is transferring to Cutex Co. (1) the assets used in
connection with its business of selling, distributing, packaging, manufacturing
and marketing nail polish remover and nail care implement products and (2) all
right, title and interest in and to the marks listed in Exhibit A and the
goodwill associated therewith (the "Marks") within the United States and Puerto
Rico (the "Territory");
WHEREAS, pursuant to the Purchase Agreement, Carson is
retaining certain assets used in connection with its business of selling,
distributing, packaging, manufacturing and marketing nail enamel products and
nail care treatment products; and
WHEREAS, Cutex Co. desires to grant to Carson, and Carson
desires to acquire from Cutex Co., an exclusive, transferable (subject to the
limitations set forth in Section 1.03), fully paid-up, royalty-free license to
use the Marks in connection with the sale, distribution, packaging, manufacture
and marketing within the Territory of (i) nail enamel products and (ii) nail
care treatment products to the extent that such nail care treatment products are
intended for use by direct application to nails and/or cuticles (the "Goods");
NOW THEREFORE, for and in consideration of the mutual
covenants and agreements contained herein and in the Purchase Agreement and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the Parties hereby agree as follows:
ARTICLE 1 GRANT OF LICENSE.
1.01 License. Subject to the other provisions hereof, Cutex
Co. hereby grants to Carson an exclusive (including as to Cutex Co.),
transferable (subject to the limitations set forth in Section 1.03), fully
paid-up, royalty-free license to use the Marks in connection with the business
of selling, distributing, packaging, manufacturing and marketing the Goods
within the Territory.
1.02 Ownership. All right, title and interest in and to the
Marks shall remain vested in Cutex Co. All use of the Marks by Carson shall
inure to the benefit of Cutex Co.
1.03 Transferability. Upon expiration of the Option Period (as
defined in the Option Agreement, dated the date hereof, by and between Carson
and Cutex Co.), Carson shall have the right to assign or sublicense its rights
under this Agreement in its sole discretion. Carson shall notify Cutex Co. of
such assignment or sublicense within a reasonable time following the effective
date of any such assignment or sublicense. In no event shall Carson transfer its
rights under this Agreement during the Option Period.
ARTICLE 2 FORM OF USE.
2.01 Notices, Legends and other Marks. Carson shall use the
Marks in connection with the federal registration symbol, (R), or the "TM"
symbol, as applicable.
2.02 Quality Standards. Subject to Section 2.03, Carson agrees
that it shall only use the Marks in a manner consistent with the past practices
of Carson immediately prior to the execution of the Purchase Agreement.
2.03 Quality Control. Cutex Co. hereby approves of all uses of
the Marks that are consistent with the practices of Carson immediately prior to
the execution of the Purchase Agreement. To the extent Carson intends to use the
Marks in a manner which materially deviates from past practices, Carson shall
submit to Cutex Co., for approval or disapproval, samples of any such proposed
use. Cutex Co. shall be deemed to have approved the use of such samples if
Carson does not receive a notice of disapproval within ten (10) business days of
Cutex Co.'s receipt of any such samples. Once Carson has obtained Cutex Co.'s
approval for any proposed use of the Marks, Carson shall only be obligated to
submit for approval samples of new proposed uses which are materially different
than the approved uses.
ARTICLE 3 TERM AND TERMINATION.
3.01 Term. The term of this Agreement shall commence on the
date of this Agreement and shall continue until terminated.
3.02 Termination of License by Cutex Co. Cutex Co. may
terminate the license granted hereunder by giving notice to the licensee (1)
upon the exercise by Cutex Co. of its option set forth in the Option Agreement
between Cutex Co. and Carson of even date herewith and the consummation of the
transactions contemplated thereby, (2) if the holder of the license ceases to
actively engage in the sale of Goods in a manner consistent with past practices
or as otherwise permitted by Cutex Co. pursuant to Section 2.03 or (3) if the
holder of the license fails to perform any material obligation under this
Agreement and does not cure such default within 45 days after written notice
from Cutex Co. of such default.
3.03 Termination for Convenience. Upon notice to Cutex Co.,
Carson may terminate the license granted to it under this Agreement for
convenience at any time.
3.04 Effect of Termination. In the event of a termination of
the license granted under this Agreement for any reason, Carson shall have the
right to continue to use the Marks in connection with the sale of any and all
previously manufactured Goods in the normal course of business for a period of
up to six (6) months in order to dispose of inventory of finished Goods and
works in progress in an orderly manner. At the end of such six-month period,
Carson shall (1) cease use of the Marks and (2) terminate all sublicenses
granted pursuant to this Agreement.
ARTICLE 4 DISCLAIMER.
EXCEPT AS SET FORTH HEREIN, NEITHER PARTY MAKES ANY REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, REGARDING OR RELATING TO THE MARKS OR ITS USE OF
THE MARKS, AND EACH PARTY EXPLICITLY DISCLAIMS ALL WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
SPECIFIC PURPOSE. NOTHING CONTAINED IN THIS SECTION SHALL LIMIT OR RESTRICT
CUTEX CO.'S RIGHTS AND REMEDIES, OR THOSE OF ANY OF ITS AFFILIATES, UNDER THE
PURCHASE AGREEMENT.
ARTICLE 5 TOOLS, DIES AND MOLDS.
5.01 Use of Tools, Dies and Molds. Pursuant to the Purchase
Agreement, Carson is selling to Cutex Co., among other assets, the tools, dies
and molds set forth on Schedule 1.1(vii) to the Purchase Agreement, which tools,
dies and molds are currently used in connection with the manufacture of the
Goods (the "Equipment"). For so long as Carson has the right to use the Marks
pursuant to the license granted hereunder, this Agreement shall also constitute
the agreement by Cutex Co. to lease to Carson on an exclusive (except as to
Cutex Co.), transferable (on the same terms as the license granted hereunder),
fully-paid up, rent-free basis the Equipment for use in connection with the
manufacture of the Goods. Cutex Co. further agrees that the Equipment shall
continue to be located at the facilities indicated on Schedule 1.1(vii) to the
Purchase Agreement and that, during the term of the lease granted hereby, Cutex
Co. will not require or authorize that the Equipment be moved from such
locations without the express written consent of Carson, which consent shall not
be unreasonably withheld. The provisions of this paragraph shall automatically
terminate at the same time as the license granted hereunder in respect of the
Marks terminates pursuant to Article 3. Carson shall maintain the equipment in
accordance with generally accepted industry practice such that upon the
termination of this provision the equipment shall be returned to Cutex Co. in
good operating condition and repair, ordinary wear and tear excepted. Carson
acknowledges that Cutex Co. shall have no responsibility for the safe-keeping,
maintenance, or condition of the equipment and Carson hereby indemnifies Cutex
Co. from any loss, liability, claim, damage or expense suffered by Cutex Co. as
a result of Carson's use of the equipment.
ARTICLE 6 MISCELLANEOUS PROVISIONS.
6.01 Notices. Except as otherwise specified in this Agreement,
all notices, requests, consents, approvals, agreements, authorizations,
acknowledgements, waivers and other communications required or permitted under
this Agreement shall be in writing and shall be deemed given: (i) on the date of
delivery, if delivered personally, (ii) on the business day after dispatch by
documented overnight delivery service such as Federal Express, if sent in such
manner, (iii) on the date of transmission by telecopy or telex or other means of
electronic transmission, if so transmitted, provided that a confirmation copy of
any such electronic transmission is sent no later than the business day
following the day of electronic transmission by documented overnight delivery
service or registered mail, postage prepaid (return receipt requested), or (iv)
on the fifth business day after deposit in the United States mail and sent by
registered mail, postage prepaid (return receipt requested). Notices or other
communications shall be directed to the following addresses:
If to Carson 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.
If to Cutex Co. to:
The Shansby Group
250 Montgomery Street
San Francisco, CA 94104
Telephone No.: (415) 398-2500
Telecopy No.: (415) 421-5120
Attention: Charles Esserman and
Don Stanners
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Telephone No.: (713) 758-3820
Telecopy No.: (713) 615-5605
Attention: Mark Metts, Esq.
and to:
Medtech Laboratories, Inc.
P.O. Box 1108
Jackson, WY 83001
Telephone No.: (307) 739-8222
Telecopy No.: (307) 739-8225
Attention: Gary Downing
with a copy to:
Chambliss, Bahner & Stophel, P.C.
1000 Tallan Building
Two Union Square
Chattanooga, TN 37402-2500
Telephone No.: (423) 756-3000
Telecopy No.: (423) 265-9574
Attention: Charles N. Jolly, Esq.
Any party may, by notice given in accordance with this Section 6.01, specify a
new address for notices under this Agreement.
6.02 Headings. The article and section headings are for
reference and convenience only and shall not be considered in the interpretation
of this Agreement.
6.03 Severability. If any provision of this Agreement is held
by a court of competent jurisdiction to be contrary to law, then the remaining
provisions of this Agreement, if capable of substantial performance, shall
remain in full force and effect.
6.04 Waivers. No delay or omission by either Party in the
exercise of any right or power it has under this Agreement shall impair or be
construed as a waiver of such right or power. A waiver by any Party of any
breach or covenant shall not be construed to be a waiver of any succeeding
breach or any other covenant. All waivers must be in writing and signed by the
Party waiving its rights.
6.05 Consents, Approvals and Requests. Except as specifically
set forth in this Agreement, all consents and approvals to be given by either
Party under this Agreement shall not be unreasonably withheld or delayed and
each Party shall make only reasonable requests under this Agreement.
6.06 Entire Agreement. This Agreement represents the entire
agreement between the Parties with respect to its subject matter, and there are
no other representations, understandings or agreements between the Parties
relative to such subject matter.
6.07 Amendments. No amendment to, or change, waiver or
discharge of, any provision of this Agreement shall be valid unless in writing
and signed by an authorized representative of each of the Parties.
6.08 Governing Law. This Agreement and the rights and
obligations of the Parties hereunder shall be governed by and construed in
accordance with United States trademark laws and the laws of the State of New
York, without giving effect to the principles thereof relating to the conflicts
of laws.
6.09 Covenant of Further Assurances. Cutex Co. and Carson
covenant and agree that, subsequent to the execution and delivery of this
Agreement and without additional consideration, each of Cutex Co. and Carson
shall execute and deliver any further legal instruments and perform any acts
which are or may become necessary to effectuate the purposes of this Agreement
to perfect or otherwise preserve and maintain Cutex Co.'s rights in and to the
Marks.
<PAGE>
IN WITNESS WHEREOF, each of Cutex Co. and Carson has caused
this Agreement to be signed and delivered by its duly authorized representative.
THE CUTEX CO.
By:___________________________________________
Name:
Title:
STATE OF_________ )
) SS.
COUNTY OF________ )
On this__day of______ ,199_, there appeared before me ________________,
personally known to me, who acknowledged that he/she signed the foregoing
license as his/her voluntary act and deed with full authority to do so.
___________________
Notary Public
<PAGE>
CARSON PRODUCTS COMPANY
By:___________________________________________
Name:
Title:
STATE OF_________ )
) SS.
COUNTY OF________ )
On this__day of______ ,199_, there appeared before me ________________,
personally known to me, who acknowledged that he/she signed the foregoing
license as his/her voluntary act and deed with full authority to do so.
___________________
Notary Public
<PAGE>
EXHIBIT A - THE MARKS
COLOR QUICK
CUTEX
CUTEX
CUTEX
CUTEX BLOCK LETTERING LOGO # 1
CUTEX BLOCK LETTERING LOGO # 2
CUTEX BLOCK LETTERING LOGO # 3
CUTEX BLOCK LETTERING LOGO # 4
CUTEX BLOCK LETTERING LOGO # 5
CUTEX BLOCK LETTERING LOGO # 6
CUTEX BLOCK LETTERING LOGO # 7
CUTEX COLOR SPLASH
CUTEX COLOR SPLASH
CUTEX LOGO
CUTEX LOGO
CUTEX QUICK AND GENTLE
CUTEX SCRIPT LETTERING LOGO
FINGER DESIGN
OPTION AGREEMENT
OPTION AGREEMENT (the "Agreement"), dated as December 9, 1998,
by and between Carson Products Company, a Delaware corporation (the "Seller"),
and The Cutex Company, a Delaware corporation (the "Buyer").
WHEREAS, the Seller and the Buyer have entered into an Asset
Purchase Agreement dated as of December 9, 1998 (the "Purchase Agreement";
capitalized terms used herein but not defined herein shall have the meanings set
forth in the Purchase Agreement), which provides for, among other things, the
purchase by the Buyer from the Seller of all of the Seller's right, title and
interest in and to (I) all intellectual property relating to the CUTEX name for
use in the United States and Puerto Rico (the "Territory") and certain related
assets (including without limitation the intellectual property and certain
related assets relating to the sale, distribution, packaging, manufacture and
marketing of the Option Products (as defined below) (the "Option Business"),
which intellectual property relating to the Option Business shall be licensed by
the Buyer to the Seller pursuant to the License Agreement (as defined below) and
(II) the assets used in the business of selling, distributing, packaging,
manufacturing and marketing CUTEX products in the Territory, including, without
limiting the foregoing, nail polish remover products and nail care implement
products (together, the "Transferred Products"), which Transferred Products do
not, except as set forth in Section 1.1 of the Purchase Agreement, include the
assets used by the Seller exclusively in the business of selling, distributing,
packaging, manufacturing and marketing CUTEX nail enamel products and nail care
treatment products in the Territory, which are being retained by the Seller (the
"Option Products");
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Seller and the Buyer are entering into a License Agreement (the
"License Agreement") which permits the Seller to use certain intellectual
property relating to the CUTEX name in connection with the Option Business
following the Closing; and
WHEREAS, as a condition and inducement to the Buyer's
willingness to enter into the Purchase Agreement and the License Agreement, the
Buyer has required that the Seller agree, and the Seller has so agreed, to grant
to the Buyer an option to purchase the Option Business on the terms and subject
to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements set forth herein and in the Purchase Agreement,
the parties hereto agree as follows:
1. Grant of Option. The Seller hereby grants the Buyer an
irrevocable option (the "Option") to purchase all inventories of finished Option
Products ("Inventories") owned by the Seller on the date of the Option Closing
(as defined below) and the items set forth in clauses (ii), (iii), (ix), (x) and
(xi) of Section 1.1 of the Purchase Agreement to the extent they relate to the
Option Products and the Option Business (together with the Inventories, the
"Option Assets") in the manner and at the price provided for in Section 3 and
Section 4 below.
2. Exercise of Option. The Option may be exercised by the
Buyer at any time following the date hereof and on or prior to June 9, 1999 (the
"Option Period"); provided that if the Option cannot be exercised on the last
day of the Option Period because of any injunction, order or similar restraint
issued by a court of competent jurisdiction, the Option shall expire on the
tenth business day after such injunction, order or restraint shall have been
dissolved or when such injunction, order or restraint shall have become
permanent and no longer subject to appeal, as the case may be. In the event the
Buyer wishes to exercise the Option, the Buyer shall deliver to the Seller a
written notice (an "Exercise Notice") specifying that it wishes to purchase the
Option Assets in accordance with the terms hereof. The closing of a purchase of
the Option Assets (the "Option Closing") shall occur at a place, on a date and
at a time agreed upon by the parties, but in no event more than ten (10)
business days following delivery of the Exercise Notice subject to the receipt
of all requisite consents and approvals and the satisfaction of all other
conditions precedent set forth herein. The date on which the Option Closing
takes place is herein called the "Option Closing Date". If the Buyer does not
deliver an Exercise Notice prior to the close of business on the last day of the
Option Period, the Option shall terminate and be of no further force or effect.
3. Further Assurances. During the Option Period, the Seller
will afford the Buyer, its counsel and its accountants, during normal business
hours, reasonable access to the books, records and other data relating to the
Option Assets in its possession and the right to make copies and extracts
therefrom, to the extent that such access may be reasonably required by the
Buyer in connection with the Buyer's decision to exercise the Option. In the
event that the Buyer delivers an Exercise Notice to the Seller, the parties
agree to negotiate in good faith instruments of sale, transfer, conveyance,
assignment, assumption and confirmation in order to transfer, convey and assign
to the Buyer all of the Seller's right, title and interest in, to and under the
Option Assets (the "Transfer Documents") and to execute and deliver all such
further documents and instruments and to take all such further action as may be
necessary to put the Buyer in actual possession and operating control of the
Option Assets (including obtaining any consent, approval, order or authorization
of, or any registration, declaration or filing with, any governmental entity,
domestic or foreign, or other person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement).
Without limiting the foregoing, the Seller will transfer and assign to the Buyer
such Contracts, assets, properties and rights of the Seller and its Affiliates
relating exclusively to the Option Business and the Option Products as the Buyer
shall reasonably request in order to enable the Buyer to conduct such business
in the same manner as the Seller. The Buyer shall not assume or agree to pay,
perform or discharge or to indemnify the Seller or hold it harmless from any
obligations not expressly assumed by the Buyer under the Transfer Documents
(which shall be limited to obligations accruing with respect to periods after
the Option Closing under the contracts that the Buyer agrees to assume and
liabilities arising out of the Buyer's ownership or use of the Option Assets or
the Option Business after the Option Closing). The Seller agrees to pay, perform
and discharge, and agrees to indemnify the Buyer and hold it harmless from, all
obligations and liabilities of the Seller except those that Buyer shall have
expressly assumed under the Transfer Documents. If the Buyer shall purchase the
Option Assets in accordance with the terms of this Agreement, from time to time
and without additional consideration the Seller will execute and deliver, or
cause to be executed and delivered, such additional or further bills of sale,
endorsements, assignments, consents and other instruments as the Buyer may
reasonably request for the purpose of effectively carrying out the transactions
contemplated by this Agreement, including, but not limited to, the sale,
conveyance, assignment, transfer and delivery of the Option Assets to the Buyer
and the release of any and all claims, liens, charges, security interests and
encumbrances with respect thereto.
4. Delivery of Inventory Statement; Payment of Closing
Payment. (a) If the Buyer delivers an Exercise Notice to the Seller pursuant to
Section 2, the Seller shall, as soon as reasonably practicable prior to the
Option Closing, deliver to the Buyer a statement (the "Inventory Statement") of
the value of the Inventories as of the Option Closing Date determined in
accordance with paragraph (e) below (the "Inventory Amount"), The Inventory
Amount shall reflect a physical count of the Inventories conducted by the Seller
and its representatives at the opening of business on the second business day
prior to the Option Closing Date. The Buyer and its representatives shall have
the right to observe the physical count of the Inventories, review all books,
work papers and procedures in connection with the preparation of the Inventory
Statement and perform any other reasonable procedures necessary to verify the
accuracy thereof.
(b) At the Option Closing, the Buyer shall pay to the Seller,
against delivery of Transfer Documents necessary or appropriate to sell, convey,
assign, transfer and deliver to the Buyer good title to the Option Assets and to
evidence the satisfaction of the conditions to the obligations of the Buyer
hereunder, by wire transfer of immediately available funds to the Seller's
account at the bank and account number which the Seller will provide to the
Buyer at least three (3) days prior to the Option Closing, an amount equal to
the Inventory Amount set forth in the Inventory Statement (the "Closing
Payment").
(c) Unless the Buyer notifies the Seller in writing within 30
days after receipt of the Inventory Statement that the Buyer objects to the
Seller's calculation of the Inventory Amount on the grounds that the Inventory
Statement (i) was not prepared in accordance with this Section 4 and/or (ii)
contained arithmetic or counting errors and specifies in reasonable detail the
basis for such objection, the Inventory Statement shall become final and binding
upon the parties. If the Buyer submits written objections to the Seller within
such period, the Buyer and the Seller shall negotiate in good faith to resolve
such objections during the 30-day period after the Seller's receipt of the
Buyer's notice of objections. During such 30-day period, the Seller and its
representatives shall have the right to review all books and work papers and
procedures related to such notice of objections, the calculation thereof and
basis therefor. If the Buyer and the Seller are unable in good faith to resolve
such objections within such 30-day period, the disputed matters shall be
submitted to a nationally recognized public accounting firm mutually agreed upon
by the Buyer and the Seller to determine the Inventory Amount in accordance with
paragraph (e) below (or, if the Buyer and the Seller are unable to agree upon a
firm within five (5) days after the end of such 30-day period, then the Buyer
and the Seller shall each select a nationally recognized public accounting firm
and such firms shall jointly select a third nationally recognized independent
accounting firm to resolve the disputed matters). The accounting firm selected
in accordance with the previous sentence is referred to herein as the
"Independent Accounting Firm". The decision of the Independent Accounting Firm
shall be final and binding on the parties. The fees, costs and expenses of the
Independent Accounting Firm shall be borne by the Buyer and the Seller in the
inverse proportion as they may prevail on matters resolved by the Independent
Accounting Firm, which proportionate allocations shall also be determined by the
Independent Accounting Firm at the time the determination of the Independent
Accounting Firm is rendered on the merits of the matters submitted. After final
determination of any disputes with respect to the Inventory Amount as set forth
on the Inventory Statement, the parties shall have no further right to make any
claims against each other with respect to any element of the calculation of the
Inventory Amount.
(d) Within five (5) business days after the Inventory Amount
has been finally determined in accordance with the paragraph (c), the excess of
such amount over the amount of the Closing Payment, if any, shall be paid by the
Buyer to the Seller, or the shortfall of such amount below the amount of the
Closing Payment, if any, shall be paid by the Seller to the Buyer, as the case
may be, together with interest thereon at a rate equal to the rate of interest
from time to time announced publicly by Citibank N.A. as its prime rate,
calculated on the basis of the actual number of days elapsed divided by 365,
from and including the Option Closing Date to but excluding the date of payment.
Such payment shall be made by wire transfer of immediately available funds by
the Buyer or the Seller, as the case may be.
(e) For purposes of this Section 4, Inventory shall be valued
at lower of market value or cost using the first-in, first-out method in
accordance with generally accepted accounting principles consistently applied.
5. Representations and Warranties of the Seller. (a) The Seller represents
and warrants to the Buyer that (i) the Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder, (ii) the execution and delivery of this
Agreement by the Seller and the consummation by the Seller of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Seller and no other corporate proceedings on the part of the
Seller are necessary to authorize this Agreement or any of the transactions
contemplated hereby and (iii) this Agreement has been duly executed and
delivered by the Seller and constitutes a valid and binding obligation of the
Seller, enforceable against the Seller in accordance with its terms.
(b) Neither the execution and delivery of this Agreement or
the other documents to be executed on the Option Closing Date by the Seller
nor the consummation of the transactions contemplated hereby or thereby will:
(i) conflict with or violate any provision of the certificate or articles of
incorporation or by-laws of the Seller, (ii) conflict with or violate any
statute, law, rule, regulation, ordinance, order, writ, injunction, judgment or
decree applicable to the Seller, or (iii) conflict with or result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or result in the creation of any Lien
pursuant to, any agreement or other instrument to which the Seller is a party or
by which any of its assets are bound. No notice, declaration, report or other
filing or registration with, and no waiver, consent, approval or authorization
of, any governmental or regulatory authority or instrumentality or any other
person is required to be given, made or obtained by the Seller in connection
with the execution, delivery or performance of this Agreement.
(c) At the Option Closing, the Seller will transfer good title
to the Option Assets, free and clear of all Liens.
6. Representations and Warranties of the Buyer. (a) The Buyer represents
and warrants to the Seller that (i) the Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder, (ii) the execution and delivery of this
Agreement by the Buyer and the consummation by the Buyer of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Buyer and no other corporate proceedings on the part of the
Buyer are necessary to authorize this Agreement or any of the transactions
contemplated hereby and (iii) this Agreement has been duly executed and
delivered by the Buyer and constitutes a valid and binding obligation of the
Buyer, enforceable against the Buyer in accordance with its terms.
(b) Neither the execution and delivery of this Agreement or
he other documents to be executed on the Option Closing Date by the Buyer nor
the consummation of the transactions contemplated hereby or thereby will: (i)
conflict with or violate any provision of the certificate or articles of
incorporation or by-laws of the Buyer, (ii) conflict with or violate any
statute, law, rule, regulation, ordinance, order, writ, injunction, judgment or
decree applicable to the Buyer, or (iii) conflict with or result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or result in the creation of any Lien
pursuant to, any agreement or other instrument to which the Buyer is a party or
by which any of its assets are bound. No notice, declaration, report or other
filing or registration with, and no waiver, consent, approval or authorization
of, any governmental or regulatory authority or instrumentality or any other
person is required to be given, made or obtained by the Buyer in connection with
the execution, delivery or performance of this Agreement.
7. Certain Covenants of the Parties.
(a) If the Buyer exercises the Option, effective as of the
Option Closing Date, the license granted under the License Agreement shall
terminate and shall cease to be of any further force or effect.
(b) The Seller shall indemnify, defend and hold harmless the
Buyer Group against any and all Losses arising out of or resulting from, in
connection with or otherwise with respect to (i) any breach by the Seller of any
of its representations, warranties, covenants or agreements contained in this
Agreement or (ii) any liabilities or obligations of any kind to the extent
arising out of or resulting from the operation or conduct of the Option Business
through the close of business on the Option Closing Date.
(c) The Buyer shall indemnify, defend and hold harmless the
Seller Group against any and all Losses arising out of or resulting from, in
connection with or otherwise with respect to (i) any breach by the Buyer of any
of its representations, warranties, covenants or agreements contained in this
Agreement or (ii) any liabilities or obligations of any kind to the extent
arising out of or resulting from the Buyer's operation or conduct of the Option
Business, including, without limitation, in respect of returns of Option
Products, following the close of business on the Option Closing Date.
(d) Any claims for indemnity by the Buyer Group or the Seller
Group pursuant to paragraph (b) or (c) above, shall be made and resolved in
accordance with the provisions of Section 8.2 of the Purchase Agreement.
(e) During the Option Period, neither Seller nor any affiliate
of Seller shall, nor shall they permit any of their respective officers,
directors, stockholders or other representatives to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any person or group (other than
Buyer and its representatives) concerning any sale of any of the Option Assets
(other than the sale of Inventory in the ordinary course) or any other
transaction that would adversely impact Buyer's rights or Seller's obligations
under this Agreement, or consummate any such sale or other transaction.
8. License to Use Certain Trademarks and Trade Names.
(a) After the Option Closing Date, the Seller hereby permits
and gives the Buyer a royalty-free, non-exclusive right and license in the
Territory, solely in connection with the sale of Inventories, to use any name,
logo, design, UPC Code and any other trademarks or service marks owned and used
by the Seller which appear on Option Products which have been sold prior to the
Option Closing Date and which are not part of the Intellectual Property
("Retained Trade Names"). The Seller hereby permits and gives the Buyer a
royalty-free, non-exclusive right and license in the Territory to use the
Retained Trade Names on new packaging materials produced by Buyer during the
six-month period following the Option Closing Date for use in connection with
the Option Products. The Seller hereby permits and gives the Buyer a
royalty-free, perpetual, non-exclusive right and license in the Territory to use
the Retained Trade Names on (i) any Inventory transferred to the Buyer pursuant
to this Agreement, whenever produced, and (ii) any Inventory produced by Buyer
during the six-month period following the Option Closing Date in accordance with
the previous sentence.
(b) Except to the extent permitted pursuant to Section 8(a),
the Buyer shall not use or permit the use of any of the Retained Trade Names in
any manner. Following the Option Closing, the Seller will use commercially
reasonable efforts to modify the equipment used to produce such packaging
materials as soon as reasonably practicable to remove the Retained Trade Names
from such equipment.
9. Shipment of the Inventories. Within thirty (30) days after the Option
Closing Date, the Buyer shall arrange for, at the Buyer's expense, the shipment
of the Inventories from the Seller's facilities to the Buyer's designated
facilities. Title and risk of loss with respect to the Inventories shall pass to
the Buyer effective as of the close of business on the Option Closing Date.
10. Sale of Components and Packaging. To the extent that AM Cosmetics Inc.
("AM") returns to the Seller components and packaging used by AM in the
manufacture of nail products pursuant to the terms of the Manufacturing
Agreement dated as of April 30, 1997 between AM and the Seller, for a period of
six months following the Option Closing Date, if the Buyer so requests, the
Seller will sell such components and packaging to the Buyer at the Seller's cost
and on an as-needed basis. In the event that the Seller engages an alternative
manufacturer in lieu of AM in connection with the manufacture of the Option
Products, the provisions of this Section 10 shall apply with respect to such
alternative manufacturer.
11. Binding Effect; No Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Except as expressly provided for in this Agreement, neither
this Agreement nor the rights or the obligations of either party hereto are
assignable, except by operation of law, or with the written consent of the other
party. Nothing contained in this Agreement, express or implied, is intended to
confer upon any person other than the parties hereto and their respective
permitted assigns any rights or remedies of any nature whatsoever by reason of
this Agreement.
12. Specific Performance. The parties recognize and agree that if for any
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate and irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that, in addition to other remedies, the
other party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of this Agreement,
neither party will allege, and each party hereby waives the defense, that there
is adequate remedy at law.
13. Entire Agreement. This Agreement, the Purchase Agreement and the
License Agreement (including the Exhibits and Schedules thereto) constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject matter hereof.
14. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery of an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision.
15. Notices. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or telecopied
or sent by certified or registered mail, postage prepaid, and shall be deemed to
be given, dated and received when so delivered personally, telegraphed or
telecopied or, if mailed, five business days after the date of mailing to the
following address or telecopy number, or to such other address or addresses as
such person may subsequently designate by notice given hereunder.
If to the Seller 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.
If to the Buyer to:
The Shansby Group
250 Montgomery Street
San Francisco, CA 94104
Telephone No.: (415) 398-2500
Telecopy No.: (415) 421-5120
Attention: Charles Esserman and
Don Stanners
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Telephone No.: (713) 758-3820
Telecopy No.: (713) 615-5605
Attention: Mark Metts, Esq.
and to:
Medtech Laboratories, Inc.
P.O. Box 1108
Jackson, WY 83001
Telephone No.: (307) 739-8222
Telecopy No.: (307) 739-8225
Attention: Gary Downing
with a copy to:
Chambliss, Bahner & Stophel, P.C.
1000 Tallan Building
Two Union Square
Chattanooga, TN 37402-2500
Telephone No.: (423) 756-3000
Telecopy No.: (423) 265-9574
Attention: Charles N. Jolly, Esq.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such State without regard to any applicable
conflicts of law rules.
17. Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same instrument.
19. Expenses. Except as otherwise expressly provided herein or in the
Purchase Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
20. Amendments; Waiver. This Agreement may be amended by the parties hereto
and the terms and conditions hereof may be waived only by an instrument in
writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized officers as of the
date first above written.
CARSON PRODUCTS COMPANY
By: ___________________________
Name:
Title:
THE CUTEX COMPANY
By: ___________________________
Name:
Title:
[EXECUTION COPY]
SECURED TERM LOAN AGREEMENT
between
CARSON PRODUCTS COMPANY,
CARSON, INC.,
the LENDERS party hereto,
QUANTUM PARTNERS LDC,
as Administrative Agent
and
NORWEST BANK MINNESOTA, N.A.,
as Collateral Agent
------------------------
Dated as of December 8, 1998
------------------------
$75,000,000
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Amount and Terms of Credit...................................1
1.01. Term Loan....................................................1
1.02. Notes........................................................2
1.03. Interest.....................................................2
SECTION 2. Payments.....................................................4
2.01. Repayment of Term Loans.....................................4
2.02. Voluntary Prepayments........................................4
2.03. Mandatory Prepayments........................................4
2.04. Method and Place of Payment..................................5
2.05. No Net Payments..............................................6
2.06. Forwarding of Payments by Administrative Agent...............6
2.07. Prepayment Premiums; Allocation of Payments.................6
SECTION 3. Conditions Precedent.........................................7
3.01. Conditions Precedent to the Term Loans.......................7
SECTION 4. Representations, Warranties and Agreements..................13
4.01. Corporate Status............................................14
4.02. Corporate Power and Authority; Business.....................14
4.03. No Violation................................................14
4.04. Litigation..................................................15
4.05. Use of Proceeds.............................................15
4.06. Governmental Approvals, Etc.................................15
4.07. Investment Company Act......................................16
4.08. Public Utility Holding Company Act..........................16
4.09. True and Complete Disclosure................................16
4.10. Financial Condition; Financial Statements; Material Adverse
Change......................................................16
4.11. Security Interests..........................................18
4.12. Tax Returns and Payments....................................18
4.13. ERISA.......................................................19
4.14. Subsidiaries................................................20
4.15. Patents, Etc................................................20
4.16. Compliance with Laws, Etc...................................20
4.17. Properties..................................................21
4.18. Securities..................................................21
4.19. Collective Bargaining Agreements............................21
4.20. Indebtedness Outstanding; Subordination.....................22
4.22. Environmental Investigations................................23
4.23 Insurance...................................................23
4.24. Fine Products Company.......................................24
4.25. Sale of Certain Assets......................................24
4.26. Morningside Management Fee..................................24
4.28 AM Cosmetics................................................24
4.27. No Defaults.................................................24
SECTION 5. Affirmative Covenants.......................................25
5.01. Information Covenants.......................................25
5.02. Books, Records and Inspections..............................27
5.03. Maintenance of Property; Insurance..........................28
5.04. Payment of Taxes............................................28
5.05. Corporate Franchises........................................29
5.06. Compliance with Statutes, Etc...............................29
5.07. ERISA.......................................................29
5.08. Performance of Obligations..................................30
5.09. Use of Proceeds.............................................30
5.10. No Further Negative Pledges.................................30
5.11. Pledge of Additional Collateral.............................30
5.12. Security Interests..........................................31
5.13. Environmental Events........................................31
5.14. New Subsidiaries............................................32
SECTION 6. Negative Covenants..........................................33
6.01. Changes in Business.........................................33
6.02. Amendments or Waivers of Certain Documents..................33
6.03. Liens.......................................................33
6.04. Indebtedness................................................35
6.05. Advances, Investments and Loans.............................36
6.06. Prepayments of Indebtedness; Amendment of Certain Agreements
.......................................................... 37
6.07. Dividends, etc..............................................38
6.08. Transactions with Affiliates................................39
6.09. Issuance of Subsidiary Stock................................40
6.10. Disposition of Assets.......................................40
6.11. Contingent Obligations......................................43
6.12. ERISA.......................................................43
6.13. Merger and Consolidations...................................44
6.14. Sale and Lease-Backs........................................44
6.15. Sale or Discount of Receivables.............................45
6.16. Fine Products Company.......................................45
SECTION 7. Events of Default...........................................45
7.01. Payments....................................................45
7.02. Representations, Etc........................................45
7.03. Covenants...................................................45
7.04. Default Under Other Agreements..............................46
7.05. Bankruptcy, Etc.............................................46
7.06. ERISA.......................................................46
7.07. Security Documents..........................................47
7.08. Guarantees..................................................47
7.09. Judgments...................................................47
7.10. Ownership; Board Composition................................48
7.11. Certain Transactions Involving Carson Holdings Limited......49
SECTION 8. The Administrative Agent....................................49
8.01 Appointment of the Administrative Agent, Etc................49
8.02 Enforcement by the Administrative Agent.....................53
SECTION 9. Definitions.................................................55
SECTION 10. Miscellaneous...............................................71
10.01. Payment of Expenses, Etc....................................71
10.02. Right of Setoff.............................................72
10.03. Notices.....................................................72
10.04. Benefit of Agreement........................................72
10.05 Confidentiality.............................................73
10.06 Assignments.................................................73
10.07. No Waiver; Remedies Cumulative..............................74
10.08. Calculations; Computations..................................74
10.09. Governing Law; Submission to Jurisdiction; Venue............74
10.10. Counterparts................................................75
10.11. Effectiveness...............................................75
10.12. Headings Descriptive........................................75
10.13. Amendment or Waiver.........................................75
10.14. Survival....................................................76
10.15. WAIVER OF JURY TRIAL........................................76
10.16. Independence of Covenants...................................76
10.17. Integration.................................................76
<PAGE>
SCHEDULE 1 Lenders
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
ANNEX XV Morningside Management Fee
ANNEX XVI AM Cosmetics
Exhibit A - Form of Term Note
Exhibit B-1 - Form of Georgia Mortgage
Exhibit B-2 - Form of Illinois Mortgage
Exhibit C - Form of Borrower Securities Pledge Agreement
Exhibit D - Form of Borrower Intellectual Property Security Agreement
Exhibit E - Form of Borrower General Security Agreement
Exhibit F - Form of Johnson Products Intellectual Property Security
Agreement
Exhibit G - Form of Johnson Products General Security Agreement
Exhibit H - Form of Dermablend Intellectual Property Security Agreement
Exhibit I - Form of Holdings Guarantee
Exhibit J - Form of Holdings Securities Pledge Agreement
Exhibit K - Form of Subsidiary Guarantee
Exhibit L - Form of Assignment and Assumption Agreement
<PAGE>
SECURED TERM LOAN AGREEMENT, dated as of December 8, 1998 (this
"Agreement"), between CARSON PRODUCTS COMPANY, a Delaware corporation (the
"Borrower"), CARSON, INC., a Delaware corporation ("Holdings"), the lenders
named on Schedule 1 hereto (the "Lenders"), QUANTUM PARTNERS LDC, as
administrative agent (together with its successors and assigns, the
"Administrative Agent") and NORWEST BANK MINNESOTA, N.A., as collateral agent
(together with its successors and assigns, the "Collateral Agent"). Unless
otherwise defined herein, all capitalized terms used herein and defined in
Section 9 are used herein as so defined.
W I T N E S S E T H :
WHEREAS, the Borrower desires to incur the Term Loans (as defined
herein) from the Lenders, the proceeds of which will be used (i) to repay the
Borrower's obligations under a credit agreement between the Borrower, Holdings
and Ivax Corporation dated as of July 14, 1998, (the "IVAX Credit Agreement"),
(ii) to purchase certain of Holdings' outstanding Senior Subordinated Notes ((i)
and (ii) together, the "Refinancing"), and (iii) for other corporate purposes;
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 Johnson Products will execute a Guarantee, secured by a pledge of
its assets, guaranteeing the Borrower's obligations hereunder; and
WHEREAS, the Lenders are willing to make available the Term Loans
provided for herein.
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01. Term Loan.
(a) Subject to and upon the terms and conditions herein set forth, each
Lender severally agrees to make term loans to the Borrower on the Closing Date
in an amount for each Lender up to but not exceeding the amount of the
Commitment of such Lender and in an aggregate principal amount not to exceed
$75,000,000 (together, the "Term Loans", and each a "Term Loan"), which shall
bear interest and shall be repaid in accordance with the terms hereof. Once
repaid, the Term Loans incurred hereunder may not be reborrowed.
(b) The Borrower shall give the Administrative Agent written notice of
the borrowing hereunder at least one Business Day prior to the Closing Date;
provided that such notice shall be deemed to have been given on a certain day
only if given before 12:00 P.M. (New York City time) on such day. Not later than
1:00 P.M. (New York City time) on the Closing Date, each Lender shall make
available the amount of the Term Loan to be made by it on such date to the
Administrative Agent as specified by the Administrative Agent, in immediately
available funds, for the account of the Borrower. The aggregate amount so
received by the Administrative Agent shall, subject to the terms and conditions
of this Agreement, be made available to the Borrower by depositing the same, in
immediately available funds, in an account of the Borrower designated by the
Borrower to the Administrative Agent in the notice of borrowing.
(c) The failure of any Lender to make any Term Loan to be made by it on
the Closing Date shall not relieve any other Lender of its obligation to make
its Term Loan on such date, but neither any Lender nor the Administrative Agent
shall be responsible for the failure of any other Lender to make a Term Loan to
be made by such other Lender, and no other Lender shall have any obligation to
the Administrative Agent or any other Lender or the Borrower for the failure by
such Lender to make any Loan required to be made by such Lender. The amounts
payable by the Borrower at any time hereunder and under the Term Notes to each
Lender shall be a separate and independent debt of the Borrower and each Lender
shall be entitled to protect and enforce its rights arising out of this
Agreement and the Term Notes, and it shall not be necessary for any other Lender
or the Administrative Agent to consent to, or be joined as an additional party
in, any proceedings for such purposes.
1.02. Notes.
(a) The Borrower's obligation to pay the principal of and interest on
the Term Loans made to it by the Lenders shall be evidenced by promissory notes
(each, a "Term Note" and, together, the "Term Notes"), substantially in the form
of Exhibit A hereto.
(b) The Term Note of the Borrower issued to each Lender shall (i) be
duly executed and delivered by the Borrower, (ii) be payable to the order of
such Lender or its registered assigns and be dated the Closing Date, (iii) be in
a stated principal amount equal to the aggregate principal amount of the Term
Loan made by such Lender on the Closing Date and be payable in the principal
amount of the outstanding Term Loans evidenced thereby from time to time, (iv)
mature on the Maturity Date, (v) be subject to mandatory prepayment as provided
in Section 2.03, (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 Loans shall bear interest
from the Closing Date until maturity thereof (whether by acceleration or
otherwise) at a rate per annum equal to 13.0%.
(b) During the period from the Closing Date ending on the second
anniversary of the Closing Date (the "Interest Deferral Period"), the Borrower
may, at its option and in lieu of making a cash payment, defer the payment of
any interest payment to be made hereunder at the end of any calendar month;
provided that (i) the Borrower may defer interest payments on no more than
twelve occasions (which need not be consecutive) during the Interest Deferral
Period; (ii) the Borrower shall give the Administrative Agent irrevocable
written notice of its intent to defer an interest payment no later than five
Business Days prior to the first Business Day of any applicable month. On the
last Business Day of the month for which the relevant interest payment is being
deferred, an interest amount (the "Capitalized Interest Amount") calculated at a
rate per annum equal to 16.0% (computed in accordance with Section 10.08(b) for
such monthly period) in respect of the then aggregate outstanding principal
amount of the Term Loans shall be added to, and shall be deemed to be a part of
for all purposes of the Credit Documents, the unpaid and outstanding principal
amount of the Term Loans. Each Capitalized Interest Amount so added to the Term
Loans shall be allocated to the principal of the Term Loan made by each Lender
hereunder on a pro rata basis. The deferral of any interest payment pursuant to
this Section 1.03(b) and the accretion of a Capitalized Interest Amount in lieu
of a cash payment shall not constitute an Event of Default hereunder.
(c) If all amounts owing under the Unsecured Term Loan Agreement have
not been paid in full on or prior to September 30, 1999, the interest rates
referred to in Sections 1.03(a), (b) and (d) shall increase by 2.0% per annum
from October 1, 1999 until such date as all such amounts owing under the
Unsecured Term Loan Agreement shall have been paid in full. After and excluding
the date on which all amounts under the Unsecured Term Loan Agreement have been
paid in full, the interest referred to in Sections 1.03(a), (b) and (d) shall be
calculated at the rates per annum originally set forth in such Sections.
(d) Overdue principal and, to the extent permitted by law, overdue
interest in respect of the Term Loans and any other overdue amount payable
hereunder shall, in each case, bear interest at a rate per annum equal to 16.0%,
such amount payable upon demand upon the occurrence, and during the
continuation, of any payment default (after the lapse of any applicable grace
periods).
(e) Interest shall accrue:
(i) on any principal amount, from and including the first date
such amount was owed as principal (being the Closing Date for the
initial principal amount of each Term Loan and the date of accretion
for a Capitalized Interest Amount added to principal), to and excluding
the date of payment of such amount; and
(ii) on any other amount, from and including the first date
such amount was owed, to and excluding the date of payment of such
amount;
and shall be payable (A) with respect to principal or other amounts outstanding,
monthly in arrears on the last Business Day of each calendar month beginning
December 1998, (B) with respect to principal or other amounts paid or prepaid,
on the date of payment or prepayment, and otherwise (C) at maturity (whether by
acceleration or otherwise); provided that all interest accruing after maturity
shall be payable on demand.
(f) All computations of interest hereunder shall be made in accordance
with Section 10.08(b).
SECTION 2. Payments.
2.01. Repayment of Term Loans.
(a) Principal. The Borrower shall pay to the Administrative Agent for
the account of each Lender the aggregate principal amount outstanding of all
Term Loans made by such Lender, and all interest accrued thereon and all fees,
costs, and other obligations due hereunder, and each Term Loan shall mature, on
the Maturity Date without demand, notice or other act whatsoever.
(b) Interest. The Borrower shall pay to the Administrative Agent for
the account of each Lender interest at the rate and at the times provided in
Section 1.03.
2.02. Voluntary Prepayments.
After all obligations under the Unsecured Term Loan Agreement shall
have been repaid in full, the Borrower shall have the right to prepay the Term
Loans in whole or in part from time to time on the following terms and
conditions: (i) the Borrower shall give the Administrative Agent written notice
(or telephonic notice promptly confirmed in writing) of its intent to prepay the
Term Loans and the amount of such prepayment, which notice shall be given prior
to 12:00 P.M. (New York City time) at least one Business Day prior to the date
of such prepayment; and (ii) each partial prepayment of the Term Loans shall be
in an aggregate principal amount of at least $100,000 and integral multiples of
$100,000 in excess of that amount.
2.03. 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 the excess of (X) 100% of such Net Cash
Proceeds or Net Financing Proceeds over (Y) the aggregate amount of all
obligations outstanding on such date under the Unsecured Term Loan Agreement
shall be applied as provided in Section 2.03(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 2.03(A) will govern and
that with respect to any Net Cash Proceeds from any Destruction or Taking,
clause (c) of this Section 2.03(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 the excess of (X) 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) over (Y) the aggregate
amount of all obligations outstanding on such date under the Unsecured Term Loan
Agreement shall be applied as provided in Section 2.03(B); provided that the
Borrower may sell, transfer or otherwise dispose of up to 2.7% of the
outstanding capital stock of Carson Holdings Limited as permitted by Section
6.10(A)(viii) without obligation to apply the proceeds therefrom to any
prepayment of the Term Loans under this Section 2.03.
(c) At the Required Lenders' 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 Administrative Agent with the consent of the Required Lenders, which consent
shall not be unreasonably withheld) shall be delivered by Holdings, the Borrower
and/or the Borrower's Subsidiaries to the Administrative Agent to be held by the
Administrative Agent 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 Administrative Agent shall release such
proceeds to the Borrower for rebuilding, repair or replacement as described
above subject to the terms of the Mortgages. 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 Administrative Agent with the consent of the Required
Lenders, which consent shall not be unreasonably withheld) of such release, the
Borrower shall, at the Required Lenders' discretion, return the unused portion
of such released funds to the Administrative Agent and authorize and direct the
Administrative Agent to apply such proceeds as provided in Section 2.03(B).
(B) Application:
Prepayments to be applied pursuant to Sections 2.02 and 2.03 shall be
applied to the prepayment of the Term Loans on a pro rata basis (based on the
relative aggregate outstanding principal amount of Term Loans after giving
effect to all prior repayments or prepayments thereof). With respect to each
such prepayment required by Section 2.03(A), the Borrower shall give the
Administrative Agent 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.
2.04. Method and Place of Payment.
(a) Except as otherwise specifically provided herein, all payments
under this Agreement or under any Term Note shall be made to the Administrative
Agent for the account of the Lender or Lenders entitled thereto not later than
1:00 P.M. (New York City 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 Administrative Agent or if no account has
been so specified at the Administrative Agent's Office.
(b) Any payments under this Agreement which are made by the Borrower
later than 1:00 P.M. (New York City time) shall be deemed to have been made on
the next succeeding Business Day. Whenever any payment to be made hereunder or
under any Term Note 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.
2.05. No Net Payments.
All payments by the Borrower under this Agreement or under any Credit
Document shall be made without set-off or counterclaim.
2.06. Forwarding of Payments by Administrative Agent.
Each payment received by the Administrative Agent under this Agreement
or any Term Note for the account of any Lender entitled thereto shall be paid by
the Administrative Agent promptly to such Lender, in immediately available
funds.
2.07. Prepayment Premiums; Allocation of Payments.
(a) If on any date the Borrower shall make any prepayment of a
principal amount under Section 2.02, 2.03(A)(a) or 2.03(A)(b), the Borrower
shall, in addition to the principal and interest paid under such Sections, pay a
prepayment premium equal to such principal amount multiplied by the percentage
(stated in decimal terms) applicable to such date set forth below:
Dates from and including: To and including: Prepayment Premium
- ------------------------ ---------------- ------------------
Closing Date March 8, 1999 0%
March 9, 1999 December 8, 1999 1%
December 9, 1999 December 8, 2000 3%
December 9, 2000 December 8, 2001 6%
December 9, 2001 December 8, 2002 3%
December 9, 2002 Maturity Date 0%
SECTION 3. Conditions Precedent.
3.01. Conditions Precedent to the Term Loans.
The obligation of the Lenders to make the Term Loans to the Borrower
hereunder is subject, at the time of the making of such Term Loans (except as
otherwise hereinafter indicated), to the satisfaction of the following
conditions:
(A) Term Loan Agreement; Fees. The Borrower and Holdings shall have
duly executed and delivered this Agreement as provided in Section 10.11. The
Borrower and Holdings shall have paid all costs, fees and expenses (including
without limitation reasonable legal fees and expenses) payable to the
Administrative Agent and the Lenders to the extent then due.
(B) Officer's Certificates. On the Closing Date, the Designated Lender
shall have received a certificate dated such date signed by an appropriate
officer of each Credit Party and the Borrower stating that (i) all of the
applicable conditions set forth in Sections 3.01(D), (E), (H), (I), (J), (M),
(N) and (Q) (in each case disregarding any reference therein that such condition
be deemed satisfactory by the Lenders or the Designated 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, (ii) no Default
or Event of Default has occurred and is continuing, or would result from any
borrowing hereunder or the application of the proceeds thereof and (iii) the
representations and warranties contained in this Agreement and in the other
Credit Documents are and will be true and correct both before and after giving
effect to the borrowing hereunder and to the application of the proceeds
thereof, as though made on such date.
(C) Opinions of Counsel. On the Closing Date (or on the date each
applicable Mortgage is executed and delivered), the Designated Lender shall have
received an opinion or opinions addressed to the Administrative Agent, the
Collateral Agent and each of the Lenders and dated the Closing Date, each in
form and substance reasonably satisfactory to the Designated Lender and the
Lenders, 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, (iii) Katten, Muchin & Zavis, special Illinois
counsel to Johnson Products and (iv) Edward, Nathan & Friedland Inc., special
South African counsel to Carson Holdings Limited, which opinions shall cover the
perfection of the security interests granted pursuant to the Security Documents
and such other matters incident to the transactions contemplated herein as the
Designated Lender may reasonably request.
(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 Lenders and the Designated 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 Lenders 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 Designated 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 the Designated 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) Organizational Documentation, Etc. On or prior to the Closing Date,
the Designated 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 and bring-down telegrams in connection therewith;
(2) Its respective By-laws, certified as of the Closing Date by its
corporate secretary.
(F) Note. There shall have been delivered to each of the Lenders the
respective Term Notes executed by the Borrower in each case in the amount and
maturity and as otherwise provided herein.
(G) Conditions Relating to Mortgaged Real Property and Real Property.
The Borrower shall have caused to be delivered to the Designated Lender the
following documents and instruments:
(i) a Mortgage encumbering each Mortgaged Real Property in favor of the
Collateral Agent, 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 and fixture filings as are contemplated by the counsel opinions
described in Sections 3.01(C)(ii) and 3.01(C)(iii) in respect of such Mortgage,
all of which shall be in form and substance reasonably satisfactory to the
Designated Lender and which will be delivered to the Title Company on the
Closing Date 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 valid and enforceable first priority Lien on such
Mortgaged Real Property subject to no Liens other than 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 Designated
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 and enforceable 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
Designated 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 Designated 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 Designated 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 agreed to by the Designated 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;
(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 Permitted
Encumbrances;
(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 Designated 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 each of the Mortgaged Real Properties located in
Savannah, Georgia and in Chicago, Illinois, an Officers' Certificate or other
evidence reasonably satisfactory to the Designated 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.
(H) 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 Lenders 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 Collateral Agent 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.
(I) Security Documents, Guarantees and Morningside Subordination
Letter. The applicable Security Documents (other than the Mortgages), the
Guarantees and the Morningside Subordination Letter shall have been duly
executed and delivered by the respective parties thereto, and there shall have
been delivered to the Designated Lender (i) certificates or other writings
representing all Pledged Securities (including without limitation the
investments referred to in clauses (i) and (ii) of the definition of "Existing
Investments"), 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 Collateral Agent 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 Liens described in Section
6.03(j), (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
Designated Lender of such other security and other documents as may be necessary
or, in the reasonable opinion of the Designated 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 Administrative Agent's security interest in the patents,
registration and applications, if any, contained on the schedules to the
Intellectual Property Security Agreements.
(J) 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 Designated Lender, materially adverse conditions upon the
consummation of 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 Loans hereunder or the consummation of the Refinancing 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 Refinancing and the transactions contemplated by the Credit
Documents.
(K) 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 transactions contemplated hereby or the
execution, delivery or performance of the Credit Documents that, in the
Designated Lender's good faith judgment, could reasonably be expected to have a
Material Adverse Effect after giving effect to the Refinancing and the
transactions contemplated by this Agreement.
(L) Environmental Review. The Lenders shall be reasonably satisfied
with their environmental risk assessment of the property of Holdings, the
Borrower and their Subsidiaries (including any potential levels of environmental
liability), such assessment to be based upon any information provided to the
Lenders by or on behalf of Holdings, the Borrower or Johnson Products with
respect to their respective properties. The Borrower need not update its
environmental review dated as of May 1995.
(M) No Material Adverse Change. From September 30, 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 and its consolidated Subsidiaries, taken as a whole, the
Borrower or the Borrower and its consolidated Subsidiaries, taken as a whole, or
in the industries in which they compete.
(N) No Default; Representations and Warranties. At the time of the
making of the Term Loans 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 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 Loans, 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.
(O) Options and Warrants. There shall be no outstanding capital stock
of the Borrower other than that owned by Holdings. There shall be no outstanding
right, option, warrant or other arrangement to acquire such capital stock of the
Borrower.
(P) Margin Rules. On the Closing Date, neither the making of the Term
Loans 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.
(Q) Financial Statements. Holdings shall have delivered to the Lenders
its consolidated financial statements and the notes thereto as of and for the
year ended December 31, 1997 and as of and for the nine-month period ended
September 30, 1998.
(R) Material Contracts. On the Closing Date, there shall have been
delivered to the Designated Lender true, correct and complete copies of the
Senior Subordinated Notes Indenture, the Management Agreement, the Cutex
Manufacturing Agreement and any documents relating to the Carson Holdings
Limited Share Incentive Trust.
(S) IVAX Credit Agreement. The Designated Lender shall have received
evidence, in form, scope and substance satisfactory to it, that the Refinancing
has been consummated and that all indebtedness under the IVAX Credit Agreement
and certain of the Senior Subordinated Notes has been or will be, simultaneously
with the transactions contemplated herein, prepaid, redeemed or defeased in full
or otherwise satisfied and extinguished in accordance with their terms, together
with all interest thereon and all other amounts owing pursuant thereto. In
addition, the creditors under the IVAX Credit Agreement shall have terminated
and released all pledges of and security interests in and Liens (if any) on the
stock, assets and properties owned by each Credit Party and the Designated
Lender shall have received such releases of security interests in and Liens on
the stock, assets and properties owned by each Credit Party, which releases
shall be in form, scope and substance satisfactory to the Designated Lender.
Without limiting the foregoing, there shall have been delivered (A) proper
termination statements (Form UCC-3 or the appropriate equivalent) or assignments
of the existing UCC-1 financing statements for filing under the UCC of each
jurisdiction where a financing statement (Form UCC-1 or the appropriate
equivalent) was filed with respect to each Credit Party in connection with the
security interests created with respect to such Indebtedness and the
documentation related thereto, (B) terminations or assignments of any security
interest in, or Lien on, any patents, trademarks, copyrights, or similar
interests of each Credit Party on which filings have been made and (C)
terminations of all mortgages, leasehold mortgages and deeds of trust created
with respect to the property of each Credit Party, all of which shall be in
form, scope and substance satisfactory to the Designated Lender.
(T) Insurance. The Designated Lender shall have received evidence of
insurance (including, without limitation, business interruption insurance)
naming the Collateral Agent as additional insured and loss payee with such
responsible and reputable insurance companies or associations, and in such
amounts and covering such risks as are currently maintained by the Borrower and
Johnson Products which insurance shall be reasonably satisfactory to the
Designated Lender.
(U) Other. The Designated Lender shall have received such other
approvals, opinions, certificates or documents as it may reasonably request.
The acceptance of the proceeds of the Term Loans shall constitute a
representation and warranty by each Credit Party to the Lenders that all of the
applicable conditions specified above (in each case disregarding any reference
therein that such condition be deemed satisfactory by the Lenders or the
Designated 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 Lenders or the Designated 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 Designated Lender) and shall be reasonably satisfactory
in form and substance to the Designated Lender. If the Closing Date shall not
have occurred by December 31, 1998, the obligations of the Secured Parties
hereunder shall terminate.
SECTION 4. Representations, Warranties and Agreements.
In order to induce the Lenders to enter into this Agreement and to make
the Term Loans provided for herein, each of Holdings and the Borrower makes the
following representations and warranties to, and agreements with, the
Administrative Agent, the Collateral Agent and the Lenders, all of which shall
survive the execution and delivery of this Agreement and the Term Notes and the
making of the Term Loans (with the execution and delivery of this Agreement and
the Term Notes and the making of the Term Loans being deemed to constitute a
representation and warranty that the matters specified in this Section 4 are
true and correct both before and after giving effect to the Refinancing unless
such representation and warranty expressly indicates that it is being made as of
any specific date:
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 antecedent to or contemplated by the Credit Documents 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 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, governmental agency or
arbitrator with respect to any Credit Party or its Subsidiaries, including any
action relating to any Environmental Law, that (i) are, individually or in the
aggregate, likely to have a Materially Adverse Effect or (ii) purport to effect
the legality, validity or enforceability of this Agreement, any other Credit
Document or the consummation of the transactions contemplated hereby or thereby.
4.05. Use of Proceeds.
(a) All the proceeds of the Term Loans to be made hereunder shall be
utilized for the Refinancing, to pay related fees and expenses and for other
corporate purposes.
(b) Neither the making of the Term Loans 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 Loans, there does not exist any judgment,
order, injunction or other restraint issued or filed with respect to the making
of the Term Loans 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 any Lender or the Administrative Agent
(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 any Lender or the Administrative Agent 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
Lenders and the Administrative Agent for use in connection with the transactions
contemplated hereby.
4.10. Financial Condition; Financial Statements; Material Adverse
Change.
(a) 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 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 4.10, "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.
(b) Holdings has delivered to the Designated Lender its consolidated
financial statements as of and for the year ended December 31, 1997 and as of
and for the nine-month period ended September 30, 1998. Such financial
statements and the notes thereto present fairly, in all material respects, the
financial position and results of operations and cash flows of Holdings and its
consolidated Subsidiaries as of such dates and or such periods in accordance
with GAAP, subject to year-end adjustments. As of the Closing Date, except as
adequately reflected or reserved against in such financial statements 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.
(c) Since September 30, 1998, there has been no material adverse change
in the business, operations, assets, liabilities, properties, or condition
(financial or otherwise) or prospects of Holdings and its consolidated
Subsidiaries, taken as a whole, the Borrower or the Borrower and its
consolidated Subsidiaries, taken as a whole, or in the industries in which they
compete.
4.11. Security Interests.
At all times after the execution of the Security Documents, the
Security Documents create, in favor of the Collateral Agent for the benefit of
the Secured Parties, as security for the obligations purported to be secured
thereby, a legal, 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 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 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 Permitted Encumbrances and Liens expressly permitted by the
applicable Security Document. Upon delivery to the Collateral Agent of any
certificated Pledged Securities (including without limitation the Existing
Investments delivered to the Collateral Agent on the Closing Date pursuant to
Section 3.01(I) (i) and the JP Notes) and upon taking all actions required by
Article 8 of the UCC in the case of any uncertificated Pledged Securities (which
delivery and/or such other actions have been done and remain in full force and
effect as to all such Pledged Securities owned by any Credit Party on any date
on which this representation and warranty is made or deemed made), the security
interests created in favor of the Collateral Agent for the benefit of the
Secured Parties under the Pledge Agreements constitute first priority perfected
security interests in the Pledged Securities described in the Pledge Agreements
and owned by the Credit Party on any date on which this representation and
warranty is made or deemed made, subject to no security interests of any other
Person. 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.
4.12. Tax Returns and Payments.
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.
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.
4.13. 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 Loans 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 4.13, 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.
4.14. Subsidiaries.
Annex II hereto lists the correct legal name of each direct and
indirect Subsidiary of Holdings and the Borrower existing on the Closing Date,
together with the ownership structure and jurisdiction of incorporation thereof.
4.15. Patents, Etc.
Except as set forth in Annex XII hereto, 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, customer lists,
proprietary information, inventions, methods, procedures, product formulations
and formulae 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. Except as set forth in Annex XII
hereto, no claim is pending or, to the best of Holdings' or the Borrower's
knowledge, threatened to the effect that any Credit Party 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. Except as set
forth in Annex XII hereto, 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 any Credit Party or which any Credit Party
otherwise has the right to use is invalid or unenforceable by any Credit Party,
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. To
Holdings' or the Borrower's knowledge, there is no unauthorized use or
infringement of any Intellectual Property of a Credit Party by a third party
including, without limitation, former employees of any Credit Party, that could
reasonably be expected to have a Materially Adverse Effect.
4.16. 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 4.21 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.
4.17. Properties.
Annex VI lists all Mortgaged Real Property owned by the Credit Parties.
Annex XIII lists all real property leased by the Credit Parties. 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 4.10 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 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.
4.18. Securities.
(a) 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.
(b) The Borrower is a Wholly-Owned Subsidiary of Holdings. Johnson
Products is a Wholly-Owned Subsidiary of the Borrower. The Borrower owns
123,368,900 ordinary shares of Carson Holdings Limited, which is approximately
52.8% of the 233, 601,560 ordinary shares outstanding of Carson Holdings
Limited. Dermablend is a Wholly-Owned Subsidiary of Johnson Products.
4.19. 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. To
the best knowledge of Holdings and the Borrower, there is (i) no unfair labor
practice complaint pending or threatened against Holdings or the Borrower or any
of their respective Subsidiaries and (ii) no strike, labor dispute, slowdown or
stoppage is pending or threatened against Holdings or the Borrower or any of
their respective Subsidiaries.
4.20. Indebtedness Outstanding; Subordination.
(a) Set forth on Part I of Annex I hereto is a complete list and
description of all Indebtedness of Holdings, the Borrower and their Subsidiaries
(other than the Term Loans) that will be outstanding immediately after the
Closing Date and set forth on Part II of 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.
(b) The subordination provisions contained in the Senior Subordinated
Notes Indenture are enforceable against Holdings, the Borrower, the respective
Subsidiaries of Holdings and the Borrower and the holders of such notes for the
benefit of the Lenders, and all Obligations and Secured Obligations (as defined
in the Security Documents) are within the definition of "Senior Indebtedness" or
"Guarantor Senior Indebtedness", as the case may be, included in such
subordination provisions.
4.21. Environmental Matters. Except as set forth in Annex X hereto:
(A) Each of the Credit Parties 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. None of the
Credit Parties 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. In the last five years, none of the Credit Parties
has received any communication, whether from a Governmental Authority, citizen
group, employee or otherwise, that alleges that any of the Credit Parties or any
of the properties or assets used in their respective businesses (including the
Real Properties) is not in compliance with Environmental Laws.
(B) There is no Environmental Notice that (i) is pending or, to the
best knowledge of the Credit Parties, threatened against any of the Credit
Parties or (ii) is pending or, to the best knowledge of any of the Credit
Parties, 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 the Credit Parties.
(C) 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 the Credit Parties (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 the Credit Parties, 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 the Credit Parties, which Notice could
reasonably be expected to result in the incurrence of costs in excess of
$100,000.
(D) Without in any way limiting the generality of the foregoing, (i)
there are, and 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 the Credit Parties (or any predecessor in interest
of any of them), (ii) there are, and have been, no polychlorinated biphenyls
used or stored by the Credit Parties, located on, at or under property
(including the Real Properties) owned, operated, leased or used by the Credit
Parties, (iii) there are and have been no properties (including the Real
Properties) currently or formerly owned, operated, managed, leased or used by
any of the Credit Parties (or any predecessor in interest of any of them) at
which Hazardous Materials generated, used, owned, managed, stored or controlled
by any of the Credit Parties (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 any of
the Credit Parties.
(E) Prior to the Closing Date, the Credit Parties 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 Designated 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 Designated Lender prior to the Closing Date.
4.22. Environmental Investigations.
All environmental investigations, studies, audits, assessments or
reviews conducted by or on behalf of the Credit Parties in relation to the
current or prior business of the Credit Parties or any Real Property or facility
now or previously owned, operated, leased, used or controlled by the Credit
Parties, including, without limitation, those relating to compliance with or
liability under any Environmental Law, have been delivered to the Designated
Lender.
4.23 Insurance.
Set forth on Annex IV is a summary of all insurance policies maintained
by Holdings and its Subsidiaries.
4.24. Fine Products.
As of the date of this Agreement and as of the Closing Date, 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. Fine Products intends to enter into the Health Care Costs
Containment Transactions on or prior to December 31, 1998; provided that no
Event of Default exists at such time or would result therefrom.
4.25. Sale of Certain Assets.
The Borrower is actively engaged in the process of attempting to sell
in one or more transactions certain assets used in the business of selling,
distributing, packaging, manufacturing and marketing CUTEX brand nail care
products in the United States and Puerto Rico, and has engaged Merrill Lynch to
act as its financial adviser in connection with such sale. The Borrower and
Johnson Products are also actively engaged in the process of attempting to sell
in one or more transactions certain assets used in the business of selling,
distributing, packaging, manufacturing and marketing Dermablend brand corrective
cosmetic products and/or the capital stock of Dermablend, a Subsidiary of
Johnson Products, and have engaged Morningside to act as their financial adviser
in connection with such sale.
4.26. Morningside Management Fee.
Annex XV sets forth the annual payment to be made to Morningside
pursuant to the Management Agreement.
4.27. AM Cosmetics.
The relationship between Holdings, the Borrower and AM Cosmetics and
all contracts, agreements and other documents in existence between such parties
are fully and completely described in Annex XVI.
4.28. No Defaults.
At the time of the making of the Term Loans and immediately after
giving effect thereto, no Default shall have occurred or be continuing.
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
Loans 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 Required Lenders):
5.01. Information Covenants.
Holdings will furnish or cause to be furnished to the Administrative
Agent (with sufficient copies for distribution to each Lender):
(a) As soon as available and in any event within 90 days after the
close of each fiscal year of Holdings, the consolidated and consolidating
balance sheets of Holdings and its Subsidiaries as at the end of such fiscal
year and the related consolidated and consolidating statements of income, of
shareholders' equity and of cash flows for such fiscal year, setting forth
comparative consolidated and consolidating figures for the preceding fiscal year
and a report on such consolidated and consolidating 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 and consolidating financial statements present fairly, in
all material respects, the consolidated and consolidating 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 and consolidating balance sheet of Holdings
and its Subsidiaries as at the end of such quarterly accounting period and the
related consolidated and consolidating 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 December 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, and in any event within three Business Days of, 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, and in any event within three Business Days of,
any Senior Officer obtaining knowledge of the institution of, or written threat
of, any action, suit, proceeding, governmental investigation or arbitration
(including any Environmental Notice) 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 Designated 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 Designated Lender and
provide such other information as may be reasonably available to enable the
Lenders and their respective 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 Designated Lender covering any
institution of, or written threat of, any action, suit, proceeding, governmental
investigation or arbitration (including any Environmental Notice) (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 Designated 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 Lenders and their respective 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 Administrative
Agent pursuant to clause (i) or (ii) above to the Administrative Agent or the
Lenders and provide such other information as may be reasonably available to it
to enable the Lenders and their respective counsel to evaluate such matters and
(iv) promptly upon, and in any event within three Business Days of, 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 Designated Lender and shall provide such other information as may be
reasonably available to enable the Lenders and their respective 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 Lenders and
may be reasonably available to Holdings or the Borrower.
(i) Holdings shall deliver to the Administrative Agent (with sufficient
copies for distribution to each 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 Administrative Agent (with sufficient copies for distribution to each
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 or designated representatives of the Lenders to visit and
inspect any of the properties or assets of Holdings, the Borrower and any of
their Subsidiaries in whomsoever's possession, and to examine the books of
account of Holdings, the Borrower and any of their Subsidiaries and discuss the
affairs, finances and accounts of Holdings, the Borrower and any of their
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 Lenders may reasonably request; provided that, upon the
occurrence and during the continuation of an Event of Default, no prior notice
is required to be given for any such visit or inspection.
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, at all times 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 Lenders 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 at all times the
insurance coverages specified in the Mortgages and the other Security Documents,
including without limitation the insurance coverage in favor of the Collateral
Agent with respect to the Mortgaged Real Property.
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
Administrative Agent (with a copy for each 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 Required Lenders 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 Required
Lenders, 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).
5.08. 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, loan agreement, credit agreement or 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.
5.09. Use of Proceeds.
The proceeds of the Term Loans shall be used as provided in Section
4.05.
5.10. No Further Negative Pledges.
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.
5.11. Pledge of Additional Collateral.
(a) 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 Collateral Agent for the benefit of the Secured Parties 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 Collateral Agent for the benefit of
the Secured Parties 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 Collateral Agent, 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 Collateral Agent shall reasonably require at the direction of
the Required Lenders. 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 Collateral Agent shall reasonably
require to confirm the Lien of a Mortgage (including, without limitation,
satisfaction of the conditions set forth in Sections 3.01(G)(iii) and 3.01(I)),
or execute a new Mortgage, with respect to such Additional Real Property.
(b) Upon the acquisition by Fine Products of the First JP Note, upon
the acquisition by the Borrower of the Second JP Note and upon the entering into
of the Holdings Make-Well Agreement by Fine Products, (i) the Borrower will, and
Holdings will cause Fine Products to, take all necessary action to grant the
Collateral Agent for the benefit of the Secured Parties a perfected first Lien
in such newly acquired assets and (ii) Holdings will pledge the common stock of
Fine Products then held by it, in each case in the manner described in Section
5.11(a) (such assets and common stock to be considered Additional Collateral).
(c) 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 5.11,
including, without limitation, costs of counsel to Holdings, such Subsidiary or
the Lenders in connection with the preparation, negotiation and delivery of the
applicable documents and opinions as required by this Section 5.11, 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 5.11, and all amendments, modifications and supplements thereto
from time to time entered into, are and shall be within the definition of
"Security Documents."
5.12. 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 Collateral Agent for the benefit of the Secured Parties
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
Permitted Encumbrances 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 Collateral Agent 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 Designated Lender, desirable to perfect the
Lien created, or purported or intended to be created, by each Security Document.
5.13. 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, and in any event within three Business Days, give notice to the
Designated 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.
5.14. New Subsidiaries.
In addition to its obligations with respect to Section 5.11, 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 Collateral Agent for the benefit of the Lenders a
Subsidiary Guarantee, substantially in the form of Exhibit K 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 and any other documents, certificates, resolutions,
and instruments, as the Designated 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 Collateral Agent for
the benefit of the Secured Parties to secure the Borrower's Obligations
hereunder such that the Collateral Agent 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.
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 Loans 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 Required Lenders):
6.01. Changes in Business.
Other than asset dispositions permitted under Section 6.06, 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.
Holdings shall not designate any Indebtedness other than the Obligations, the
Secured Obligations (as such term is defined in the Security Documents) and the
obligations under the Unsecured Term Loan Agreement as "Designated Senior
Indebtedness" or "Designated Guarantor Senior Indebtedness", as the case may be,
for purposes of the Senior Subordinated Notes and any other document related
thereto.
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 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 and in compliance
with the Mortgages;
(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 set forth on Annex XIII
and any extensions or renewals 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 to 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 and listed on
Annex V 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 the South African Credit
Agreement permitted pursuant to Section 6.04(h).
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 (including
without limitation guarantees required by the Unsecured Term Loan Agreement of
the Indebtedness outstanding thereunder by Holdings and its Subsidiaries);
(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 or any such Subsidiary 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 to
the extent the same is listed on Annex XV;
(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 and payable on the
Senior Subordinated Notes (provided no Default or Event of Default exists under
this Agreement and any such payment is not prohibited by this Agreement) and
(ii) taxes payable when due (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 Carson Holdings Limited pursuant to the South
African Credit Agreement in an amount not exceeding the equivalent of $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);
(i) Indebtedness of any Credit Party (including pursuant to the
issuance of any guarantees) incurred pursuant to the Senior Subordinated Notes
in an original aggregate principal amount of $100,000,000 (less the aggregate
principal amount of all repayments of principal thereof effected after the
Closing Date); and
(j) Indebtedness of Johnson Products pursuant to the JP Notes and
Indebtedness of Holdings and Fine Products, if any, pursuant to the Holdings
Make-Well Agreement so long as (i) no Event of Default then exists or would
result therefrom, (ii) the obligations of Holdings and Fine Products under the
Holdings Make-Well Agreement shall be subordinate to the Obligations, and (iii)
the obligations of Johnson Products under the JP Notes shall be subordinate to
the Obligations.
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 so long as the same is
subject to the pledge arrangements under the Security Documents;
(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, (i) in each case permitted
under Section 6.04(f) and (ii) in connection with the Health Care Costs
Containment Transactions;
(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 $5,000,000
in the aggregate at any one time outstanding;
(j) Existing Investments;
(k) investments in connection with the Refinancing; and
(l) loans, advances and/or investments in one or more contract
manufacturers, suppliers, vendors and distributors that are not Affiliates of
Holdings, that is not Morningside and that are not Affiliates of Morningside 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 more of its Subsidiaries in an aggregate amount at any one
time outstanding not to exceed $4,000,000.
6.06. Prepayments of Indebtedness; Amendment of Certain Agreements.
(A) Other than in accordance with Section 2.02 of this Agreement and
Section 2.02 of the Unsecured Term Loan Agreement or in connection with the
Refinancing, 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.
(B) Other than in accordance with Section 2.03 of this Agreement and
Section 2.03 of the Unsecured Term Loan Agreement or in connection with the
Refinancing, 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 (i) using the proceeds of Indebtedness permitted to be incurred by
Section 6.04 to refinance or replace such Indebtedness and (ii) in connection
with the Health Care Costs Containment Transactions.
(C) Holdings will not, and will not permit any of its Subsidiaries to:
amend, modify or change any of the Unsecured Term Loan Agreement, 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, the Borrower, Fine Products or any of
the other Credit Parties (other than in connection with the Health Care Costs
Containment Transactions), 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 (other than in
connection with the Health Care Costs Containment Transactions), in each case
without the prior written consent of the Designated Lender with the consent of
the Required Lenders, 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;
(iv) Holdings or any of its Subsidiaries may make payments to
Affiliates pursuant to and in compliance with Section 6.08;
(v) Carson Holdings Limited may pay Dividends if such Dividends,
together with the aggregate of all other Dividends made by Carson Holdings
Limited after the Closing Date, without duplication, do not exceed the sum of
(1) 25% of the consolidated cumulative net income of Carson Holdings Limited for
the period (taken as one accounting period) from the Closing Date and ended as
of the most recently ended fiscal quarter of Carson Holdings Limited at the time
of such Dividend plus (2) 100% of the aggregate net cash proceeds and the fair
market value of any property or securities (as determined by the board of
directors of Carson Holdings Limited in good faith) received by Carson Holdings
Limited or any Wholly Owned Subsidiary thereof from the issue or sale of capital
stock or other equity interests of Carson Holdings Limited or any of its
Subsidiaries subsequent to the Closing Date (other than capital stock or other
equity interests issued or sold to a Subsidiary) plus (3) any dividends or
distributions actually received in cash by Carson Holdings Limited or any of its
Subsidiaries after the Closing Date from any other Subsidiary, to the extent
that such dividends or distributions were not otherwise included in the
consolidated net income of Carson Holdings Limited for such period; and
(vi) Holdings and any of its Domestic Subsidiaries may engage in the
Health Care Costs Containment Transactions to the extent permitted by this
Agreement.
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 an aggregate of $500,000, or above such amount up to an aggregate of
$750,000 with written 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 in the ordinary course consistent with prudent
business practices, (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, (vi) investments made pursuant to Section 6.05(l);
(vii) payments to Morningside, Human Services Group, Inc. and C.B. Equities
Capital Corp. III LLC for advisory services rendered to the Borrower and Johnson
Products in connection with the sale of the Dermablend assets and Dermablend
Subsidiary capital stock described in the second sentence of Section 4.25 and in
an aggregate amount not to exceed $500,000, plus reimbursement of reasonable
out-of-pocket expenses; and (viii) transactions between the parties to the
Health Care Costs Containment Transactions to the extent permitted by this
Agreement.
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 that nothing contained in this
Section 6.09 shall prohibit (i) 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, (ii) the sale or disposition
of the capital stock of the Dermablend Subsidiary in the transaction or
transactions described in the second sentence of Section 4.25 (so long as the
net proceeds of such sale or disposition are used to repay Indebtedness under
this Agreement pursuant to Section 2.02 or 2.03 or under the Unsecured Term Loan
Agreement, or (iii) the issuance and sale of capital stock of Fine Products and
the Borrower in connection with the Health Care Costs Containment Transactions
to the extent permitted by the Agreement.
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 (i) such sales are approved by the Required
Lenders; (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 (w)
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, (x) for at least the fair market value of
such equipment, (y) not in excess of $100,000 individually or $250,000 per year
in the aggregate for sales of such equipment and (z) 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 Agreement pursuant to Section 2.02 or 2.03 or under the
Unsecured Term Loan Agreement; (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; (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;
(viii) the Borrower sells or otherwise disposes of no more than 2.7% of the
outstanding capital stock of Carson Holdings Limited; (ix) the Borrower sells or
otherwise disposes of all or any portion of either its CUTEX business or
Dermablend business (including the capital stock of the Dermablend Subsidiary)
as described in Section 4.25 in one or more transactions, provided that the net
proceeds of such sale or disposition are used to repay Indebtedness under this
Agreement pursuant to Section 2.02 or 2.03 or under the Unsecured Term Loan
Agreement; or (x) such sales or other dispositions that are in connection with
the Health Care Costs Containment Transactions to the extent permitted by this
Agreement.
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 90% 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 Designated Lender an instruction (a "Release Instruction") directing
the Collateral Agent to prepare and deliver 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
Designated Lender and the Collateral Agent 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
Collateral Agent, (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 be continuing and the parties executing any and all documents in
connection with the Release (other than the Collateral Agent) 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 Designated Lender's obligation to deliver a Release Instruction
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 Designated 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
Collateral Agent'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 those Liens permitted by the Mortgage or
previously consented to by the Required Lenders;
(v) Holdings shall cause to have been delivered to the Collateral Agent
a Survey reasonably acceptable to the Designated 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 Collateral Agent an Officers' Certificate certifying that the conditions set
forth in subsections (i) through (v) have been satisfied.
(D) The Collateral Agent shall not be obligated to release any
Collateral unless it receives a Release Instruction. If the Collateral Agent
receives such a Release Instruction, then (whether or not the conditions are or
remain satisfied), the Collateral Agent 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
thereafter. Holdings or the Borrower shall (i) execute, deliver, obtain and
record such instruments as the Collateral Agent may require, including, without
limitation, amendments to the Security Documents or this Agreement and, (ii)
deliver to the Collateral Agent such evidence of the satisfaction of the Release
Conditions and the Partial Release Conditions as the Designated 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 Collateral Agent 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 and guarantees required by the Unsecured Term Loan
Agreement of the Indebtedness outstanding thereunder by Holdings and its
Subsidiaries;
(iii) obligations arising as a direct consequence of 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 that is a Domestic
Subsidiary.
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 and the transfers described in the defined term "Health
Care Costs Containment Transactions". Holdings will not permit Fine Products to
engage in any business activity other than the Health Care Costs Containment
Transactions to the extent permitted by this Agreement.
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 in the payment when due of any principal
of the Term Loans or the Unsecured Term Loans, (ii) default, and such default
shall continue for five or more Business Days, in the payment when due of any
interest on the Term Loans 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 5.10, 5.11, 5.12,
5.14 or Section 6 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
5.13(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 the 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 within 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 after 60 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 days (whether or
not consecutive); 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 days (whether
or not consecutive); 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 any Credit Party admits in writing its
inability to pay its debts and they became due; 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.
7.07. Security Documents.
Any Security Document shall cease to be in full force and effect, or
shall cease to give the Collateral Agent for the benefit of the Secured Parties
the Liens, rights, powers and privileges purported to be created thereby, in
favor of the Collateral Agent for the benefit of the Secured Parties, superior
to and prior to the rights of all third Persons and subject to no Liens other
than Permitted Encumbrances, 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
7.09. 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; or
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; 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 (each of clauses (i), (ii) and
(iii) of this Section 7.10, a "Change of Control"); or
7.11. Certain Transactions Involving Carson Holdings Limited.
Any Credit Party 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 or any of the Subsidiaries of Carson Holdings Limited;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent at the direction of the
Required Lenders shall, by written notice to Holdings and the Borrower, take any
or all of the following actions, without prejudice to the rights of each 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
Administrative Agent 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 Loans 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. The Administrative Agent and the Collateral Agent.
8.01 Appointment of the Administrative Agent and the Collateral
Agent, Etc.
(a) Quantum Partners LDC is hereby designated and appointed as the
Administrative Agent of each Lender hereunder and under each Credit Document and
Norwest Bank Minnesota, N.A., is hereby designated and appointed as the
Collateral Agent of each Lender hereunder and under each Security Document, and
each Lender authorizes the Administrative Agent and the Collateral Agent
(individually, an "Agent" and together the "Agents") to act as the agent of such
Person for the purposes of enforcing the rights and remedies of the Lenders in
respect of the Credit Documents and, as to the Collateral Agent, in respect of
the Collateral. The Lenders hereby further authorize the Collateral Agent to
accept delivery of the Security Documents for the ratable benefit of the
Lenders. Norwest Bank Minnesota, N.A. and Quantum Partners LDC agree to act as
such upon the express conditions contained in this Section 8. The Agents shall
not have a fiduciary relationship in respect of any Lender by reason of this
Agreement.
(b) Each Agent shall have and may exercise such powers hereunder and
under the Credit Documents as are specifically delegated to such Agent by the
terms hereof, together with such powers as are reasonably incidental thereto, in
each case upon (and only upon) the written direction of the Required Lenders or,
to the extent set forth in Section 6.10(b), the Designated Lender. The sole duty
of the Collateral Agent shall be to receive and hold the Security Documents
(without any inquiry as to, or responsibility for, the scope, terms,
enforceability, legality, priority, perfection or sufficiency thereof) and, upon
direction of the Required Lenders or, to the extent set forth in Section
6.10(b), the Designated Lender, to exercise its rights and powers thereunder.
Notwithstanding any provision to the contrary elsewhere in this Agreement or the
other Credit Documents, neither Agent shall have implied duties or
responsibilities to any Lender, nor any obligation to any Lender to take any
action hereunder except any action specifically provided by this Agreement and
with respect to the Credit Documents to be taken by such Agent. No implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or the other Credit Documents or shall otherwise
exist against either Agent. Subject to the provisions of this Section 8, each
Agent agrees to take such actions, and to refrain from taking such actions,
under this Agreement and under the other Credit Documents, as the Required
Lenders may direct from time to time.
(c) At any time or times, in order to comply with any legal requirement
in any jurisdiction, the Collateral Agent may appoint another financial
institution, bank or trust company or one or more other Persons to act as
collateral trustee for the Collateral Agent, with such power and authority as
the Collateral Agent determines to be necessary for the effectual operation of
the provisions of the Security Documents for which such collateral trustee is
appointed. The terms of such appointment may be specified in an agreement which
may, in the discretion of the Collateral Agent, include provisions for the
protection of such collateral trustee similar to the provisions of this Section
8. The Collateral Agent shall have no liability to any Lender for any action
taken or omitted to be taken by such collateral trustee, provided that such
collateral trustee is selected in good faith.
(d) Neither Agent nor any of its respective directors, officers,
agents, employees, attorneys-in-fact or affiliates shall be (i) liable to any
Lender for any action taken or omitted to be taken by it or such persons
hereunder or under any other Credit Document or in connection herewith or
therewith except for direct damages (and not for any special, consequential,
indirect or punitive damages) resulting from its or such persons' own gross
negligence or willful misconduct or its or such persons' grossly negligent or
willful failure to follow written directions received by it from the Required
Lenders (other than any such directions contrary to any applicable law), or (ii)
responsible in any manner to any Lender for any recitals, statements, warranties
or representations made in or in connection with this Agreement or any other
Credit Document and shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Collateral, this Agreement, any other Credit Document or any other
instrument or document furnished pursuant hereto or thereto.
(e) Neither Agent shall be responsible to any Lender for any recitals,
reports, statements, warranties or representations contained herein, in any
other Credit Document or any other writing relating hereto or thereto or be
bound to ascertain or inquire as to the performance or observance of any of the
terms of this Agreement or any other Credit Document.
(f) In addition to, and not in limitation of, the other provisions of
this Section 8, either Agent shall in all cases be fully protected in acting, or
in refraining from acting, hereunder and under the other Credit Documents in
accordance with written instructions signed by the Required Lenders, and such
instruction and any action taken or failure to act pursuant thereto shall be
binding on all of the Lenders.
(g) The Administrative Agent may execute any of its respective duties
as the Administrative Agent hereunder and the Collateral Agent may execute any
of its respective duties as the Collateral Agent with respect to the Security
Documents by or through employees, agents, and attorneys-in-fact; the Collateral
Agent may hire consultants and other agents and representatives to sell,
liquidate, foreclose or otherwise dispose of the Collateral and shall not be
answerable to any Lender, except as to money or securities received by it or its
authorized agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Either Agent shall be
entitled to rely on advice of counsel, consultants and experts concerning all
matters pertaining to the agency hereby created and its duties hereunder.
(h) Either Agent shall be entitled to rely upon, and shall incur no
liability under or in respect of this Agreement or any other Credit Document by
acting upon, any notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agents, which counsel
may be employees of such Agent.
(i) Each Lender shall reimburse and indemnify the Agents ratably in
proportion to such Lender's respective outstanding Term Loan (i) for any amounts
not reimbursed by the Borrower for which either Agent is entitled to
reimbursement by the Borrower hereunder or under any other Credit Document, (ii)
for any other costs or expenses (including, without limitation, reasonable fees,
expenses and other client charges of counsel to either Agent) incurred by such
Agent in connection with the preparation, negotiation, execution, delivery,
administration or enforcement of this Agreement or any other Credit Document and
any modification, waiver, amendment or termination of this Agreement or any
other Credit Document, (iii) for any liabilities, obligations, losses, damages
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever which may be imposed on, incurred by or asserted
against either Agent (including, without limitation, reasonable fees, expenses
and other client charges of counsel to such Agent) in any way relating to or
arising out of this Agreement, any other Credit Document or any of the
transactions contemplated hereby or thereby, or the enforcement of any of the
terms hereof or of any such other documents, and (iv) any amounts required to be
paid to either Agent pursuant to this subsection (i) by a Lender that are not
paid by such Lender on demand; provided that no Lender shall be liable for any
portion of the foregoing to the extent it arises primarily from the gross
negligence or willful misconduct of such Agent as determined by a court of
competent jurisdiction. Without limiting the generality of the foregoing, each
Lender agrees to repay to either Agent immediately upon demand any payment
distributed by such Agent to such Lender, to the extent such Agent must return
such payment or disgorge such amount, pursuant to an order of a court or
otherwise in accordance with any Security Document.
(j) Norwest Bank Minnesota, N.A. and Quantum Partners LCD, and their
other respective Affiliates may generally engage in any kind of business with
the Borrower, any of their respective Affiliates, or any Person who may do
business with or own securities of the Borrower, or any of their respective
Affiliates, all as if Norwest Bank Minnesota, N.A. were not the Administrative
Agent and Quantum Partners LCD were not the Collateral Agent and neither with
any duty to account therefor to any Lender.
(k) Neither Agent shall be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder or under any Credit
Document unless such Agent has received written notice from a Lender, the
Borrower or another Credit Party under this Agreement describing such Default or
Event of Default and stating that such notice is a "notice of default"; provided
that (i) no Lender nor any director, officer, agent or employee thereof shall
have any liability for any failure to give such notice and (ii) the failure to
give such notice shall not affect the liabilities or obligations of the Lenders
or either Agent hereunder. In such event the Agent receiving the notice shall
give notice thereof to each Lender and the other Agent and, subject to Section
8.02, unless and until such Agent shall have received such directions such Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Lenders.
(l) Each Lender acknowledges that it has, independently and without
reliance upon either of the Agents or any other Lender and based on the
financial statements furnished by the Borrower and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to accept the benefit of this Agreement and the other Credit Documents.
Each Lender also acknowledges that it will, independently and without reliance
upon either Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement or the
other Credit Documents. Except for any notices, reports and other documents
expressly required to be furnished to the Lenders by either Agent hereunder,
such Agent shall not have any duty or responsibility to provide any Lender with
any other information concerning the business, operations, property, prospects,
financial and other conditions or creditworthiness of the Borrower or any
Guarantor which may come into the possession of such Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
(m) Either Agent may resign at any time by giving written notice
thereof to each Lender and the Borrower, which resignation shall be effective
upon the appointment of a successor Administrative Agent or a successor
Collateral Agent, as the case may be, pursuant to the terms of this Section
8(m). Upon any such resignation, the Required Lenders shall have the right to
appoint, on behalf of the Lenders and the Borrower, a successor Administrative
Agent or a successor Collateral Agent, as the case may be. At any time either
Agent may be removed with or without cause by the Required Lenders. Upon any
removal of either Agent, the Required Lenders shall have the right to appoint,
on behalf of the Lenders, the Borrower and the Guarantors, a successor
Administrative Agent or a successor Collateral Agent, as the case may be. If
upon any resignation no successor Administrative Agent or successor Collateral
Agent shall have been appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the retiring Agent's resignation, then the
retiring Agent may appoint, on behalf of the Lenders, a successor Administrative
Agent or a successor Collateral Agent, as the case may be. If upon any removal
no successor Administrative Agent or successor Collateral Agent shall have been
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent's removal, then the retiring Agent may
appoint, on behalf of the Lenders, a successor Administrative Agent or a
successor Collateral Agent, as the case may be. Upon the acceptance of any
appointment as an Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent under this Agreement and the other
Credit Documents, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Credit Documents. After any
retiring Agent's resignation or removal hereunder as Administrative Agent or
Collateral Agent, as the case may be, the provisions of this Section 8 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Administrative Agent or Collateral Agent,
as the case may be, hereunder and under the other Credit Documents.
8.02 Enforcement by the Administrative Agent and the Collateral
Agent.
(a) The Agents agree to make such demands and to give such notices
under the Credit Documents as the Required Lenders may request, and the Agents
agree to take such action to enforce the Credit Documents as may be directed by
the Required Lenders and to foreclose upon, collect and dispose of the
Collateral or any portion thereof as may be directed by the Required Lenders
(including, without limitation, the acceleration of the Term Loan after an Event
of Default in accordance with Section 7); provided that (i) neither Agent shall
be required to take any action that is in its opinion contrary to law or to the
terms of this Agreement or any other Credit Document, or which may in its
opinion subject it or any of its officers, members, employees or directors to
liability, and (ii) neither Agent shall be required to take any action under
this Agreement or any other Credit Document unless and until such Agent shall be
indemnified to its satisfaction (which may include cash security) by the Lenders
against any and all loss, cost, expense or liability in connection therewith.
(b) Each Lender agrees that either Agent may only act as the Required
Lenders may request or as otherwise provided for in this Agreement or any other
Credit Document, that neither Agents shall have no liability to any Lender for
acting in accordance with any such request and that none of the Lenders or the
Agents shall have any liability to any other Lender or Agent for any such
request. The only rights of any such Lender or Agent under any Security Document
are for the Obligations owed to such Lender or Agent to be secured by the
Collateral to the extent provided for therein and to receive a share of the
proceeds of the Collateral to the extent and at the time provided in such
Security Document and herein.
(c) Either Agent may at any time request directions from the Lenders as
to any course or other matter relating hereto or to this Agreement or any other
Credit Document, and each Lender will promptly respond to any such request.
Subject to Section 10.13, the parties hereby agree that with the consent of the
Required Lenders, the appropriate Agent ort Agents may, (i) agree to the
amendment, supplement, modification or waiver of any of the terms of the Credit
Documents or any document relating thereto, (ii) consent to any action or
failure to act by the Borrower or any other Credit Party, and (iii) exercise or
refrain from exercising any rights or remedies which the Lenders or the Agents
may have under the Credit Documents, including, without limitation, the right at
any time to declare or to refrain from declaring, the Term Loans due and payable
when permitted to do so pursuant to this Agreement, and to foreclose and sell
and otherwise deal with, or to refrain from foreclosing and selling or otherwise
dealing with, any Collateral or to enforce, or to refrain from enforcing, the
Security Documents.
(d) Notwithstanding anything herein to the contrary, each Lender agrees
not to take any action to enforce any provision of this Agreement or any other
Credit Document, or to enforce any rights or remedies in respect of the
Collateral (including, without limitation, by exercising any right of set-off,
banker's lien or other similar right), except through or at the written
direction of either the Administrative Agent or the Collateral Agent.
(e) Each Lender agrees that if after the giving of a Notice of
Acceleration such Lender shall receive the proceeds of any of the Collateral,
such Lender shall hold such amounts in trust for the benefit of the Agents,
shall segregate such amounts from its other property and shall forthwith deliver
to the Administrative Agent such amounts for distribution to the Lenders
pursuant to this Agreement.
(f) The provisions of this Section 8.02 are for the benefit only of the
Lenders and the Agents and may not be enforced by the Borrower, any Guarantor or
any other Person.
(g) If any Lender shall at any time receive payment on account of all
or part of its pro rata share in the Term Loans, including, without limitation,
by way of set-off, in a greater proportion than the payments made on account of
the interests of the other Lenders, such Lender receiving such greater
proportionate interest shall hold such amounts in trust for the benefit of the
Agents, shall segregate such amounts from its other property and shall forthwith
deliver to the Administrative Agent such amounts for distribution to the Lenders
pursuant to this Agreement, in such amounts so that after such delivery the
amount unpaid on account of the interest in the respective Term Loans of each
Lender will bear the same proportion to the total unpaid principal amount of
the Term Loans at such time as each such Lender's proportionate interest in the
Term Loans prior to receipt by any Lender of a disproportionate payment. In
the event that any such payment is disbursed by legal process or otherwise,
appropriate further adjustments shall be made.
(h) In the event that either Agent, exercising its rights and powers
hereunder and under the other Credit Documents, (i) proceeds to foreclose upon,
collect, sell or otherwise dispose of, or to take any other action with respect
to, the Collateral or any portion thereof, or to enforce any Security Document,
(ii) proposes to take any other action pursuant to this Agreement, or (iii)
requests instructions from any of the Lenders, each Lender agrees to provide
promptly to such Agent such information as such Agent may, from time to time,
reasonably request, as at such date as such Agent may specify. Such Agent shall
be entitled to rely conclusively on such information.
(i) In the event that the Collateral Agent receives any proceeds in
respect of any sale of, collection from, or other realization upon all or any
part of the Collateral pursuant to the exercise by the Collateral Agent of its
remedies under the Security Documents, such proceeds shall be applied first to
the payment of all costs and expenses, fees, commissions and taxes of such sale,
collection or other realization, including, without limitation, reasonable
out-of-pocket costs and expenses of the Collateral Agent and its agents and
counsel, and expenses, liabilities and advances made in or incurred by the
Collateral Agent in connection therewith, and all other Obligations (including
indemnification obligations, whether or not related thereto) then outstanding to
the Collateral Agent.
(j) The Borrower hereby agrees to pay the fees and out-of-pocket
expenses incurred in connection with the negotiation, preparation, execution,
performance and enforcement of the Credit Documents, including, without
limitation, the reasonable fees and expenses of counsel incurred in connection
therewith.
SECTION 9. 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:
"Additional Collateral" has the meaning provided in Section 5.11.
"Additional Real Property" has the meaning provided in Section 5.11.
"Administrative Agent" means Quantum Partners LDC, in its capacity as
administrative agent for the Lenders hereunder.
"Administrative Agent's Office" means Quantum Partners LDC, 888 7th
Avenue, New York, New York 10006 or such other office of which the initial
Administrative Agent or any successor thereto shall inform the other parties
hereto from time to time.
"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.
"Agents" means the Administrative Agent and the Collateral Agent.
"Aggregate Market Value" has the meaning provided in Section 7.10.
"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.
"AM Cosmetics" means AM Cosmetics, Inc., a Delaware corporation.
"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), (vii), (viii) or (ix)).
"Authorized Officer" means any senior officer of the Borrower or
Holdings, as the case may be, designated as such in writing to the
Administrative Agent 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, and a
Wholly Owned Subsidiary of Holdings.
"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, 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 Interest Amount" has the meaning provided in Section
1.03(b).
"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, 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 December 8, 1998 on which
the conditions set forth in Section 3 have been satisfied (or waived) and the
borrowing hereunder 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.
"Collateral Agent" means Norwest Bank Minnesota, N.A., in its capacity
as collateral agent for the Lenders hereunder and under the Security Documents.
"Commitment" means, for any Lender, the obligation of such Lender to
make a Term Loan on the Closing Date up to but not exceeding the amount set
opposite the name of such Lender on Schedule 1 hereto. The aggregate amount of
the Commitments of all Lenders hereunder is $75,000,000.
"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 that the term Contingent Obligation shall not include (i) endorsements
of instruments for deposit or collection in the ordinary course of business,
(ii) any obligations arising from the Holdings Make-Well Agreement, and (iii)
amounts that are permitted by Section 6.05. 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 Term Note, (iii)
each Guarantee, (iv) each Security Document, (v) the Unsecured Term Loan
Agreement and (vi) the Morningside Subordination Letter.
"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 (other than Fine Products).
"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.
"Dermablend" means Dermablend, Inc., a Delaware corporation and a
Wholly Owned Subsidiary of the Borrower.
"Dermablend Intellectual Property Security Agreement" means the
Intellectual Property Security Agreement executed by Dermablend substantially in
the form of Exhibit H 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.
"Designated Lender" means Quantum Partners LDC, a Cayman Islands
limited duration company, so long as Quantum Partners LDC or a single assignee
thereof holds more than 50% of the aggregate outstanding principal amount of the
Term Loans, and otherwise the Administrative Agent.
"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" or "$" means United States Dollars.
"Domestic Subsidiary" means, with respect to any Person, any Subsidiary
of such Person which is incorporated or organized in any of the United States of
America or under the laws of the United States of America or any state of the
United States of America or the District of Columbia.
"Effective Date" has the meaning provided in Section 10.11.
"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
4.21.
"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, including the Indebtedness outstanding under the Unsecured
Term Loan Agreement and guarantees thereof by Holdings or any Subsidiary of
Holdings as provided in the Unsecured Term Loan Agreement.
"Existing Investments" means (i) a non-interest bearing promissory note
dated as of August 15, 1996 in the original principal amount of $500,000 of
Joyce Roche payable to the order of Holdings, a non-interest bearing promissory
noted dated as of August 15, 1996 in the original principal amount of $250,000
of Dennis Smith payable to the order of Holdings, a non-interest bearing
promissory note dated as of August 15, 1996 in the original principal of
$250,000 of John P. Brown payable to the order of Holdings, and a non-interest
bearing promissory note dated as of August 15, 1996 in the original principal
amount of $125,000 of Arthur P. Gnann III payable to the order of Holdings (each
of Ms. Roche and Messrs. Smith, Brown and Gnann being former employees of
Holdings), (ii) a non-interest bearing promissory note dated as of August 15,
1996 in the original principal amount of $125,000 of Donald Cowsar payable to
the order of Holdings (Mr. Cowsar being a current employee of Holdings), (iii)
300 shares of cumulative Payment in Kind Preferred Shares issued by Morningside
AM Acquisition Corp. (the "AM PIK Shares") to the Borrower in June 1996 at an
original acquisition price of $10,000 per share, plus additional AM PIK Shares
that have been issued since June 1996 and that may be issued after the date
hereof as dividends in lieu of cash dividend payments thereon; and (iv) a
promissory note bearing interest at 10% dated May 14, 1997 in the original
principal amount of $250,000 of MG Taylor Corporation payable to the order of
Holdings (MG Taylor Corporation being a provider of strategic planning and other
consulting services to the Borrower).
"Existing Leases" means the Leases of Holdings and the other Credit
Parties 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
Indebtedness permitted by Sections 6.04(a), (b), (c) and (d) effected in
accordance with the applicable provisions of such Sections, or (ii) transactions
between any of the Borrower, Holdings and any Wholly Owned Subsidiaries of
Holdings.
"Fine Products" means Fine Products Company, a Georgia corporation.
"First JP Note" has the meaning provided in the term "Health Care Costs
Containment Transactions".
"Foreign Subsidiary" means any Subsidiary that is not a Domestic
Subsidiary.
"FP Stock" has the meaning provided in the term "Health Care Costs
Containment Transactions".
"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 5.11.
"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 5.14.
"Guarantor" for purposes of this Agreement means, individually, each of
Holdings, Johnson Products and each other Subsidiary of Holdings 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.
"Health Care Costs Containment Transactions" means the series of
transactions whereby Fine Products will become responsible for administering the
current and future medical and dental benefits programs of Holdings and its
Domestic Subsidiaries. Such transactions include (i) the issuance by the
Borrower to Holdings of a dividend in the form of all of the capital stock of
Fine Products plus a cash dividend amount of $450,000, (ii) the recapitalization
of Fine Products through the issuance of a new class of common shares to
Holdings in exchange for $450,000 in cash and the then existing common stock of
Fine Products, (iii) the issuance by Johnson Products to the Borrower in the
form of a dividend of a $30,347,061 promissory note of Johnson Products that is
subordinated to the Obligations (the "First JP Note"), (iv) the issuance by the
Borrower to Johnson Products of an additional share of common stock of the
Borrower in exchange for a $8,353,008 promissory note of Johnson Products that
is subordinated to the Obligations (the "Second JP Note", and together with the
First JP Note, the "JP Notes") and the assumption by the Borrower of all of the
current and future medical and dental obligations of Johnson Products and its
Subsidiaries, (v) the creation by Fine Products of a new class of preferred
stock (the "FP Stock"), (vi) the transfer by Fine Products to the Borrower of
$50,000 of the FP Stock in exchange for the assumption by Fine Products of all
of the current and future medical and dental obligations of the Borrower,
Johnson Products and their respective Subsidiaries and the transfer to Fine
Products of the First JP Note, (vii) the sale by the Borrower of the FP Stock
for $50,000 to a third party health consultant who will monitor and manage the
medical and dental programs being administered by Fine Products pursuant to a
consulting or management agreement with the overall goal of reducing the costs
of such programs, (viii) the entering into of a make-well agreement between
Holdings and Fine Products which is subordinated to the Obligations whereby
Holdings will agree to make capital contributions to Fine Products to satisfy
any cash shortfalls that Fine Products may experience in satisfying its health
care obligations (the "Holdings Make-Well Agreement"), and (ix) the making or
payment of amounts, dividends or capital contributions pursuant to the JP Notes,
the FP Stock, the Holdings Make-Well Agreement and the other agreements and
transactions described in this definition and other transactions reasonably
related thereto; the terms and provisions of all of the above shall be subject
to the prior approval of the Required Lenders.
"Holdings" means Carson, Inc., a Delaware corporation.
"Holdings Guarantee" means the Holdings Guarantee substantially in the
form of Exhibit I 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 Make-Well Agreement" has the meaning provided in the term
"Health Care Costs Containment Transactions".
"Holdings Pledge Agreement" means the Holdings Securities Pledge
Agreement substantially in the form of Exhibit J 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.
"Information" has the meaning provided in Section 10.05
"Intellectual Property" has the meaning provided in Section 4.15.
"Intellectual Property Security Agreements" means and includes the
Borrower Intellectual Property Security Agreement, the Johnson Products
Intellectual Property Security Agreement, the Dermablend Intellectual Property
Security Agreement and any other intellectual property security agreements
delivered pursuant to Section 5.11.
"Interest Deferral Period" has the meaning provided in Section 1.03(b).
"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.
"Johnson Products General Security Agreement" means the General
Security Agreement 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 Guarantee" means the Subsidiary Guarantee executed by
Johnson Products substantially in the form of Exhibit K 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 F 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.
"JP Notes" has the meaning provided in the term "Health Care Costs
Containment Transactions".
"Lease" means any lease, sublease, franchise agreement, license,
occupancy or concession agreement.
"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 2.03(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 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 any Lender or the Administrative Agent 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 Refinancing and the other transactions contemplated hereby on the terms
contemplated hereby and thereby.
"Maturity Date" means December 8, 2003.
"Morningside" means Morningside Capital Group, L.L.C., a Connecticut
limited liability company.
"Morningside Subordination Letter" means the Letter Agreement dated the
Closing Date between Morningside and the Administrative Agent pursuant to which
Morningside agrees to subordinate the management fees payable to it pursuant to
the Management Agreement.
"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-1 or B-2 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 Collateral Agent, 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 for the benefit of the Collateral Agent.
"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.
"Notice of Acceleration" means a written certification from or on
behalf of a Lender, certifying that an Event of Default has occurred under a
Credit Document and that such Lender has directed the Administrative Agent to
commence action permitted by Section 7.
"Obligations" means all amounts, direct or indirect, contingent or
absolute, of every type or description, including without limitation the
principal of and interest on the Term Notes issued by, and the Term Loans made
to the Borrower under this Agreement, and all indemnities, fees and interest
thereon or owed thereunder, and at any time existing, owing to the Lenders, the
Collateral Agent and the Administrative Agent pursuant to the terms of this
Agreement or any other Credit Document or secured by any of the Security
Documents, and all obligations to pay or guarantee payment of any of the
foregoing under any Guarantee.
"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 Term Loans 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
6.10(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 5.11.
"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 Collateral Agent by
each of the Pledge Agreements, including, without limitation, all Pledged
Collateral as defined therein.
"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).
"Release Instruction" has the meaning provided in Section 6.10(B).
"Release Notice" has the meaning provided in Section 6.10(B).
"Released Real Property" has the meaning provided in Section 6.10(B).
"Regulation A" means Regulation A 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 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.
"Required Lenders" means Lenders holding more than 50% of the aggregate
outstanding principal amount of the Term Loans.
"SEC" means the Securities and Exchange Commission or any successor
thereto.
"Second JP Note" has the meaning provided in the term "Health Care
Costs Containment Transactions".
"Secured Parties" means, collectively, the Administrative Agent, the
Collateral Agent and the Lenders.
"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 security 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).
"Senior Subordinated Notes Indenture" means the Indenture dated as of
November 6, 1997 among Holdings, as issuer, the Borrower, as guarantor, and
Marine Midland Bank, as trustee, as supplemented by the First Supplemental
Indenture dated as of July 14, 1998 among Holdings, the Company, Johnson
Products, as first additional guarantor, Dermablend, as second additional
guarantor and Marine Midland Bank.
"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 an aggregate principal amount of $2,000,000, 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. Fine Products is a
Subsidiary of Holdings.
"Subsidiary Guarantee" means each guarantee substantially in the form
of Exhibit K 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 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 that are Foreign Subsidiaries 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 Designated
Lender) to the Collateral Agent 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" and "Term Loans" have the meanings provided in Section
1.01(a).
"Term Note" and "Term Notes" have the meanings provided in Section
1.02.
"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 Chicago Title Insurance Company or such other
title insurance or abstract company as shall be selected by Holdings or the
Borrower and reasonably acceptable to the Designated 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.
"Unsecured Term Loan Agreement" means the Unsecured Term Loan Agreement
dated as of December 8, 1998 between the Borrower, Holdings, the lenders party
thereto and the Administrative Agent, as administrative agent.
"Unsecured Term Loans" means the "Term Loans" made pursuant to the
Unsecured Term Loan Agreement.
"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
and other than in the case of Fine Products, the FP Stock issued pursuant to the
Health Care Costs Containment Transactions, 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 10. Miscellaneous.
10.01. Payment of Expenses, Etc.
Holdings and the Borrower agree to: (i) pay all reasonable
out-of-pocket costs and expenses of the Administrative Agent, the Collateral
Agent and the Lenders 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 (A) common counsel for the Lenders and
the Administrative Agent and (B) counsel for the Collateral Agent, in each case
with prior notice to Holdings and the Borrower of the engagement of any
counsel); (ii) pay and hold the Lenders, the Collateral Agent and the
Administrative Agent harmless from and against any and all present and future
stamp and other similar taxes with respect to the foregoing matters and save the
Lenders, the Collateral Agent and the Administrative Agent 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 any Lender, the Collateral
Agent or the Administrative Agent) to pay such taxes; and (iii) defend and
indemnify the Lenders, the Collateral Agent and the Administrative Agent, their
respective 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
Collateral Agent takes possession of, uses, operates, manages, controls or sells
the Mortgaged Property, provided 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 any Lender, the Collateral Agent
or the Administrative Agent or of the agents of any Lender or the Administrative
Agent) 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 any Lender or the Administrative Agent 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 Loans hereunder or the Refinancing or the
consummation of any other transactions contemplated in any Credit Document,
including, without limitation, the reasonable fees and expenses of counsel,
experts and consultants incurred by any Person to be indemnified 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). To the extent that the undertaking to indemnify, pay or hold
harmless the Administrative Agent, the Collateral Agent or any Lender set forth
in the preceding sentence may be unenforceable because it is violative of any
law or public policy, Holdings and the Borrower shall make the maximum
contribution to the payment and satisfaction of each of the indemnified
liabilities which is permissible under applicable law.
10.02. 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, each Lender and
the Administrative Agent 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 such Lender or the
Administrative Agent 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 such Lender or the Administrative Agent 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 such Lender or the Administrative Agent shall
have made any demand hereunder.
10.03. 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 a Lender, at its address set forth
in Schedule 1 hereto; if to the Administrative Agent, at the Administrative
Agent'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.
10.04. Benefit of Agreement.
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 Notes
evidencing the Term Loans, and their respective successors and assigns. No other
person shall have any rights hereunder.
10.05 Confidentiality.
Each of the Lenders, the Administrative Agent and the Collateral Agent
agrees to keep confidential (and to cause its officers, directors, employees,
agents and representatives to keep confidential) all information, materials and
documents furnished to it (the "Information"). Notwithstanding the foregoing, a
Lender or the Administrative Agent shall be permitted to disclose Information
(i) to such of its respective 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 or enforcement of this Agreement or the transfer or prospective
transfer of rights hereunder; (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 such Lender, the Administrative Agent or the Collateral Agent on a
non-confidential basis from a source other than the Administrative Agent, the
Collateral Agent, any other Lender, Holdings, the Borrower, or any of their
respective subsidiaries, officers, directors, employees, agents or
representatives or (C) was available to the Lenders, the Administrative Agent or
the Collateral Agent on a non-confidential basis prior to its disclosure to the
Lenders, the Administrative Agent or the Collateral Agent 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 the Administrative Agent, the Collateral Agent, any Lender, any of their
respective officers, directors, employees, agents and representatives, any other
person bound by a similar confidentiality agreement and any prospective
transferee so long as such prospective transferee shall enter into a written
agreement with the prospective transferor or the Administrative Agent to
preserve the confidentiality of any Information to the extent set forth in this
Section 10.05. Without limiting the foregoing provisions of this Section 10.05,
each Lender, the Collateral Agent and the Administrative Agent agree not to use
the Information in any fashion which would violate applicable law, including
laws governing the purchase or sale of securities. The confidentiality agreement
contained in this Section 10.05 shall, as of the Closing Date and with respect
to all actions taken thereafter, supersede and replace all confidentiality
agreements previously executed by any Lender.
10.06 Assignments.
(a) Assignments by the Credit Parties. No Credit Party may assign any
of its rights or obligations hereunder or under the Term Notes without the prior
consent of all of the Lenders and the Administrative Agent.
(b) Assignments by the Lenders. Each Lender may assign its Term Loan or
its Term Note at any time and without the consent of any Credit Party, any other
Lender, the Administrative Agent or the Collateral Agent; provided that any such
partial assignment (other than to another Lender) shall be in an amount at least
equal to $1,000,000; provided, further, that each Lender may assign the full
outstanding amount of its Term Loan at any time without the consent of any
Credit Party, any other Lender, the Administrative Agent or the Collateral
Agent.
Upon execution and delivery by the assignee to the Borrower and the
Administrative Agent of an Assignment and Assumption Agreement in the form of
Exhibit L hereto pursuant to which such assignee agrees to become a "Lender"
hereunder (if not already a Lender) having the Term Loans specified in such
instrument, and upon consent thereto by the Borrower and the Administrative
Agent to the extent required above, the assignee shall have, to the extent of
such assignment (unless otherwise consented to by the Borrower and the
Administrative Agent, the obligations, rights and benefits of a Lender hereunder
holding the Term Loan assigned to it (in addition to the Term Loan, if any,
theretofore held by such assignee) and the assigning Lender shall, to the extent
that rights and obligations hereunder have been assigned by it, relinquish its
rights and be released from its obligations under this Agreement and the other
Credit Documents.
10.07. No Waiver; Remedies Cumulative.
No failure or delay on the part of any Lender, the Administrative Agent
or the Collateral Agent in exercising any right, power or privilege hereunder or
under any other Credit Document and no course of dealing between any Credit
Party and any Lender, the Administrative Agent or the Collateral Agent 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
Lenders, the Administrative Agent or the Collateral Agent 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 any Lender, the Administrative Agent or
the Collateral Agent to any other or further action in any circumstances without
notice or demand.
10.08. Calculations; Computations.
(a) The financial statements to be furnished to the Lenders and the
Administrative Agent 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 Administrative Agent).
(b) All computations of interest and fees under Section 1.02(a) shall
be made on a monthly bond equivalent basis using a 360-day year comprised of
twelve 30-day months. Each Capitalized Interest Amount accreted under Section
1.03(b) shall be computed on a monthly bond equivalent basis, compounding
monthly, using a 360-day year comprised of twelve 30-day months.
10.09. Governing Law; Submission to Jurisdiction; Venue.
(a) This Agreement and the rights and obligations of the parties
hereunder shall be governed by, and construed in accordance with, the laws of
the State of New York. Any legal action or proceeding with respect to this
Agreement or any other Credit Document shall 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 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 10.03, such service to
become effective 15 days after such mailing. The Borrower and Holdings hereby
irrevocably appoint CT Corporation System having an address at 1633 Broadway,
New York, New York 10019 and such other Persons as may hereafter be selected by
the Borrower or Holdings 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 to the fullest extent
permitted under applicable law 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.
10.10. 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
Administrative Agent.
10.11. Effectiveness.
This Agreement shall become effective on the date (the "Effective
Date") on which Holdings, the Borrower, each Lender and the Administrative Agent
shall have signed a copy hereof (whether the same or different copies) and
delivered the same to the other parties.
10.12. 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.
10.13. 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 Holdings, the
Borrower and the Administrative Agent at the direction of the Required Lenders;
provided that no amendment, waiver or consent shall, unless in writing and
signed by all Lenders, (i) change the Maturity Date or reduce the principal of
any Term Loan, (ii) reduce the interest rate applicable to any Term Loan or the
amount of interest otherwise payable on any Term Loan (other than as a result of
waiving the applicability of any post-default increases in interest rates),
(iii) except in any case as expressly provided in a Credit Document, either
release any substantial portion of the Collateral, or release any of the
Guarantees supporting the Term Loans, (iv) terminate a Security Document except
in accordance with the express provisions thereof or of this Agreement, or (v)
modify the definition of the term "Required Lenders" or amend this Section
10.13. Any waiver or consent by the Administrative Agent or the Lenders under
this Agreement shall be effective only in the specific instance and for the
specific purpose for which given, and except as otherwise provided in such
waiver or consent, shall not extend to any subsequent or other noncompliance
hereunder or thereunder.
10.14. Survival.
All indemnities set forth herein including, without limitation, in
Section 10.01 shall survive the execution and delivery of this Agreement and the
making of the Term Loans and the repayment of the Obligations.
10.15. 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.
10.16. 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.
10.17. Integration.
This Agreement and any separate letter agreements with respect to fees,
constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or
written, relating to the subject matter hereof.
[signature pages follow]
<PAGE>
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:
QUANTUM PARTNERS LDC,
as Administrative Agent
By: __________________________
Name:
Title:
NORWEST BANK MINNESOTA, N.A.,
as Collateral Agent
By: __________________________
Name:
Title:
Lenders
QUANTUM PARTNERS LDC
By: __________________________
Name:
Title:
QUOTA FUND, N.V.
By: __________________________
Name:
Title:
<PAGE>
SCHEDULE 1
Lenders
-------
Name and Address Commitment Amount
- ---------------- -----------------
QUANTUM PARTNERS LDC $58,888,888.87
888 7th Avenue, 33rd Floor
New York, NY 10006
Tel.: (212) 262-6300
Fax: (212) 586-4537
QUOTA FUND, N.V. $16,111,111.13
888 7th Avenue, 33rd Floor
New York, NY 10006
Tel.: (212) 262-6300
Fax: (212) 586-4537
---------------
Total $75,000,000.00
CARSON, INC. ANNOUNCES SALE OF
CUTEX NAIL POLISH REMOVER BUSINESS
SAVANNAH, GA, December 10, 1998--Carson, Inc.(NYSE:CIC), a leading international
manufacturer and marketer of personal care products for people of color
announced today that it has sold the Cutex nail polish remover business to
The Cutex Company, a new entity formed by the investment firm The Shansby Group,
of San Francisco, CA.
"This transaction marks another important step in our Company's previously
announced strategic plan to focus on our leadership positions in our core ethnic
market domestically and internationally," said Gregory J. Andrews, Carson's
President and Chief Executive Officer. "Studies show Black consumer power is
growing faster than the national average throughout the U.S., and we believe the
opportunities abroad, as demonstrated by the growth experienced by our South
African subsidiary, are no less attractive. Our corporate mission is well
defined, and this sale further enhances our ability to concentrate our efforts."
Carson said that Cutex' nail polish and treatment line was not included in
the transaction. The purchase price is $30 million, a portion of which is being
used to reduce long-term debt.
Carson, Inc. is the leading global manufacturer and marketer of hair and
skin care products specifically formulated to address the unique characteristics
of people of African descent. Carson sells its products in the U.S. and in over
60 countries around the world under the leading brand names DARK & LOVELY,
GENTLE TREATMENT, MAGIC SHAVE, and ULTRASHEEN.
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.
CARSON, INC. REPORTS PRO FORMA CASH AND LONG TERM DEBT POSITIONS
SAVANNAH, GA, Dec. 11, 1998--Carson Inc. (NYSE:CIC), a leading international
manufacturer and marketer of personal care products for people of color, said
today that as a result of previously announced transactions this week involving
the borrowing of $83 million of Senior Term Loans and the sale of the Cutex nail
polish remover business, and the application of these proceeds, it had as of
December 9, 1998, on a pro forma unaudited basis, approximately $23 million of
cash (of which approximately $10 million was held by Carson Holdings Limited,
the Company's South African subsidiary), and outstanding long-term debt of $60
million of Secured Term Loans due 2003, $73 million of 10 3/8% Senior
Subordinated Notes due 2007 and $0.4 million of other debt issued by Carson
Holdings Limited.
Carson, Inc. is the leading global manufacturer and marketer of hair and
skin care products specifically formulated to address the unique characteristics
of people of African descent. Carson sells its products in the U.S. and in over
60 countries around the world under the leading brand names DARK & LOVELY,
GENTLE TREATMENT, MAGIC SHAVE, and ULTRASHEEN.
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.
