SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 12 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 25, 2000
Carson, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-12271 06-1428605
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(State or Other Juris- (Commission File (IRS Employer
diction of Incorporation) Number) Identification No.)
64 Ross Road, Savannah, Georgia 31405
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (912) 651-3400
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
(a) The Merger
On February 28, 2000, Carson, Inc., a Delaware corporation (the
"Company"), announced that it had entered into an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of February 25, 2000, by and among the
Company, Cosmair, Inc., a Delaware corporation wholly-owned by L'Oreal, S.A.
("Cosmair"), and Crayon Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Cosmair ("Purchaser"), pursuant to which Cosmair will
acquire the Company in a two-step transaction.
To implement the Merger Agreement, Purchaser will commence a cash
tender offer to acquire all the issued and outstanding shares of Class A Common
Stock, par value $.01 per share, of the Company (the "Class A Common Stock") at
a price of $5.20 per share net to the seller in cash (the "Offer"). Purchaser's
obligation to purchase shares of Class A Common Stock tendered pursuant to the
Offer will be subject to the satisfaction of customary conditions, including the
expiration or termination of the applicable waiting periods under
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the Competition Act of
the Republic of South Africa and the valid tender of a majority of the
outstanding shares of Company Common Stock (as defined below) on a fully-diluted
basis. If the conditions to the Offer are satisfied any and all shares tendered
in the Offer must be purchased by Cosmair. The Merger Agreement may be
terminated by either party if the Offer is not consummated on or prior to July
31, 2000.
If the Offer is successfully completed, Purchaser will be merged with
and into the Company (the "Merger"), with the Company becoming a wholly-owned
subsidiary of Cosmair. Consummation of the Merger is subject to the approval of
the Company's stockholders. Cosmair and Purchaser have agreed in the Merger
Agreement to vote all shares of Class A Common Stock purchased in the Offer in
favor of the Merger. The Majority Stockholders (as defined below) will also be
required to vote their shares of Class C Common Stock, par value $.01 per share,
of the Company ("Class C Common Stock" and, together with the Class A Common
Stock, "Company Common Stock"), in favor of the Merger in the event that they
are not required to convert their shares of Class C Common Stock into shares of
Class A Common Stock and tender their shares to Purchaser pursuant to the
Stockholders Agreement, as described below. In the Merger, all shares of Company
Common Stock not purchased in the Offer will be converted into the right to
receive the cash amount payable in the Offer, without interest.
To induce Cosmair and Purchaser to enter into the Merger Agreement,
certain stockholders of the Company (the "Majority Stockholders") entered into a
Stockholders Agreement, dated February 25, 2000, with the Company, Cosmair and
Purchaser (the "Stockholders Agreement"). Collectively, the Majority
Stockholders own shares of Company Common Stock representing approximately 48%
of the outstanding shares of Company Common Stock on a fully-diluted basis and
approximately 88% of the voting power of all outstanding shares of Company
Common Stock. In the Stockholder Agreement, the Majority Stockholders agreed,
among other things, (i) subject to at least 565,857 shares of Class A Common
Stock being tendered in the Offer, to convert their shares of Class C Common
Stock into shares of Class A Common Stock and to tender all of their shares of
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Company Common Stock in the Offer, and (ii) in the event that they are not
required to so convert their shares of Class C Common Stock, to vote their
shares of Class C Common Stock in favor of the Merger.
The Merger Agreement and the Stockholders Agreement are attached hereto
as Exhibits 2 and 10.1, respectively and are incorporated herein by reference.
Additional information with respect to the transaction is included in
the press release issued February 28, 2000, attached hereto as Exhibit 99.
(b) The Settlement
On February 25, 2000, Carson Products Company, a wholly-owned
subsidiary of the Company ("CPC"), entered into a settlement agreement (the
"Settlement Agreement") with mutual releases (the "Releases") with AM Cosmetics
Corp., a Delaware corporation ("AMC"), and AM Products Company, a Delaware
corporation ("AMP"), to resolve the following litigation proceedings: the
arbitration proceeding commenced by AMC against CPC before the American
Arbitration Association, entitled AM Cosmetics, Inc. v. Carson Products Company,
Case No. 13-181-01123-98 (the "Arbitration"); the lawsuit brought by CPC against
AMC in the Superior Court of Fulton County, State of Georgia, entitled Carson
Products Company, a Delaware Corporation v. AM Cosmetics, Inc., a Delaware
Corporation, Civil Action No. 1999CV08276 (the "Lawsuit"); and the Verified
Complaint for Declaratory Judgment filed by CPC against AMC and AMP in the
Superior Court of the State of New Jersey, Chancery Division, for Bergen County,
entitled Carson Products Company v. AM Cosmetics Corp. and AM Products Company
(the "New Jersey Action").
Pursuant to the Settlement Agreement, CPC agreed to make a settlement
payment totaling $2,000,000 to AMP. CPC paid AMP $1,000,000 on February 25, 2000
upon execution of the Settlement Agreement, and agreed to make the remaining
$1,000,000 settlement payment on or prior to the earlier of July 31, 2000 or the
closing of the Merger (the "Second Payment"). In addition, all shares of
preferred stock of AMC owned by CPC were surrendered to AMC and appropriate
filings have been made terminating with prejudice each of the Arbitration, the
Lawsuit and the New Jersey Action.
In connection with the settlement, six directors of the Company caused
GrandBank, a Maryland state chartered bank, to issue an irrevocable letter of
credit (the "Letter of Credit") in the amount of $690,000 for the benefit of AMP
to secure a portion of the Second Payment. AMP is entitled to make a draw down
under the Letter of Credit to the extent that the Second Payment has not been
made on or prior to March 31, 2000. The Company is required to reimburse such
directors pursuant to a letter agreement among the Company and such directors
(the "Letter of Credit Reimbursement Agreement"), for any amounts drawn down
under the Letter of Credit in circumstances in which the Merger is not
consummated, together with interest thereon at the rate of 12% per annum from
the date of the draw down to the date of reimbursement. The Company is required
to reimburse such directors for any amounts drawn down under the Letter of
Credit in excess of $531,492 in circumstances in which the Merger is consummated
(the first $531,492 of reimbursement in such circumstance being the
responsibility of the Company's largest stockholder, DNL Partners Limited
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Partnership), together with interest thereon at the rate of 12% per annum from
the date of the draw down to the date of reimbursement.
Cosmair conditioned its willingness to enter into the Merger Agreement
on CPC's settlement of all disputes with AMP and AMC arising out of any business
relationships between them. The Company believes that it was in the Company's
best interest to settle the controversies between the parties and the financial
terms of the settlement will not have a material adverse effect on the Company.
The Settlement Agreement, each of the Releases and the Letter of Credit
Reimbursement Agreement are attached hereto as Exhibits 10.2, 10.3, 10.4 and
10.5, respectively and are incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not Applicable.
(b) Not Applicable.
(c) Exhibit No. Description
(2) Agreement and Plan of Merger, dated as of February 25,
2000, by and among Cosmair, Inc., Crayon Acquisition
Corp. and Carson, Inc.
(10.1) Stockholders Agreement, dated as of February 25, 2000,
among Cosmair, Inc., Crayon Acquisition Corp., Carson,
Inc. and the stockholders of the Company signatory
thereto.
(10.2) Settlement Agreement, dated as of February 25, 2000,
among Carson Products Company, AM Cosmetics Corp. and
AM Products Company.
(10.3) Release, dated as of February 25, 2000, by Carson
Products Company in favor of AM Cosmetics Corp. and AM
Products Company.
(10.4) Release, dated as of February 25, 2000, by AM
Cosmetics Corp. and AM Products Company in favor of
Carson Products Company.
(10.5) Letter Agreement, dated as of February 25, 2000, among
Carson, Inc. and certain directors of the Company.
(99) Carson, Inc. Press Release, dated February 28, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
CARSON, INC.
Date: March 2, 2000 By: /S/Robert W. Pierce
Name: Robert W. Pierce
Title: Vice President and
Chief Financial Officer
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CARSON, INC.
EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K
Exhibit
(2) Agreement and Plan of Merger, dated as of February 25, 2000,
by and among Cosmair, Inc., Crayon Acquisition Corp. and
Carson, Inc.
(10.1) Stockholders Agreement, dated as of February 25, 2000, among
Cosmair, Inc., Crayon Acquisition Corp., Carson, Inc. and
the stockholders of the Company signatory thereto.
(10.2) Settlement Agreement, dated as of February 25, 2000, among
Carson Products Company, AM Cosmetics Corp. and AM Products
Company.
(10.3) Release, dated as of February 25, 2000, by Carson Products
Company in favor of AM Cosmetics Corp. and AM Products
Company.
(10.4) Release, dated as of February 25, 2000, by AM Cosmetics
Corp. and AM Products Company in favor of Carson Products
Company.
(10.5) Letter Agreement, dated as of February 25, 2000, among
Carson, Inc. and certain directors of the Company.
(99) Carson, Inc. Press Release, dated February 28, 2000.
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AGREEMENT AND PLAN OF MERGER
dated as of February 25, 2000
by and among
COSMAIR, INC.,
CRAYON ACQUISITION CORP.
and
CARSON, INC.
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TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which
it is attached but is inserted for convenience only.
Page
No.
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ARTICLE I THE OFFER...........................................................2
1.01 The Offer..........................................................2
1.02 Company Actions....................................................3
1.03 Company Board Representation; Section 14(f)........................4
ARTICLE II THE MERGER.........................................................6
2.01 The Merger.........................................................6
2.02 Closing............................................................6
2.03 Effective Time.....................................................6
2.04 Certificate of Incorporation and Bylaws of the Surviving Corporation
............................................................................6
2.05 Directors and Officers of the Surviving Corporation................6
2.06 Effects of the Merger..............................................7
2.07 Further Assurances.................................................7
ARTICLE III CONVERSION OF SHARES..............................................7
3.01 Conversion of Capital Stock........................................7
3.02 Exchange of Certificates...........................................8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................10
4.01 Organization and Qualification....................................10
4.02 Capital Stock.....................................................11
4.03 Authority Relative to this Agreement..............................12
4.04 Non-Contravention; Approvals and Consents.........................12
4.05 SEC Reports and Financial Statements..............................13
4.06 Absence of Certain Changes or Events..............................14
4.07 Absence of Undisclosed Liabilities................................14
4.08 Legal Proceedings.................................................14
4.09 Information Supplied..............................................14
4.10 Compliance with Laws and Orders...................................15
4.11 Compliance with Agreements; Certain Agreements....................15
4.12 Taxes.............................................................17
4.13 Employee Benefit Plans; ERISA.....................................19
4.14 Labor Matters.....................................................21
4.15 Environmental Matters.............................................21
4.16 Intellectual Property Rights......................................23
4.17 Assets............................................................23
4.18 Insurance.........................................................23
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No.
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4.19 Affiliate Transactions............................................24
4.20 Vote Required.....................................................24
4.21 Opinion of Financial Advisor......................................24
4.22 Section 203 of the DGCL Not Applicable............................24
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB...................25
5.01 Organization and Qualification....................................25
5.02 Authority Relative to this Agreement..............................25
5.03 Non-Contravention; Approvals and Consents.........................25
5.04 Information Supplied..............................................26
5.05 Ownership of Company Common Stock.................................27
5.06 Financing.........................................................27
ARTICLE VI COVENANTS OF THE COMPANY..........................................27
6.01 Covenants of the Company..........................................27
6.02 No Solicitations..................................................29
6.03 Third Party Standstill Agreements.................................30
6.04 Settlement Agreement and Related Matters..........................30
ARTICLE VII ADDITIONAL AGREEMENTS............................................30
7.01 Access to Information; Confidentiality............................30
7.02 Preparation of Proxy Statement....................................31
7.03 Approval of Stockholders..........................................31
7.04 Regulatory and Other Approvals....................................31
7.05 Employee Benefit Plans; Prior Service.............................32
7.06 Directors' and Officers' Indemnification and Insurance............33
7.07 Expenses..........................................................34
7.08 Brokers or Finders................................................34
7.09 Takeover Statutes.................................................34
7.10 Conveyance Taxes..................................................35
7.11 Conduct of Business of Sub........................................35
7.12 Notice and Cure...................................................35
7.13 Fulfillment of Conditions.........................................35
ARTICLE VIII CONDITIONS......................................................36
8.01 Conditions to Each Party's Obligation to Effect the Merger if the
Offer has been Consummated.................................................36
8.02 Condition to Parent's and Sub's Obligation to Effect the Merger if
the Merger Trigger is Invoked..............................................36
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.................................36
9.01 Termination.......................................................36
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No.
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9.02 Effect of Termination.............................................37
9.03 Amendment.........................................................38
9.04 Waiver............................................................38
ARTICLE X GENERAL PROVISIONS.................................................38
10.01 Non-Survival of Representations, Warranties, Covenants and
Agreements.................................................................38
10.02 Notices...........................................................38
10.03 Entire Agreement; Incorporation of Exhibits.......................39
10.04 Public Announcements..............................................40
10.05 No Third Party Beneficiary........................................40
10.06 No Assignment; Binding Effect.....................................40
10.07 Headings..........................................................40
10.08 Invalid Provisions................................................40
10.09 Governing Law; Consent to Jurisdiction............................41
10.10 Enforcement of Agreement..........................................41
10.11 Certain Definitions...............................................41
10.12 Counterparts......................................................42
Annex A CONDITIONS TO THE OFFER
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GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have the
meanings ascribed to them in the corresponding Sections of this Agreement listed
below:
"affiliate" -- Section 10.11(a)
"Agreement" -- Preamble
"Alternative Proposal" -- Section 6.02
"Antitrust Division" -- Section 7.04
"beneficially" -- Section 10.11(b)
"Board Percentage" -- Section 1.03(a)
"business day" -- Section 10.11(c)
"CERCLA" -- Section 4.15(c)
"Certificate of Merger" -- Section 2.03
"Certificates" -- Section 3.02(b)
"CHL" -- Section 4.01
"Class A Common Stock" -- Preamble
"Class B Common Stock" -- Section 4.02
"Class C Common Stock" -- Preamble
"Closing" -- Section 2.02
"Closing Date" -- Section 2.02
"Code" -- 3.02(e)
"Company" -- Preamble
"Company Common Stock" -- Preamble
"Company Disclosure Letter" -- Section 4.01
"Company Employee Benefit Plans" -- Section 4.13(b)(i)
"Company Financial Statements" -- Section 4.05
"Company Material Adverse Effect" -- Section 4.01
"Company Option Plans" -- Section 3.01(e)
"Company Permits" -- Section 4.10
"Company Preferred Stock" -- Section 4.02
"Company SEC Reports" -- Section 4.05
"Company Stockholders' Approval" -- Section 7.03
"Company Stockholders' Meeting" -- Section 7.03
"Confidentiality Agreement" -- Section 7.01
"Constituent Corporations" -- Section 2.01
"Contracts" -- Section 4.04(a)
"control," "controlling," "controlled
by" and "under common control with" -- Section 10.11(a)
"Control Date" -- Section 1.03(a)
"CPC" -- Section 4.11(c)
"DGCL" -- Section 1.01(a)
"Dissenting Share" -- Section 3.01(d)(i)
"DNL Partners" -- Section 6.04
"Effective Time" -- Section 2.03
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"Election Period" -- Section 1.01(d)
"Environmental Law" -- Section 4.15(h)(ii)
"ERISA" -- Section 4.13(b)(i)
"ERISA Affiliate" Section 4.13(e)(iii)
"Exchange Act" -- Section 1.01(a)
"FTC" -- Section 7.04
"Governmental or Regulatory Authority" -- Section 4.04(a)
"group" -- Section 10.11(f)
"Hazardous Material" -- Section 4.15(h)(iii)
"HSR Act" -- Section 4.04(b)
"Indemnified Liabilities" -- Section 7.06
"Indemnified Parties" -- Section 7.06
"Independent Directors" -- Section 1.03(c)
"Intellectual Property" -- Section 4.16
"Investment Assets" -- Section 4.21
"knowledge" -- Section 10.11(d)
"laws" -- Section 4.04(a)
"Liabilities" -- Section 4.21
"License" -- Section 4.15(h)(iv)
"Lien" -- Section 4.02(b)
"Merger" -- Preamble
"Merger Price" -- Section 3.01(c)
"Merger Trigger" -- Section 1.01(d)
"Minimum Condition" -- Annex A
"NPL" -- Section 4.15(c)
"Offer" -- Section 1.01(a)
"Offer Documents" -- Section 1.01(b)
"Offer to Purchase" -- Section 1.01(b)
"Option Amount" -- Section 3.01(e)
"Options" -- Section 4.02
"orders" -- Section 4.04(a)
"PaineWebber" -- Section 4.21
"Parent" -- Preamble
"Parent's Designees" -- Section 1.03(a)
"Payment Agent" -- Section 3.02(a)
"Payment Fund" -- Section 3.02(a)
"Per Share Amount" -- Section 1.01(a)
"Permitted Liens" -- Section 4.17(a)
"person" -- Section 10.11(f)
"Plan" -- Section 4.13(b)(ii)
"Proxy Statement" -- Section 4.09
"Reimbursement Agreement" -- Section 6.04
"Releases" -- Section 4.11(c)
"Representatives" -- Section 10.11(g)
"Schedule TO" -- Section 1.01(b)
"Schedule 14D-9" -- Section 1.02(b)
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"SEC" -- Section 1.01(a)
"Secretary of State" -- Section 2.03
"Securities Act" -- Section 4.05
"Settlement Agreement" -- Section 4.11(c)
"South African Competition Act" -- Section 4.04(b)
"Stockholders" -- Preamble
"Stockholders Agreement" -- Preamble
"Sub" -- Preamble
"Sub Common Stock" -- Section 3.01(a)
"Subsidiary" -- Section 10.11(i)
"Surviving Corporation" -- Section 2.01
"Surviving Corporation Common Stock" -- Section 3.01(a)
"Taxes" -- Section 4.12(k)
"Tax Return" -- Section 4.12(k)
"WARN" Section 4.14
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This AGREEMENT AND PLAN OF MERGER dated as of February 25,
2000 ("this Agreement") is made and entered into by and among Cosmair, Inc., a
Delaware corporation ("Parent"), Crayon Acquisition Corp., a Delaware
corporation wholly owned by Parent ("Sub"), and Carson, Inc., a Delaware
corporation (the "Company").
WHEREAS, the Boards of Directors of Sub and the Company have
each determined that it is advisable and in the best interests of their
respective stockholders to consummate, and have approved, the business
combination transaction provided for herein in which (i) Sub will make a cash
tender offer to acquire all of the issued and outstanding shares of Class A
Common Stock, par value $.01 per share, of the Company (the "Class A Common
Stock"), including Class A Common Stock issued upon conversion of Class C Common
Stock, par value $.01 per share, of the Company (the "Class C Common Stock" and,
together with the Class A Common Stock, the "Company Common Stock"), upon the
terms and subject to the conditions of this Agreement and (ii) subsequently Sub
will merge with and into the Company and the Company will become a wholly-owned
subsidiary of Parent (the "Merger");
WHEREAS, as an inducement and to satisfy a condition to Parent
and Sub entering into this Agreement and incurring the obligations set forth
herein, concurrently with the execution and delivery of this Agreement,
stockholders of the Company who together own 2,875,973 shares of Class A Common
Stock and 5,126,163 shares of Class C Common Stock (representing 100% of the
issued and outstanding shares of Class C Common Stock), such shares of Class A
Common Stock and Class C Common Stock collectively representing approximately
52.6% of the number of shares of Company Common Stock issued and outstanding and
approximately 88% of the total voting power of all issued and outstanding shares
of Company Common Stock (together, the "Stockholders") have entered into a
Stockholders Agreement (the "Stockholders Agreement") with Parent, Sub and the
Company pursuant to which the Stockholders have agreed, among other things, (i)
subject to at least 565,857 additional shares of Class A Common Stock being
tendered in the Offer, to convert their shares of Class C Common Stock into
shares of Class A Common Stock and to tender all shares of Class A Common Stock
owned by them in the Offer, and (ii) in the event that they are not required to
so convert their shares of Class C Common Stock and tender all their shares of
Class A Common Stock, to vote their shares of Class A Common Stock and Class C
Common Stock in favor of the Merger;
WHEREAS, the Board of Directors of the Company has approved
the execution and delivery of the Stockholders Agreement and the consummation of
the transactions contemplated thereby; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties and agreements in connection with the transactions
contemplated by this Agreement and also to prescribe various conditions to the
consummation of such transactions;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
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ARTICLE I
THE OFFER
1.01 The Offer. (a) Provided that this Agreement shall not
have been terminated in accordance with Section 9.01 and none of the events set
forth in Annex A hereto shall have occurred and be continuing, as promptly as
practicable, but in no event later than eight business days, after the date
hereof, Parent shall cause Sub to, and Sub shall, commence (within the meaning
of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (such Act
and the rules and regulations promulgated thereunder being referred to herein as
the "Exchange Act")) a tender offer (the "Offer") to purchase all of the issued
and outstanding shares of Class A Common Stock for $5.20 per share (such amount,
or any greater amount per share paid pursuant to the Offer, the "Per Share
Amount") net to the seller in cash. The obligation of Sub to consummate the
Offer and to accept for payment and to pay for any shares of Class A Common
Stock tendered pursuant to the Offer shall be subject only to the conditions set
forth in Annex A hereto. Sub expressly reserves the right to waive any such
condition, to increase the Per Share Amount and to make any other changes in the
terms and conditions of the Offer. Notwithstanding the foregoing, no change may
be made which (i) decreases the Per Share Amount, (ii) changes the form of
consideration to be paid in the Offer, (iii) reduces the number of shares of
Class A Common Stock sought to be purchased in the Offer, (iv) imposes
conditions to the Offer in addition to those set forth in Annex A hereto, (v)
extends the expiration date of the Offer (which shall initially be the minimum
period that the Offer must remain open under the applicable rules and
regulations of the Securities and Exchange Commission (the "SEC")) or (vi)
otherwise alters or amends any term of the Offer in any manner adverse to the
holders of shares of Class A Common Stock; provided, however, that (subject to
the right of the parties to terminate this Agreement in accordance with Section
9.01) the Offer may be extended (1) for any period to the extent required by law
or by any rule, regulation, interpretation or position of the SEC or the staff
thereof applicable to the Offer, (2) on one or more occasions (each such
extension period not to exceed 10 business days at one time) if at the then
scheduled expiration date of the Offer any of the conditions to Sub's
obligations to accept for payment and pay for Class A Common Stock set forth in
Annex A hereto shall not be satisfied or waived, (3) on one or more occasions
for an aggregate period of not more than 10 business days if the Minimum
Condition (as defined in Annex A hereto) has been satisfied but less than 90% of
the then outstanding shares of Class A Common Stock have been validly tendered
and not properly withdrawn, and (4) to provide for a subsequent offering period
in accordance with Rule 14d-11 under the Exchange Act. Parent and Sub agree
that, in the event Sub is unable to consummate the Offer on or prior to the
expiration date of the Offer due to the failure of any conditions set forth in
Annex A hereto to be satisfied, but subject to the right of the parties to
terminate this Agreement in accordance with Section 9.01 and to the right of
Parent to exercise the Merger Trigger, Parent shall cause Sub to, and Sub shall,
extend the Offer until the earlier of (i) July 31, 2000 or (ii) such time as
each such condition has been satisfied or waived. Assuming the prior
satisfaction or waiver of the conditions of the Offer and subject to the
foregoing right to extend the Offer, Sub shall pay for any and all shares of
Class A Common Stock validly tendered and not withdrawn pursuant to the Offer as
soon as practicable after termination thereof.
(b) As soon as practicable on the date of commencement of
the Offer, Sub shall file with the SEC a Tender Offer Statement on Schedule TO
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promulgated under the Exchange Act (together with all amendments and supplements
thereto, the "Schedule TO") with respect to the Offer, and take such steps as
are reasonably necessary to cause the Offer to Purchase to be disseminated to
the holders of shares of Company Common Stock as and to the extent required by
applicable federal securities laws. The Schedule TO shall contain an offer to
purchase (the "Offer to Purchase") and forms of the related letter of
transmittal and any related summary advertisement (the Schedule TO, the Offer to
Purchase and such other documents, together with all amendments and supplements
thereto, the "Offer Documents"). Parent, Sub and the Company shall correct
promptly any information provided by any of them for use in the Offer Documents
which shall have become false or misleading in any material respect, and Parent
and Sub shall take all steps necessary to cause the Schedule TO as so corrected
to be filed with the SEC and the other Offer Documents as so corrected to be
disseminated to holders of shares of Company Common Stock, in each case as and
to the extent required by applicable federal securities laws. The Company and
its counsel shall be given an opportunity to review and comment on the Offer
Documents prior to their being filed with the SEC, and Parent and Sub will
provide the Company and its counsel in writing with any comments that Parent or
Sub receives from the SEC or its staff with respect to the Offer Documents
promptly after receipt of any such comments.
(c) Parent shall provide or cause to be provided to Sub on a
timely basis the funds necessary to accept for payment, and pay for, any shares
of Class A Common Stock that Sub becomes obligated to accept for payment, and
pay for, pursuant to the Offer.
(d) If at the then scheduled expiration date of the Offer the
Minimum Condition has not been satisfied, Parent and Sub shall have the right to
terminate the Offer and, by written notice given within five business days
following termination (the "Election Period"), require that Parent, Sub and the
Company comply with the provisions of Sections 7.02 and 7.03 as soon as
practicable thereafter (the "Merger Trigger"). If Parent and Sub shall not have
given the notice referred to in the preceding sentence prior to the end of the
Election Period, then the Company shall have the right, by written notice given
within five business days following the end of the Election Period, to invoke
the Merger Trigger, in which case the Company, Parent and Sub shall comply with
the provisions of Sections 7.02 and 7.03 as soon as practicable thereafter.
1.02 Company Actions. (a) The Company hereby approves and
consents to the Offer and represents that the Board of Directors of the Company,
at a meeting duly called and held, has (A) determined that this Agreement and
the transactions contemplated hereby, including the Offer and the Merger, taken
together, are fair to and in the best interests of the holders of shares of
Company Common Stock, (B) approved and adopted this Agreement and the
Stockholders Agreement and the transactions contemplated hereby and thereby, (C)
recommended that the stockholders of the Company accept the Offer, tender their
shares of Class A Common Stock thereunder to Sub and, if required by applicable
law in order to consummate the Merger, approve and adopt this Agreement and the
transactions contemplated hereby. The Company hereby consents to the inclusion
in the Offer Documents of the recommendation of the Board described in the
immediately preceding sentence. The Company has been advised by each of its
directors and executive officers that, except as provided in the Stockholders
Agreement, they intend to convert their shares of Class C Common Stock into
shares of Class A Common Stock and to tender all shares of Company Common Stock
beneficially owned by them to Sub pursuant to the Offer.
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(b) On the date the Offer Documents are filed with the SEC,
the Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 promulgated under the Exchange Act (together with all amendments
and supplements thereto, the "Schedule 14D-9") containing the recommendation of
the Board of Directors of the Company described in Section 1.02(a), and shall
take such steps as are necessary to cause the Schedule 14D-9 to be disseminated
to the holders of shares of Company Common Stock as and to the extent required
by applicable federal securities laws. The Company, Parent and Sub shall correct
promptly any information provided by any of them for use in the Schedule 14D-9
which shall have become false or misleading in any material respect, and the
Company shall take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and disseminated to holders of shares of
Company Common Stock, in each case as and to the extent required by applicable
federal securities laws. Parent and its counsel shall be given an opportunity to
review and comment on the Schedule 14D-9 prior to its being filed with the SEC,
and the Company will provide Parent and its counsel in writing with any comments
that the Company receives from the SEC or its staff with respect to the Schedule
14D-9 promptly after receipt of any such comments.
(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish Sub promptly with mailing labels containing the names
and addresses of all record holders of shares of Company Common Stock and with
security position listings of shares of Company Common Stock held in stock
depositories, each as of a recent date, together with all other available
listings and computer files containing names, addresses and security position
listings of record holders and beneficial owners of shares of Company Common
Stock. The Company shall furnish Sub with such additional information,
including, without limitation, updated listings and files of stockholders,
mailing labels and security position listings and such other assistance as
Parent, Sub or their agents may reasonably request in communicating the Offer to
record and beneficial holders of shares of Company Common Stock. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Offer or the Merger, Parent and Sub shall hold in confidence the information
contained in such labels, listings and files, shall use such information only in
connection with the Offer and the Merger, and, if this Agreement shall be
terminated in accordance with Section 9.01, shall deliver to the Company all
copies of, and any extracts or summaries from, such information then in their
possession or control.
(d) In connection with the Offer, the Company will furnish
Parent with such information (which will be treated and held in confidence by
Parent) and assistance as Parent or its Representatives may reasonably request
in connection with the preparation of the Offer and communicating the Offer to
the record and beneficial holders of shares of Company Common Stock.
1.03 Company Board Representation; Section 14(f). (a) Subject
to compliance with the applicable provisions of the DGCL, the Company's
Certificate of Incorporation and other applicable law, promptly upon the payment
by Sub for shares of Class A Common Stock pursuant to the Offer, and from time
to time thereafter, (i) Parent shall be entitled to designate such number of
directors ("Parent's Designees"), rounded up to the next whole number as will
give Parent representation on the Board of Directors of the Company equal to the
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product of (x) the number of directors on the Board of Directors of the Company
(giving effect to any increase in the number of directors pursuant to this
Section 1.03) and (y) the percentage that the aggregate voting power of such
number of shares of Class A Common Stock so purchased bears to the aggregate
voting power of all shares of Company Common Stock then outstanding (such number
being, the "Board Percentage"), and (ii) the Company shall, upon request by
Parent, promptly satisfy the Board Percentage by (x) using reasonable efforts to
secure the resignations of such number of directors as is necessary to enable
Parent's Designees to be elected or appointed to the Board of Directors of the
Company, or failing that, (y) increasing the size of the Board of Directors of
the Company, and use best efforts to cause Parent's Designees promptly to be so
elected or appointed. The date on which Parent's Designees constitute at least a
majority of the Company's Board of Directors is herein referred to as the
"Control Date".
(b) The Company's obligations to appoint Parent's Designees
to the Board of Directors of the Company shall be subject to Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder, if applicable. The
Company shall promptly take all actions required pursuant to such Section and
Rule in order to fulfill its obligations under this Section, and shall include
in the Schedule 14D-9 such information with respect to the Company and its
officers and directors as is required under such Section and Rule to fulfill
such obligations. Parent or Sub shall supply to the Company and be solely
responsible for any information with respect to either of them and their
designees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-1, and the Company agrees to include such information in the Schedule
14D-9.
(c) Following the election of any Parent's Designees pursuant
to this Section and prior to the Effective Time, any amendment of this Agreement
or the Certificate of Incorporation or Bylaws of the Company, any termination of
this Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of Parent or Sub or waiver
of any of the Company's rights hereunder shall require the concurrence of a
majority of the directors of the Company then in office who neither are Parent's
Designees nor are employees of the Company or any of its Subsidiaries (the
"Independent Directors"). If the number of Independent Directors shall be
reduced below two for any reason whatsoever, the remaining Independent Director
shall designate a person to fill such vacancy who shall not be an officer or
employee of Parent, the Company or any of their respective affiliates, and such
person shall be deemed to be an Independent Director for purposes of this
Agreement or, if no Independent Directors then remain, the other directors shall
designate two persons to fill such vacancies who shall not be officers or
employees of Parent, the Company or any of their respective affiliates, and such
persons shall be deemed to be Independent Directors for purposes of this
Agreement. The Independent Directors shall have the authority to retain such
counsel and other advisors at the expense of the Company as are reasonably
appropriate to the exercise of their duties in connection with this Agreement,
subject to approval by the Company of the terms of such retention, which
approval shall not be unreasonably withheld. In addition, the Independent
Directors shall have the authority to institute any action, on behalf of the
Company, to enforce performance of this Agreement.
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ARTICLE II
THE MERGER
2.01 The Merger. Upon the terms and subject to the conditions
of this Agreement, at the Effective Time, Sub shall be merged with and into the
Company in accordance with the DGCL. At the Effective Time, the separate
existence of Sub shall cease and the Company shall continue as the surviving
corporation in the Merger (the "Surviving Corporation"). Sub and the Company are
sometimes referred to herein as the "Constituent Corporations". As a result of
the Merger, the outstanding shares of capital stock of the Constituent
Corporations shall be converted or cancelled in the manner provided in Article
III.
2.02 Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 9.01, the closing of the Merger (the "Closing") will take place at the
offices of Milbank, Tweed, Hadley & McCloy LLP, 1 Chase Manhattan Plaza, New
York, New York 10005 at 10:00 a.m., local time, on a date to be specified by
Parent or Sub, which shall be no later than the second business day following
consummation of the Offer and, if required by applicable law in order to
consummate the Merger, after the adoption of this Agreement by the requisite
vote of the stockholders of the Company, subject to the satisfaction or waiver
(where applicable) of the conditions set forth in Article VIII, unless another
date, time or place is agreed to in writing by the parties hereto (the "Closing
Date").
2.03 Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date, the parties shall file a
certificate of merger or other appropriate documents (in any such case, the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL and shall make all other filings or recordings required under the DGCL.
The Merger shall become effective at such time as the Certificate of Merger is
duly filed with the Secretary of State of the State of Delaware (the "Secretary
of State"), or at such other time as Sub and the Company shall agree should be
specified in the Certificate of Merger (the time the Merger becomes effective
being hereinafter referred to as the "Effective Time").
2.04 Certificate of Incorporation and Bylaws of the Surviving
Corporation. At the Effective Time, (i) the Certificate of Incorporation of the
Sub as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation, provided that
the name of Sub shall be changed to the name of the Company, and (ii) the Bylaws
of Sub as in effect immediately prior to the Effective Time shall be the Bylaws
of the Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation and such Bylaws.
2.05 Directors and Officers of the Surviving Corporation. The
directors of Sub and the officers of Sub immediately prior to the Effective Time
shall, from and after the Effective Time, be the directors and officers,
respectively, of the Surviving Corporation until their successors shall have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws.
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2.06 Effects of the Merger. Subject to the foregoing, the
effects of the Merger shall be as provided in the applicable provisions of the
DGCL.
2.07 Further Assurances. Each party hereto will, either prior
to or after the Effective Time, execute such further documents, instruments,
deeds, bills of sale, assignments and assurances and take such further actions
as may reasonably be requested by one or more of the others to consummate the
Merger, to vest the Surviving Corporation with full title to all assets,
properties, privileges, rights, approvals, immunities and franchises of either
of the Constituent Corporations or to effect the other purposes of this
Agreement.
ARTICLE III
CONVERSION OF SHARES
3.01 Conversion of Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder thereof:
(a) Capital Stock of Sub. Each share of the common stock, par
value $.01 per share, of Sub issued and outstanding immediately prior to the
Effective Time ("Sub Common Stock") shall be converted into and become one fully
paid and nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation ("Surviving Corporation Common Stock"). Each certificate
representing outstanding shares of Sub Common Stock shall at the Effective Time
represent an equal number of shares of Surviving Corporation Common Stock.
(b) Cancellation of Treasury Stock and Stock Owned by Parent
and Subsidiaries. All shares of Company Common Stock that are owned by the
Company or any wholly-owned Subsidiary of the Company as treasury stock and any
shares of Company Common Stock owned by Parent, Sub or any wholly-owned
Subsidiary of Parent shall be canceled and retired and shall cease to exist and
no stock of Parent or other consideration shall be delivered in exchange
therefor.
(c) Exchange Ratio for Company Common Stock. (i) Each share
of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares to be canceled in accordance with Section
3.01(b) and other than Dissenting Shares) shall be converted into the right to
receive the Per Share Amount in cash without any interest thereon (the "Merger
Price").
(ii) All shares of Company Common Stock converted in
accordance with paragraph (i) of this Section 3.01(c) shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares shall cease
to have any rights with respect thereto, except the right to receive the Merger
Price per share, upon the surrender of such certificate in accordance with
Section 3.02, without interest.
(d) Dissenting Shares. (i) Notwithstanding any provision of
this Agreement to the contrary, each outstanding share of Company Common
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Stock the holder of which has not voted in favor of the Merger or consented
thereto in writing, has perfected such holder's right to an appraisal of such
holder's shares in accordance with the applicable provisions of the DGCL and has
not effectively withdrawn or lost such right to appraisal (a "Dissenting Share")
shall not be converted into or represent a right to receive the Merger Price
pursuant to Section 3.01(c), but the holder thereof shall be entitled only to
such rights as are granted by the applicable provisions of the DGCL; provided,
however, that any Dissenting Share held by a person at the Effective Time who
shall, after the Effective Time, withdraw the demand for appraisal or lose the
right of appraisal, in either case pursuant to the DGCL, shall be deemed to be
converted into, as of the Effective Time, the right to receive the Merger Price
pursuant to Section 3.01(c).
(ii) The Company shall give Parent (x) prompt notice of
any written demands for appraisal, withdrawals of demands for appraisal and any
other instruments served pursuant to the applicable provisions of the DGCL
relating to the appraisal process received by the Company and (y) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the DGCL. The Company will not voluntarily make any payment
with respect to any demands for appraisal and will not, except with the prior
written consent of Parent, settle or offer to settle any such demands.
(e) Company Stock Option Plans. Each option to purchase a
share of Class A Common Stock outstanding under the Company's 1996 Long-Term
Incentive Plan and 1996 Non-Employee Directors Equity Incentive Program
(collectively, the "Company Option Plans"), whether or not then exercisable,
shall in full settlement thereof be changed into an amount in cash in respect of
each share of Class A Common Stock subject to such option (the "Option Amount")
equal to the Merger Price less the purchase price therefor pursuant to the
applicable Company Option Plan and the related stock option agreements executed
pursuant thereto, to the extent such difference is a positive number. Each
restricted share of Class A Common Stock outstanding under the Company Option
Plans which has not fully vested as of the Closing Date shall in full settlement
thereof be changed into an amount in cash in respect of each such share equal to
the Merger Price. On the Closing Date, the Company shall deposit in a bank
account not within the Company's control an aggregate amount of cash equal to
the Option Amount for each option then outstanding under the Company Option
Plans plus amounts payable in respect of restricted shares of Class A Common
Stock pursuant to the preceding sentence (subject, in each case, to any
applicable withholding tax), together with instructions that such cash be
promptly distributed following the Effective Time to the holders of such options
and restricted shares in accordance with this Section.
3.02 Exchange of Certificates.
(a) Payment Agent. At the Effective Time, Parent shall make
available directly, or to the Surviving Corporation, for deposit with a bank or
trust company designated before the Closing Date by Parent and reasonably
acceptable to the Company (the "Payment Agent") a cash amount equal to the
aggregate Merger Price to which holders of shares of Company Common Stock shall
be entitled upon consummation of the Merger, to be held for the benefit of and
distributed to such holders in accordance with this Section. The Payment Agent
shall agree to hold such funds (such funds, together with earnings thereon,
being referred to herein as the "Payment Fund") for delivery as contemplated by
this Section and upon such additional terms as may be agreed upon by the Payment
Agent, the Company and Parent. If for any reason (including losses) the Payment
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Fund is inadequate to pay the cash amounts to which holders of shares of Company
Common Stock shall be entitled, Parent shall in any event remain liable, and
shall make available to the Surviving Corporation additional funds, for the
payment thereof. The Payment Fund shall not be used for any purpose except as
expressly provided in this Agreement.
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Surviving Corporation shall cause the Payment
Agent to mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates") whose shares are converted pursuant to
Section 3.01(c) into the right to receive the Merger Price (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Payment Agent and shall be in such form and have such other
provisions as the Surviving Corporation may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Price. Upon surrender of a Certificate for cancellation to the
Payment Agent, together with such letter of transmittal duly executed and
completed in accordance with its terms and such other customary documents as may
be required, the holder of such Certificate shall be entitled to receive in
exchange therefor a check representing the Merger Price per share of Company
Common Stock represented thereby, which such holder has the right to receive
pursuant to the provisions of this Article III, and the Certificate so
surrendered shall forthwith be canceled. In no event shall the holder of any
Certificate be entitled to receive interest on any funds to be received in the
Merger, including any interest accrued in respect of the Payment Fund. In the
event of a transfer of ownership of Company Common Stock which is not registered
in the transfer records of the Company, the Merger Price may be issued to a
transferee if the Certificate representing such Company Common Stock is
presented to the Payment Agent accompanied by all documents required to evidence
and effect such transfer and by evidence that any applicable stock transfer
taxes have been paid. Until surrendered as contemplated by this Section 3.02(b),
each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger Price per
share of Company Common Stock represented thereby as contemplated by this
Article III.
(c) No Further Ownership Rights in Company Common Stock. All
cash paid upon the surrender for exchange of Certificates in accordance with the
terms hereof shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares of Company Common Stock represented thereby.
From and after the Effective Time, the stock transfer books of the Company shall
be closed and there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Section.
(d) Termination of Payment Fund. Any portion of the Payment
Fund which remains undistributed to the stockholders of the Company for six
months after the Effective Time shall be delivered to the Surviving Corporation,
upon demand, and any stockholders of the Company who have not theretofore
complied with this Article III shall thereafter look only to the Surviving
Corporation (subject to abandoned property, escheat and other similar laws) as
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general creditors for payment of their claim for the Merger Price per share.
Neither Parent nor the Surviving Corporation shall be liable to any holder of
shares of Company Common Stock for cash representing the Merger Price delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
(e) Withholding Rights. Parent shall be entitled to deduct
and withhold from the Merger Price otherwise payable pursuant to this Agreement
to any holder of shares of Company Common Stock such amounts as Parent (or any
affiliate thereof) or the Payment Agent is required to deduct and withhold
pursuant to the applicable rules under the Internal Revenue Code of 1986, as
amended (the "Code"), or any provision of state, local or foreign Tax law. To
the extent that amounts are so withheld by Parent, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the holder
of the shares of Company Common Stock in respect of which withholding was made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as
follows:
4.01 Organization and Qualification. Each of the Company and
its Subsidiaries is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has full
corporate power and authority to conduct its business as and to the extent now
conducted and to own, use and lease its assets and properties, except for such
failures to be so incorporated, existing and in good standing or to have such
power and authority which, individually or in the aggregate, are not having and
could not be reasonably expected to have a material adverse effect on the
business, financial condition or results of operations of the Company and its
Subsidiaries taken as a whole or of Carson Holdings Limited, a South African
corporation ("CHL"), and its Subsidiaries taken as a whole (either or both, a
"Company Material Adverse Effect"). Each of the Company and its Subsidiaries is
qualified, licensed or admitted to do business and is in good standing in each
jurisdiction in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, are not having and could not be reasonably expected to have a Company
Material Adverse Effect. Section 4.01 of the letter dated the date hereof and
delivered to Parent and Sub by the Company concurrently with the execution and
delivery of this Agreement (the "Company Disclosure Letter") sets forth (i) the
name and jurisdiction of incorporation of each Subsidiary of the Company, (ii)
its authorized capital stock, (iii) the number of issued and outstanding shares
of capital stock and (iv) the record owners of such shares. Except for interests
in the Subsidiaries of the Company and as disclosed in Section 4.01 of the
Company Disclosure Letter, the Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in, any corporation,
partnership, limited liability company, joint venture or other business
association or entity. The Company has previously made available to Parent
correct and complete copies of the certificate or articles of incorporation and
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bylaws (or other comparable charter documents) of the Company and its
Subsidiaries.
4.02 Capital Stock. (a) The authorized capital stock of the
Company consists solely of 150,000,000 shares of Class A Common Stock, 2,000,000
shares of Class B Common Stock, par value $.01 per share ("Class B Common
Stock"), 13,000,000 shares of Class C Common Stock, and 10,000,000 shares of
preferred stock, par value $.01 per share ("Company Preferred Stock"). As of
February 25, 2000, 10,083,485 and 5,126,163 shares of Class A Common Stock and
Class C Common Stock, respectively, were issued and outstanding, 13,245 and
28,969 shares of Class A Common Stock and Class C Common Stock, respectively,
were held in the treasury of the Company, 5,126,163 shares of Class A Common
Stock were reserved for issuance upon conversion of outstanding shares of Class
C Common Stock and 1,487,025 shares of Class A Common Stock were reserved for
issuance upon exercise of options outstanding under the Company Option Plans. As
of the date hereof, no shares of Class B Common Stock or Company Preferred Stock
are issued and outstanding. All of the issued and outstanding shares of Company
Common Stock are, and all shares reserved for issuance will be, upon issuance in
accordance with the terms specified in the instruments or agreements pursuant to
which they are issuable, duly authorized, validly issued, fully paid and
nonassessable. Except pursuant to this Agreement and except as set forth in
Section 4.02 of the Company Disclosure Letter, there are no outstanding
subscriptions, options, warrants, rights (including "phantom" stock rights or
"shareholder rights" or "poison pills"), preemptive rights or other contracts,
commitments, understandings or arrangements, including any right of conversion
or exchange under any outstanding security, instrument or agreement (together,
"Options"), obligating the Company or any of its Subsidiaries to issue or sell
any shares of capital stock of the Company or to grant, extend or enter into any
Option with respect thereto.
(b) Except as disclosed in Section 4.02 of the Company
Disclosure Letter, all of the outstanding shares of capital stock of each
Subsidiary of the Company are duly authorized, validly issued, fully paid and
nonassessable and are owned, beneficially and of record, by the Company or a
Subsidiary wholly-owned, directly or indirectly, by the Company, free and clear
of any liens, claims, mortgages, encumbrances, pledges, security interests,
equities and charges of any kind (each a "Lien"). Except as disclosed in Section
4.02 of the Company Disclosure Letter, there are no (i) outstanding Options
obligating the Company or any of its Subsidiaries to issue or sell any shares of
capital stock of any Subsidiary of the Company or to grant, extend or enter into
any such Option or (ii) voting trusts, proxies or other commitments,
understandings, restrictions or arrangements in favor of any person other than
the Company or a Subsidiary wholly-owned, directly or indirectly, by the Company
with respect to the voting of or the right to participate in dividends or other
earnings on any capital stock of any Subsidiary of the Company.
(c) Except as disclosed in Section 4.02 of the Company
Disclosure Letter, there are no outstanding contractual obligations of the
Company or any Subsidiary of the Company to repurchase, redeem or otherwise
acquire any shares of Company Common Stock or any capital stock of any
Subsidiary of the Company or to provide funds to, or make any investment (in the
form of a loan, capital contribution or otherwise) in, any Subsidiary of the
Company or any other person.
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4.03 Authority Relative to this Agreement. The Company has
full corporate power and authority to enter into this Agreement and, subject to
obtaining the Company Stockholders' Approval, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby have been approved by the
Board of Directors of the Company, the Board of Directors of the Company has
recommended adoption of this Agreement by the stockholders of the Company and
directed that this Agreement be submitted to the stockholders of the Company for
their consideration, and no other corporate proceedings on the part of the
Company or its stockholders are necessary to authorize the execution, delivery
and performance of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby, other than obtaining the
Company Stockholders' Approval if and to the extent required by applicable law.
This Agreement has been duly and validly executed and delivered by the Company
and, subject to the obtaining of the Company Stockholders' Approval, constitutes
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.04 Non-Contravention; Approvals and Consents. (a) Except as
disclosed in Section 4.04(a) of the Company Disclosure Letter, the execution and
delivery of this Agreement by the Company do not, and the performance by the
Company of its obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a violation or breach of,
constitute (with or without notice or lapse of time or both) a default under,
result in or give to any person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or properties of the
Company or any of its Subsidiaries under, any of the terms, conditions or
provisions of (i) the certificates or articles of incorporation or bylaws (or
other comparable charter documents) of the Company or any of its Subsidiaries,
or (ii) subject to the obtaining of the Company Stockholders' Approval and the
taking of the actions described in paragraph (b) of this Section, (x) any
statute, law, rule, regulation or ordinance (together, "laws"), or any judgment,
decree, order, writ, permit or license (together, "orders"), of any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, the European Union or other supranational
body, any foreign country or any domestic or foreign state, county, city or
other political subdivision (a "Governmental or Regulatory Authority")
applicable to the Company or any of its Subsidiaries or any of their respective
assets or properties or any Company Permits , or (y) any note, bond, mortgage,
security agreement, indenture, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind (together,
"Contracts") or any Company Employee Benefit Plan to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
or any of their respective assets or properties is bound, excluding from the
foregoing clauses (x) and (y) conflicts, violations, breaches, defaults,
terminations, modifications, accelerations and creations and impositions of
Liens which, individually or in the aggregate, could not be reasonably expected
to have a Company Material Adverse Effect or a material adverse effect on the
ability of the Company to consummate the transactions contemplated by this
Agreement.
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(b) Except (i) for the filing of the Schedule 14D-9 and any
Proxy Statement with the SEC pursuant to the Exchange Act, (ii) for the filing
of the Certificate of Merger and other appropriate merger documents required by
the DGCL with the Secretary of State and appropriate documents with the relevant
authorities of other states in which the Constituent Corporations are qualified
to do business, (iii) for the filing of a premerger notification report by the
Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), (iv) for the
merger notice filing required under the Competition Act No. 89 of 1998 of the
Republic of South Africa (the "South African Competition Act") and (v) as
disclosed in Section 4.04 of the Company Disclosure Letter, no consent, approval
or action of, filing with or notice to any Governmental or Regulatory Authority
or other public or private third party is necessary or required under any of the
terms, conditions or provisions of any law or order of any Governmental or
Regulatory Authority or any Contract to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective assets or properties is bound for the execution and
delivery of this Agreement by the Company, the performance by the Company of its
obligations hereunder or the consummation of the transactions contemplated
hereby, other than such consents, approvals, actions, filings and notices which
the failure to make or obtain, as the case may be, individually or in the
aggregate, could not be reasonably expected to have a Company Material Adverse
Effect or a material adverse effect on the ability of the Company to consummate
the transactions contemplated by this Agreement.
4.05 SEC Reports and Financial Statements. The Company
delivered to Parent prior to the execution of this Agreement a true and complete
copy of each form, report, schedule, registration statement, definitive proxy
statement and other document (together with all amendments thereof and
supplements thereto) filed by the Company or any of its Subsidiaries with the
SEC since December 31, 1995 (as such documents have since the time of their
filing been amended or supplemented, the "Company SEC Reports"), which are all
the documents (other than preliminary material) that the Company and its
Subsidiaries were required to file with the SEC since such date. As of their
respective dates, the Company SEC Reports (i) complied as to form in all
material respects with the requirements of the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act"), or the
Exchange Act, as the case may be, and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements (including, in each case, the notes, if any, thereto) included in the
Company SEC Reports (the "Company Financial Statements") complied as to form in
all material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated therein or in the notes thereto and except with respect to
unaudited statements as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited interim financial statements, to normal,
recurring year-end audit adjustments (which are not expected to be, individually
or in the aggregate, materially adverse to the Company and its Subsidiaries
taken as a whole)) the consolidated financial position of the Company and its
consolidated subsidiaries as at the respective dates thereof and the
consolidated results of their operations and cash flows for the respective
periods then ended. Except as set forth in Section 4.05 of the Company
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Disclosure Letter, each Subsidiary of the Company is treated as a consolidated
subsidiary of the Company in the Company Financial Statements for all periods
covered thereby.
4.06 Absence of Certain Changes or Events. Except as disclosed
in Section 4.06 of the Company Disclosure Letter or in the Company SEC Reports
filed prior to the date of this Agreement, (a) since September 30, 1999 there
has not been any change, event or development having, or that could be
reasonably expected to have, individually or in the aggregate, a Company
Material Adverse Effect, other than events, changes or effects that (i) are
caused by general economic conditions in any region in which the Company and its
Subsidiaries conduct business or conditions affecting the types of businesses
operated by the Company and its Subsidiaries, which conditions do not affect the
Company and its Subsidiaries in a disproportionate manner, or (ii) are related
to or result from the execution and delivery of this Agreement or the
Stockholders Agreement or from any action or inaction on the part of Parent or
any of its affiliates, and (b) between such date and the date hereof (i) the
Company and its Subsidiaries have conducted their respective businesses only in
the ordinary course consistent with past practice, and (ii) neither the Company
nor any of its Subsidiaries has taken any action which, if taken after the date
hereof, would constitute a breach of any provision of clause (ii) of Section
6.01(b).
4.07 Absence of Undisclosed Liabilities. Except for matters
reflected or reserved against in the balance sheet for the period ended
September 30, 1999 included in the Company Financial Statements or as disclosed
in Section 4.07 of the Company Disclosure Letter, neither the Company nor any of
its Subsidiaries had at such date, or has incurred since that date, any
liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature that would be required
by generally accepted accounting principles to be reflected on a consolidated
balance sheet of the Company and its consolidated subsidiaries (including the
notes thereto), except liabilities or obligations (i) which were incurred in the
ordinary course of business consistent with past practice or (ii) which have not
had, and could not be reasonably expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
4.08 Legal Proceedings. Except as disclosed in the Company
SEC Reports filed prior to the date of this Agreement or in Section 4.08 of the
Company Disclosure Letter, (i) there are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of the Company, threatened against,
relating to or affecting, nor to the knowledge of the Company are there any
Governmental or Regulatory Authority investigations or audits pending or
threatened against, relating to or affecting, the Company or any of its
Subsidiaries or any of their respective assets and properties which,
individually or in the aggregate, could be reasonably expected to have a Company
Material Adverse Effect, and (ii) neither the Company nor any of its
Subsidiaries is subject to any order of any Governmental or Regulatory Authority
which, individually or in the aggregate, is having or could be reasonably
expected to have a Company Material Adverse Effect.
4.09 Information Supplied. (a) The Schedule 14D-9, any proxy
statement or information statement, as the case may be, relating to the Company
Stockholders' Meeting, as amended or supplemented from time to time (as so
amended and supplemented, the "Proxy Statement"), and any other documents to be
filed by the Company with the SEC or any other Governmental or Regulatory
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Authority in connection with the Offer or the Merger and the other transactions
contemplated hereby will not, on the date of its filing or, with respect to the
Schedule 14D-9, at the date it is filed with the SEC and first published, sent
or given to stockholders, or, in the case of the Proxy Statement, at the date it
is mailed to stockholders of the Company and at the date of the Company
Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading, except that no representation is made by the Company
with respect to information supplied in writing by or on behalf of Parent or Sub
expressly for inclusion therein and information incorporated by reference
therein from documents filed by Parent or any of its Subsidiaries with the SEC.
The Schedule 14D-9, Proxy Statement and any such other documents filed by the
Company with the SEC under the Exchange Act will comply as to form in all
material respects with the requirements of the Exchange Act.
(b) Neither the information supplied or to be supplied in
writing by or on behalf of the Company for inclusion, nor the information
incorporated by reference from documents filed by the Company or any of its
Subsidiaries with the SEC, in the Offer Documents or any other documents to be
filed by Parent or Sub with the SEC or any other Governmental or Regulatory
Authority in connection with the Offer or the Merger and the other transactions
contemplated hereby will on the date of its filing or, with respect to the Offer
Documents, at the date they are filed with the SEC and first published, sent or
given to stockholders, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading.
4.10 Compliance with Laws and Orders. The Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental and Regulatory Authorities necessary for the
lawful conduct of their respective businesses (the "Company Permits"), except
for failures to hold such permits, licenses, variances, exemptions, orders and
approvals which, individually or in the aggregate, are not having and could not
be reasonably expected to have a Company Material Adverse Effect. The Company
and its Subsidiaries are in compliance with the terms of the Company Permits,
except failures so to comply which, individually or in the aggregate, are not
having and could not be reasonably expected to have a Company Material Adverse
Effect. Except as disclosed in the Company SEC Reports filed prior to the date
of this Agreement, the Company and its Subsidiaries are not in violation of or
default under any law or order of any Governmental or Regulatory Authority,
except for such violations or defaults which, individually or in the aggregate,
are not having and could not be reasonably expected to have a Company Material
Adverse Effect.
4.11 Compliance with Agreements; Certain Agreements. (a)
Except as disclosed in the Company SEC Reports filed prior to the date of this
Agreement or in Section 4.11(a) of the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries nor, to the knowledge of the Company, any
other party thereto is in breach or violation of, or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with notice or lapse of time or both, could be reasonably expected to
result in a default under, (i) the certificates or articles of incorporation or
bylaws (or other comparable charter documents) of the Company or any of its
Subsidiaries or (ii) any Contract to which the Company or any of its
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Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective assets or properties is bound, except in the case of
clause (ii) for breaches, violations and defaults which, individually or in the
aggregate, are not having and could not be reasonably expected to have a Company
Material Adverse Effect.
(b) Except as disclosed in Section 4.11(b) of the Company
Disclosure Letter or in the Company SEC Reports filed prior to the date of this
Agreement or as provided for in this Agreement, as of the date hereof, neither
the Company nor any of its Subsidiaries is a party to any oral or written:
(i) (A) Contract (excluding Company Employee Benefit Plans)
providing for a commitment of employment or consultation services for a
specified or unspecified term or otherwise relating to employment or
the termination of employment; and (B) representations, commitments,
promises, communications or courses of conduct (excluding Company
Employee Benefit Plans and any such Contracts referred to in clause
(A)) involving an obligation of the Company or any Subsidiary of the
Company to make payments in any year, other than with respect to salary
or incentive compensation payments in the ordinary course of business,
to any employee exceeding $100,000 individually or $500,000 in the
aggregate;
(ii) Contracts with any person containing any provision or
covenant prohibiting or limiting the ability of the Company or any
Subsidiary of the Company to engage in any business activity, change
its operations or compete with any person or prohibiting or limiting
the ability of any person to compete with the Company or any Subsidiary
of the Company;
(iii) partnership, joint venture, shareholders' or other
similar Contracts with any person;
(iv) Contracts relating to indebtedness of the Company or any
Subsidiary of the Company in excess of $250,000 or to any capital stock
issued or issuable by the Company or any Subsidiary of the Company;
(v) Contracts relating to (A) the future disposition or
acquisition of any assets or properties, other than dispositions or
acquisitions in the ordinary course of business consistent with past
practice, and (B) any merger or other business combination;
(vi) agreement or plan, including any stock option, stock
appreciation right, restricted stock or stock purchase plan, any of the
benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of
which will be calculated on the basis of any of, or which will
terminate or require the payment of any penalties or other amounts upon
the occurrence of, the transactions contemplated by this Agreement;
(vii) collective bargaining or similar labor Contracts;
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(viii) other Contracts involving commitments in excess of
$250,000 or having a term of twelve (12) months or more and not
terminable on less than three months' notice without costs or other
liability to the Company or its Subsidiaries, except for employment and
insurance Contracts; and
(ix) agreements, transactions or payments of any kind between
the Company or its Subsidiaries, on the one hand, and any of the
Stockholders or their Subsidiaries or affiliates, on the other hand.
(c) The Settlement Agreement, dated as of February 25, 2000
(the "Settlement Agreement"), by and between AM Products Company, formerly known
as AM Cosmetics, Inc., a Delaware corporation, AM Cosmetics Corp., formerly
known as Pam Acquisition Corp., a Delaware corporation, and Carson Products
Company, a Delaware corporation wholly owned by the Company ("CPC"), and the
related mutual releases entered into in connection therewith and the releases
referred to in Section 7.06 of the Company Disclosure Letter (collectively, the
"Releases"), are in full force and effect, and there does not exist thereunder
any breach, violation, default or event or condition that, after notice or lapse
of time or both, would constitute a breach, violation or default thereunder by
any party thereto.
4.12 Taxes. (a) Each of the Company and its Subsidiaries has
filed all income, franchise and other material Tax Returns required to be filed
by it, or requests for extensions to file such Tax Returns have been timely
filed or granted and have not expired, and all such Tax Returns are complete and
accurate in all material respects. The Company and each of its Subsidiaries has
paid (or the Company has paid on its behalf) all income, franchise and other
material Taxes due with respect to such Tax Returns. The most recent financial
statements contained in the Company SEC Reports reflect an adequate reserve in
accordance with generally accepted accounting principles for all income,
franchise and other material Taxes payable by the Company and its Subsidiaries
for all taxable periods and portions thereof accrued through the date of such
financial statements, and no deficiencies for any income, franchise and other
material Taxes have been proposed, asserted or assessed by any taxing authority
against the Company or any of its Subsidiaries that have not been fully paid or
are not adequately reserved for in the appropriate financial statements of the
Company and its Subsidiaries.
(b) Except as set forth in Section 4.12(b) of the Company
Disclosure Letter, (i) there are no audits or other administrative proceedings
or court proceedings presently pending with respect to any Taxes or Tax Returns
of the Company or its Subsidiaries and neither the Company nor any of its
Subsidiaries has received notice of any pending or threatened audit or
proceeding and no power of attorney with respect to any Taxes has been executed
or filed with any taxing authority which power of attorney is currently in
force, (ii) there are no Tax Liens upon the assets of the Company or any of its
Subsidiaries, excepts liens for Taxes not yet due; (iii) the Company has not
received any written ruling of a taxing authority relating to Taxes; (iv) the
Company has made available to Parent and Sub complete and accurate copies of all
Tax Returns and associated work papers filed by or on behalf of the Company and
its Subsidiaries for all taxable years ending on or prior to the date hereof;
(v) the Company and its Subsidiaries have not filed the consent referred to in
Code section 341(f) or agreed to have Code Section 341(f)(2) apply to any
disposition of a subsection (f) asset (as that term is defined in Code Section
341(f)) owned by the Company or any of its Subsidiaries; and (vi) the Company
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and its Subsidiaries are not parties to any agreement, contract, or arrangement
that would result, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Code Section 280G or any amount that
would be non-deductible under Code Section 162(m).
(c) Neither the Company nor any of its Subsidiaries nor any
affiliated, consolidated, combined or unitary group of which the Company or any
of its Subsidiaries is or was a member, has waived any statute of limitations or
agreed to any extension of time for the filing of any Tax Return, or the
assessment or collection of Taxes, which statute of limitations has not since
expired or Taxes or Tax Return has not since been timely paid or filed.
(d) Neither the Company nor any of its Subsidiaries is a
party to or is bound by any Tax sharing agreement, Tax indemnity obligation or
similar agreement, arrangement or practice with respect to Taxes pursuant to
which it will have any obligation to make any payment after the Closing Date.
Neither the Company nor any of its Subsidiaries has executed or entered into a
closing agreement or any other written agreement with any taxing authority.
(e) The Company and its Subsidiaries have withheld and paid
all material Taxes required to be withheld and paid in connection with any
amounts paid or owing to any employee, creditor, independent contractor or other
third party.
(f) Neither the Company nor any of its Subsidiaries has
agreed to or is required to make any adjustment pursuant to Code Section 481(a)
or similar provision of state, local or foreign law.
(g) No property owned by the Company or any of its
Subsidiaries is: (i) property required to be treated as owned by another person
pursuant to Section 168(f) of the Internal Revenue Code of 1954, as amended and
in effect immediately prior to the enactment of the Tax Reform Act of 1986; (ii)
"tax exempt use property" within the meaning of Code Section 168(h)(1); (iii)
"tax exempt bond financed property" within the meaning of Code Section 168(g),
or (iv) "limited use property" within the meaning of Rev. Proc. 76-30.
(h) No claim has been made by a taxing authority in a
jurisdiction where the Company or any of its Subsidiaries does not file Tax
Returns to the effect that the Company or any of its Subsidiaries is or may be
subject to Taxation by that jurisdiction.
(i) Neither the Company nor any of its Subsidiaries has
constituted either a "distribution corporation" or a "controlled corporation"
(within the meaning of Code Section 355(a)(1)(A)) in a distribution of stock
qualifying for tax-free treatment under Code Section 355(i) in the two years
prior to the date of this Agreement or (ii) in a distribution which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Code Section 355(e)) in conjunction with the Merger.
(j) Except as set forth in Section 4.12(j) of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries has even been
a member of an affiliated group of corporations within the meaning of Code
Section 1504, other than the affiliated group of which the Company is the common
parent.
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(k) As used in this Agreement, (i) "Taxes" shall include all
federal, state, local and foreign taxes, assessments, duties, levies or similar
charges of any kind including, without limitation, income, franchise, property,
sales, use, excise and other taxes, including obligations for withholding taxes
from payments due or made to any other person and any interest, penalties or
additions to tax; and (ii) "Tax Return" shall mean any report, return, document,
declaration, claim for refund or any other information return or statement
relating to Taxes or any amendment thereto, and including any schedule or
attachment thereto.
4.13 Employee Benefit Plans; ERISA. (a)Section 4.13 (a) of
the Company Disclosure Letter contains a true and complete list of each material
Company Employee Benefit Plan. Copies or descriptions of each Company Employee
Benefit Plan (and, where applicable, the most recent summary plan description,
determination letter, annual report (Form 5500) and trust agreement relating to
such Plans), including all amendments, schedules and exhibits to such documents,
have been made available to Parent for review prior to the date hereof.
(b) Except as described in the Company SEC Reports filed
prior to the date of this Agreement or as could not reasonably be expected to
have a Company Material Adverse Effect or as set forth in Section 4.13(b) of the
Company Disclosure Letter, (i) all Company Employee Benefit Plans are and have
been maintained in compliance with all applicable requirements of law, including
ERISA and the Code, (ii) neither the Company nor any of its Subsidiaries has any
liabilities or obligations with respect to any Company Employee Benefit Plans,
whether accrued, contingent or otherwise, and (iii) neither the Company nor any
of its Subsidiaries has any reasonably foreseeable present risk of any liability
to any Governmental or Regulatory Authority or any other person due to any
"reportable event" or "prohibited transaction" (as such terms are defined in
ERISA and the Code) or any termination which has occurred with respect to any
Company Employee Benefit Plan. Except as set forth in Section 4.13(b) of the
Company Disclosure Letter, the execution of, and performance of the transactions
contemplated in, this Agreement will not constitute an event under any Company
Employee Benefit Plan that will result in any payment (whether of severance pay
or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any employee
or give rise to the payment of any amount that would not be deductible by
Parent, Sub, the Company or any of its ERISA Affiliates by reason of Section
280G or Section 162(m) of the Code. The only severance agreements or severance
policies applicable to the Company or any of its Subsidiaries are the agreements
and policies specifically referred to in Section 4.13(b) of the Company
Disclosure Letter. Except as set forth in Section 4.13(b) of the Company
Disclosure Letter or as could not reasonably be expected to have a Company
Material Adverse Effect, each Company Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code is so qualified, has received a
favorable determination letter from the IRS and nothing has changed that could
adversely affect such termination.
(c) None of the Company Employee Benefit Plans is (i) a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA or (ii) subject
to Title IV of ERISA or Section 412 of the Code.
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(d) All contributions (including all employer contributions
and employee salary reduction contributions) required to have been made under
any of the Company Employee Benefit Plans or by law to any funds or trusts
established thereunder or in connection therewith have been made by the due date
thereof (including any valid extension), and all contributions for any period
ending on or before the Effective Time which are not yet due will have been paid
or accrued in the books and records of the Company on or prior to the Effective
Time, except for such failures to make or accrue contributions which,
individually or in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect. Except as set forth in Section 4.13(d) of the
Company Disclosure Letter, none of the Company Employee Benefit Plans provides
for post-employment life or health insurance, benefits or coverage for any
participant or any beneficiary of a participant, except as may be required under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. No stock
or other security issued by the Company or any ERISA Affiliate forms or has
formed a material part of the assets of any Company Employee Benefit Plan. There
are no pending actions, claims or lawsuits which have been asserted or
instituted against any Company Employee Benefit Plan, the assets of any of the
trusts under such plans or the plan sponsor or the plan administrator, or
against any fiduciary of such plans or arrangements with respect to the
operation of such plans (other than routine benefit claims), which, individually
or in the aggregate, could reasonably be expected to have a Company Material
Adverse Effect, nor to the knowledge of the Company are there any facts existing
which could reasonably be expected to form the basis for any such claim or
lawsuit. In addition to the foregoing, all required reports and descriptions
(including Form 5500 Annual Reports and Summary Annual Report) have been filed
or distributed appropriately with respect to each Company Employee Benefit Plan,
except as set forth in Section 4.13(d) of the Company Disclosure Letter or for
such failures which, individually or in the aggregate, could not reasonably be
expected to have a Company Material Adverse Effect.
(e) As used herein:
(i) "Company Employee Benefit Plan" means any Plan entered
into, established, maintained, sponsored, contributed to or required to
be contributed to by the Company or any of its Subsidiaries for the
benefit of the current or former employees or directors of the Company
or any of its Subsidiaries and existing on the date of this Agreement
and, in the case of a Plan which is subject to Part 3 of Title I of the
Employee Retirement Income Security Act of 1974, as amended, and the
rules and regulations thereunder ("ERISA"), Section 412 of the Code or
Title IV of ERISA, at any time during the six-year period preceding the
date of this Agreement;
(ii) "Plan" means any employment, bonus, incentive
compensation, deferred compensation, pension, profit sharing,
retirement, stock purchase, stock option, stock ownership, stock
appreciation rights, phantom stock, payroll practice, consulting,
change in control, equity-based compensation, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life,
health, medical, accident, disability, workmen's compensation or other
insurance, severance, separation, termination, change of control or
other benefit plan, agreement, practice, policy, program or arrangement
of any kind, whether written or oral, including but not limited to any
"employee benefit plan" within the meaning of Section 3(3) of ERISA;
and
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(iii) "ERISA Affiliate" means any trade or business (whether
or not incorporated) that together with the Company is treated as a
single employer under Section 414(b) or (c) of the Code.
4.14 Labor Matters. (a) Except as disclosed in the Company
SEC Reports filed prior to the date of this Agreement or in Section 4.14 of the
Company Disclosure Letter, there are no controversies pending or, to the
knowledge of the Company, threatened between the Company or any of its
Subsidiaries and any representatives of its employees, except as could not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect and, to the knowledge of the Company, there are no
organizational efforts presently being made involving any of the now unorganized
employees of the Company or any of its Subsidiaries. Since December 31, 1998,
there has been no work stoppage, strike or other concerted action by employees
of the Company or any of its Subsidiaries except as did not, individually or in
the aggregate, have a Company Material Adverse Effect. During that period, the
Company and its Subsidiaries have complied with all applicable laws relating to
the employment of labor, including without limitation those relating to wages,
hours and collective bargaining, except for such failures to be in compliance as
could not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. Except as set forth in Section 4.14 of the
Company Disclosure Letter, there have been and currently are no unfair labor
practice complaints pending against the Company or any of its Subsidiaries
before the National Labor Relations Board or any similar state, local or foreign
agency.
(b) A true and complete copy of each employment, labor and
collective bargaining agreement, together with any side letters, with or
affecting the employees of the Company or its Subsidiaries have been made
available to Parent for review prior to the date hereof. There are no
complaints, charges or claims against the Company or its Subsidiaries pending
or, to the knowledge of the Company, threatened based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment or failure to employ by the Company and its Subsidiaries of any
individual which, individually or in the aggregate, could reasonably be expected
to have a Company Material Adverse Effect. The Company and its Subsidiaries are
in compliance with all laws, regulations and orders relating to the employment
of labor, including all such laws, regulations and orders relating to wages,
hours, the Worker Adjustment and Retraining Notification Act and any similar
state or local "mass layoff" or "plant closing" law ("WARN"), collective
bargaining, discrimination, civil rights, safety and health, workers'
compensation and the collection and payment of withholding and/or social
security taxes, except for such failures to be in compliance which, individually
or in the aggregate, could not reasonably be expected to have a Company Material
Adverse Effect. There has been no "mass layoff" or "plant closing" as defined by
WARN with respect to the Company and its Subsidiaries within the six (6) months
prior to the date hereof.
4.15 Environmental Matters. (a) Except as set forth in Section
4.15 of the Company Disclosure Letter, the operations of the Company and its
Subsidiaries comply and have complied with Environmental Laws and each of the
Company and its Subsidiaries has obtained all Licenses which are required under
applicable Environmental Laws in connection with the conduct of the business or
operations of the Company or its Subsidiaries, except for such failures to be in
compliance or to obtain Licenses which, individually or in the aggregate, could
not reasonably be expected to have a Company Material Adverse Effect. Except as
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set forth in Section 4.15 of the Company Disclosure Letter, each of such
Licenses is in full force and effect and each of the Company and its
Subsidiaries is in compliance in all respects with the terms and conditions of
all such Licenses and with any applicable Environmental Law, except for such
failures which, individually or in the aggregate, could not reasonably be
expected to have a Company Material Adverse Effect.
(b) To the knowledge of the Company, no site or facility now
or previously owned by the Company or any of its Subsidiaries is listed or
proposed for listing on the National Priorities List ("NPL") under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, and the rules and regulations promulgated thereunder ("CERCLA") or on
any similar list of a Governmental or Regulatory Authority of sites requiring
investigation or clean-up.
(c) No Liens have arisen under or pursuant to any
Environmental Law on any site or facility owned, operated or leased by the
Company or any of its Subsidiaries, other than any such Liens on real property
not individually or in the aggregate material to the Company and its
Subsidiaries taken as a whole, and no Governmental or Regulatory Authority
action has been taken or, to the knowledge of the Company, is in process that
could subject any such site or facility to such Liens, and neither the Company
nor any of its Subsidiaries would be required to place any notice or restriction
relating to the presence of Hazardous Materials at any site or facility owned by
it in any deed to the real property on which such site or facility is located.
(d) To the knowledge of the Company, there have been no
environmental investigations, studies, audits, tests, reviews or other analyses
conducted by, or that are in the possession of, the Company or any of its
Subsidiaries in relation to any site or facility now or previously owned,
operated or leased by the Company or any of its Subsidiaries which have not been
made available to Parent prior to the execution of this Agreement.
(e) As used herein:
(i) "Environmental Law" means any law or order of any
Governmental or Regulatory Authority relating to the regulation or
protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or
wastes into the environment (including, without limitation, ambient
air, soil, surface water, ground water, wetlands, land or subsurface
strata), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes;
(ii) "Hazardous Material" means (A) any petroleum or petroleum
products, flammable explosives, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation
and transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls (PCBs); (B) any
chemicals or other materials or substances which are now or hereafter
become defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import under any Environmental
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Law; and (C) any other chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated
by any Governmental or Regulatory Authority under any Environmental
Law; and
(iii) "Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and
similar consents granted or issued by any Governmental or Regulatory
Authority.
4.16 Intellectual Property Rights. The Company and its
Subsidiaries have all right, title and interest in, or a valid and binding
license to use, all Intellectual Property individually or in the aggregate
material to the conduct of the businesses of the Company and its Subsidiaries
taken as a whole. Section 4.16 of the Company Disclosure Letter sets forth a
list of each patent and trademark owned or used in connection with the
businesses of each of the Company and its Subsidiaries, all registrations
thereof and pending applications thereof, and each license or other Contract
relating thereto. Except as set forth in Section 4.16 of the Company Disclosure
Letter, all of the Intellectual Property listed thereon and all other material
items of Intellectual Property are owned by the Company or its Subsidiaries free
and clear of any and all Liens. Neither the Company nor any Subsidiary of the
Company is in default (or with the giving of notice or lapse of time or both,
would be in default) under any license to use such Intellectual Property, no
third party licensee from the Company or any of its Subsidiaries of any such
Intellectual Property is in default under its license, there has been no failure
to maintain or enforce such Intellectual Property, such Intellectual Property is
not being infringed by any third party, and neither the Company nor any
Subsidiary of the Company is infringing any Intellectual Property of any third
party, except for such defaults, failures and infringements which, individually
or in the aggregate, are not having and could not be reasonably expected to have
a Company Material Adverse Effect. For purposes of this Agreement, "Intellectual
Property" means patents and patent rights, trademarks and trademark rights,
trade names and trade name rights, service marks and service mark rights,
service names and service name rights, brand marks and brand mark rights, brand
names and brand name rights, computer programs, data bases, industrial designs,
product formulae and product production know-how, copyrights and copyright
rights and other proprietary intellectual property rights and all pending
applications for and registrations of any of the foregoing.
4.17 Assets. The assets, properties, rights and Contracts,
including (as applicable) title or leaseholds thereto, of the Company and its
Subsidiaries, taken as a whole, are sufficient to permit the Company and its
Subsidiaries to conduct their business as currently being conducted with only
such exceptions as are not reasonably likely to have a Company Material Adverse
Effect. All material real property owned by the Company and its Subsidiaries is
owned free and clear of all Liens, except (i) those reflected or reserved
against in the latest balance sheet or notes thereto included in the Company
Financial Statements, (ii) Taxes and general and special assessments not in
default and payable without penalty or interest, (iii) Liens disclosed in
Section 4.17 of the Company Disclosure Letter and (iv) Liens that do not
materially adversely interfere with any present use of such property.
4.18 Insurance. The assets, properties, businesses and
operations of the Company and its Subsidiaries, taken as a whole, are insured by
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insurers, reasonably believed by the Company to be of recognized financial
responsibility and solvency, against such losses and risks and in such amounts
as are customary in the businesses in which they are engaged.
4.19 Affiliate Transactions. Except as disclosed in Section
4.19 of the Company Disclosure Letter or as described in the Company SEC Reports
filed prior to the date of this Agreement, (i) there are no intercompany
indebtedness, obligations or other liabilities (whether absolute, accrued,
contingent, fixed or otherwise, or whether due or to become due) ("Liabilities")
between the Company or any of its Subsidiaries, on the one hand, and any holder
of Class C Common Stock, officer, director or affiliate (other than any
Subsidiary of the Company) of the Company, on the other, (ii) no such holder of
Class C Common Stock, officer, director or affiliate provides or causes to be
provided any assets, services or facilities to the Company or any Subsidiary of
the Company, (iii) neither the Company nor its Subsidiaries provides or causes
to be provided any assets, services or facilities to any such holder of Class C
Common Stock, officer, director or affiliate and (iv) neither the Company nor
any Subsidiary of the Company beneficially owns, directly or indirectly, any
Investment Assets issued by any such holder of Class C Common Stock, officer,
director or affiliate. For the purposes of this Section 4.19, "Investment
Assets" means all debentures, notes and other evidences of indebtedness, stocks,
securities (including rights to purchase and securities convertible into or
exchangeable for other securities), interests in joint ventures and general and
limited partnerships, mortgage loans and other investment or portfolio assets
owned of record or beneficially by the Company or any of its Subsidiaries and
issued by any person other than the Company or any of its Subsidiaries (other
than trade receivables generated in the ordinary course of business of the
Company and its Subsidiaries).
4.20 Vote Required. Assuming the accuracy of the
representation and warranty contained in Section 5.05, the affirmative vote of
the holders of record of shares of Company Common Stock representing a majority
of the total number of votes entitled to be cast by the holders of all
outstanding shares of Company Common Stock with respect to the adoption of this
Agreement is the only vote of the holders of any class or series of the capital
stock of the Company required to adopt this Agreement and approve the Merger and
the other transactions contemplated hereby.
4.21 Opinion of Financial Advisor. The Company has received
the opinion of PaineWebber Incorporated ("PaineWebber"), dated the date hereof,
to the effect that, as of the date hereof, the consideration to be received in
the Offer and the Merger by the stockholders of the Company is fair from a
financial point of view to the stockholders of the Company, and a true and
complete copy of such opinion has been delivered to Parent prior to the
execution of this Agreement.
4.22 Section 203 of the DGCL Not Applicable. The Company has
taken all necessary actions so that the provisions of Section 203 of the DGCL
will not, before the termination of this Agreement, apply to this Agreement, the
Offer, the Merger, the Stockholders Agreement or the other transactions
contemplated hereby or thereby.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as
follows:
5.01 Organization and Qualification. Each of Parent and Sub
is a corporation duly incorporated, validly existing and in good standing under
the laws of its respective jurisdiction of incorporation and has full corporate
power and authority to conduct its business as and to the extent now conducted
and to own, use and lease its assets and properties, except for such failures to
be so incorporated, existing and in good standing or to have such power and
authority which, individually or in the aggregate, are not having and could not
be reasonably expected to have a material adverse effect on Parent and its
Subsidiaries taken as a whole. Sub was formed solely for the purpose of engaging
in the transactions contemplated by this Agreement, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby. Parent has previously delivered to the Company correct and complete
copies of the certificate of incorporation and bylaws (or other comparable
charter or organizational documents) of Parent and Sub.
5.02 Authority Relative to this Agreement. Each of Parent and
Sub has full corporate power and authority to enter into this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by each of Parent and Sub and the consummation by each of Parent and Sub of the
transactions contemplated hereby have been approved by its Board of Directors
and by the stockholder of Sub, and no other corporate proceedings on the part of
either of Parent or Sub or their stockholders are necessary to authorize the
execution, delivery and performance of this Agreement by Parent and Sub and the
consummation by Parent and Sub of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by each of Parent and Sub and
constitutes a legal, valid and binding obligation of each of Parent and Sub
enforceable against each of Parent and Sub in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.03 Non-Contravention; Approvals and Consents. (a) The
execution and delivery of this Agreement by each of Parent and Sub do not, and
the performance by each of Parent and Sub of its obligations hereunder and the
consummation of the transactions contemplated hereby will not, conflict with,
result in a violation or breach of, constitute (with or without notice or lapse
of time or both) a default under, result in or give to any person any right of
payment or reimbursement, termination, cancellation, modification or
acceleration of, or result in the creation or imposition of any Lien upon any of
the assets or properties of Parent or any of its Subsidiaries under, any of the
terms, conditions or provisions of (i) the certificates or articles of
incorporation or bylaws (or other comparable charter or organizational
documents) of Parent or any of its Subsidiaries, or (ii) subject to the taking
of the actions described in paragraph (b) of this Section, (x) any laws or
orders of any Governmental or Regulatory Authority applicable to Parent or any
of its Subsidiaries or any of their respective assets or properties, or (y) any
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Contracts to which Parent or any of its Subsidiaries is a party or by which
Parent or any of its Subsidiaries or any of their respective assets or
properties is bound, excluding from the foregoing clauses (x) and (y) conflicts,
violations, breaches, defaults, terminations, modifications, accelerations and
creations and impositions of Liens which, individually or in the aggregate,
could not be reasonably expected to have a material adverse effect on the
ability of Parent and Sub to consummate the transactions contemplated by this
Agreement.
(b) Except (i) for the filing of the Offer Documents with the
SEC, (ii) for the filing of the Certificate of Merger and other appropriate
merger documents required by the DGCL with the Secretary of State and
appropriate documents with the relevant authorities of other states in which the
Constituent Corporations are qualified to do business, (iii) for the filing of a
premerger notification report by Parent under the HSR Act and (iv) for the
merger notice filing required under the South African Competition Act, no
consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority or other public or private third party is necessary or
required under any of the terms, conditions or provisions of any law or order of
any Governmental or Regulatory Authority or any Contract to which Parent or any
of its Subsidiaries is a party or by which Parent or any of its Subsidiaries or
any of their respective assets or properties is bound for the execution and
delivery of this Agreement by each of Parent and Sub, the performance by each of
Parent and Sub of its obligations hereunder or the consummation of the
transactions contemplated hereby, other than such consents, approvals, actions,
filings and notices which the failure to make or obtain, as the case may be,
individually or in the aggregate, could not be reasonably expected to have a
material adverse effect on the ability of Parent and Sub to consummate the
transactions contemplated by this Agreement.
5.04 Information Supplied. (a) The Offer Documents and any
other documents to be filed by Parent or Sub with the SEC or any other
Governmental or Regulatory Authority in connection with the Offer or the Merger
and the other transactions contemplated hereby will not, on the date of its
filing or, with respect to the Offer Documents, on the date they are filed with
the SEC and first published, sent or given to stockholders of the Company, as
the case may be, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading, except that no representation is made by Parent or Sub
with respect to information supplied in writing by or on behalf of the Company
expressly for inclusion therein and information incorporated by reference
therein from documents filed by the Company or any of its Subsidiaries with the
SEC. The Offer Documents and any other such documents filed by Parent or Sub
with the SEC under the Exchange Act will comply as to form in all material
respects with the requirements of the Exchange Act.
(b) Neither the information supplied or to be supplied in
writing by or on behalf of Parent or Sub for inclusion, nor the information
incorporated by reference from documents filed by Parent or any of its
Subsidiaries with the SEC, in the Schedule 14D-9, the Proxy Statement or any
other documents to be filed by Parent, Sub or the Company with the SEC or any
other Governmental or Regulatory Authority in connection with the Offer or the
Merger and the other transactions contemplated hereby will on the date of its
filing or, with respect to the Schedule 14D-9, on the date it is filed with the
SEC and first published, sent or given to stockholders of the Company, or, in
the case of the Proxy Statement, at the date it is mailed to stockholders of the
Company and at the date of the Company Stockholders' Meeting, contain any untrue
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statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
5.05 Ownership of Company Common Stock. On the date hereof
neither Parent nor any of its Subsidiaries or other affiliates beneficially owns
any shares of Company Common Stock.
5.06 Financing. Parent has sufficient cash and/or available
credit facilities to pay the Per Share Amount for all shares of Class A Common
Stock tendered pursuant to the Offer and to pay the aggregate Merger Price upon
consummation of the Merger in accordance with this Agreement and to make all
other necessary payments of fees and expenses required to be paid by Parent and
Sub in connection with the transactions contemplated by this Agreement.
ARTICLE VI
COVENANTS OF THE COMPANY
6.01 Covenants of the Company. At all times from and after
the date hereof until the Control Date, the Company covenants and agrees as to
itself and its Subsidiaries that (except as expressly contemplated or permitted
by this Agreement, or to the extent that Parent shall otherwise previously
consent in writing, which consent shall not be unreasonably withheld or
delayed):
(a) The Company and its Subsidiaries shall conduct their
respective businesses only in, and neither the Company nor any such Subsidiary
shall take any action except in, the ordinary course consistent with past
practice.
(b) Without limiting the generality of paragraph (a) of this
Section, (i) the Company and its Subsidiaries shall use all commercially
reasonable efforts to preserve intact in all material respects their present
business organizations and reputation, to keep available the services of their
key officers and employees, to maintain their assets and properties in good
working order and condition, ordinary wear and tear excepted, to maintain
insurance on their tangible assets and businesses in such amounts and against
such risks and losses as are currently in effect, to preserve in all material
respects their relationships with customers and suppliers and others having
significant business dealings with them and to comply in all material respects
with all laws and orders of all Governmental or Regulatory Authorities
applicable to them, and (ii) the Company shall not, nor shall it permit any of
its Subsidiaries to, except as otherwise expressly provided for in this
Agreement:
(A) amend or propose to amend its certificate or articles of
incorporation or bylaws (or other comparable corporate charter documents);
(B) (w) declare, set aside or pay any dividends on or make
other distributions in respect of any of its capital stock, except for the
declaration and payment of dividends by a wholly-owned Subsidiary solely to its
parent corporation, (x) split, combine, reclassify or take similar action with
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respect to any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, (y) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization or (z) directly or indirectly redeem, repurchase or otherwise
acquire any shares of its capital stock or any Option with respect thereto;
(C) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any Option
with respect thereto (other than (x) the issuance of shares of Class A Common
Stock upon exercise of Class C Common Stock outstanding on the date of this
Agreement or Options outstanding on the date of this Agreement under the Company
Option Plans and (y) the issuance by a wholly-owned Subsidiary of its capital
stock to its parent corporation), or modify or amend any right of any holder of
outstanding shares of capital stock or Options with respect thereto;
(D) acquire (by merging or consolidating with, or by
purchasing an equity interest in or a portion of the assets of, or by any other
manner) any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets other than inventory and other assets to be sold or used in
the ordinary course of business consistent with past practice;
(E) other than dispositions in the ordinary course of its
business consistent with past practice of assets which are not, individually or
in the aggregate, material to the Company and its Subsidiaries taken as a whole,
sell, lease, grant any security interest in or otherwise dispose of or encumber
any of its assets or properties;
(F) except to the extent required by applicable law, (x)
permit any change in (A) any investment, accounting, financial reporting,
inventory, credit, allowance or tax practice or policy or (B) any method of
calculating any bad debt, contingency or other reserve for accounting, financial
reporting or tax purposes or (y) permit any material change in any pricing,
marketing or purchasing practice or policy or make or revoke any Tax election or
settle or compromise any Tax liability, or change (or make a request to any
taxing authority to change) its Tax or accounting methods, policies, practice or
procedures, except as required by generally accepted accounting principles;
(G) (x)incur any indebtedness for borrowed money or guarantee
any such indebtedness other than in the ordinary course of its business
consistent with past practice under existing credit facilities (net of any
amounts of any such indebtedness discharged during such period), or (y)
voluntarily purchase, cancel, prepay or otherwise provide for a complete or
partial discharge in advance of a scheduled repayment date with respect to, or
waive any right under, any indebtedness for borrowed money;
(H) enter into, adopt, amend (except as may be required by
applicable law) or terminate any Company Employee Benefit Plan, or other
agreement, arrangement, plan or policy between the Company or one of its
Subsidiaries and one or more of its directors, officers or employees, or
increase in any respect the compensation or fringe benefits of any director,
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officer or employee or pay any benefit not required by any plan or arrangement
in effect as of the date hereof;
(I) make any capital expenditures or commitments for
additions to plant, property or equipment constituting capital assets in excess
of $25,000 individually or $250,000 in the aggregate;
(J) make any change in the lines of business in which it
participates or is engaged; or
(K) enter into any Contract, commitment or arrangement to do
or engage in any of the foregoing.
(c) As of the Control Date, all agreements, arrangements and
understandings between the Company and any of its Subsidiaries, on the one hand,
and any Stockholders or affiliates of any Stockholders, on the other hand, shall
be terminated without any liability to the Company or its Subsidiaries or any
amounts being or becoming due thereunder from the date hereof through the
Control Date, except as set forth in Section 6.01(c) of the Company Disclosure
Letter.
6.02 No Solicitations. Prior to the Effective Time, the
Company agrees (a) that neither it nor any of its Subsidiaries or other
affiliates shall, and it shall use its best efforts to cause their respective
Representatives not to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its stockholders) with
respect to a merger, consolidation or other business combination including the
Company or any of its Subsidiaries or any acquisition or similar transaction
(including, without limitation, a tender or exchange offer) involving the
purchase of (i) all or any significant portion of the assets of the Company and
its Subsidiaries taken as a whole or (ii) the outstanding shares of any class of
Company Common Stock or any capital stock of CHL or any other Subsidiary (any
such proposal or offer being hereinafter referred to as an "Alternative
Proposal"), or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person or
group relating to an Alternative Proposal (excluding the transactions
contemplated by this Agreement), or otherwise facilitate any effort or attempt
to make or implement an Alternative Proposal; (b) that it will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties with respect to any of the foregoing, and it will take the
necessary steps to inform such parties of its obligations under this Section;
and (c) that it will notify Parent promptly if any such inquiries, proposals or
offers are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, it or
any of such persons or groups, and will identify the party making such inquiry,
proposal, offer or request and, if an offer has been received, will describe the
material terms thereof, except to the extent such notification would, in the
written opinion of the Company's outside counsel, cause the Company or its Board
of Directors to be in violation of any applicable law, regulation or
governmental order; provided, however, that nothing contained in this Section
6.02 shall prohibit the Board of Directors of the Company from, to the extent
applicable, complying with Rule 14e-2 promulgated under the Exchange Act with
regard to an Alternative Proposal.
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6.03 Third Party Standstill Agreements. During the period
from the date of this Agreement through the Effective Time, neither the Company
nor any of its Subsidiaries shall terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement to which it is a party.
During such period, the Company shall enforce, to the fullest extent permitted
under applicable law, the provisions of any such agreement, including, but not
limited to, by obtaining injunctions to prevent any breaches of such agreements
and to enforce specifically the terms and provisions thereof in any court having
jurisdiction.
6.04 Settlement Agreement and Related Matters. (a)The Company
shall not amend or otherwise modify any of the Settlement Agreement, the
Releases, the letter agreement dated as of February 25, 2000 (the "Reimbursement
Agreement") by and among the Company and certain directors of the Company and
agreed to and accepted by DNL Partners Limited Partnership ("DNL Partners"), or
the letter agreement dated as of February 25, 2000 by and between Parent and DNL
Partners without, in any case, the prior written consent of Parent.
(b) The Company will not make, permit or cause to be made (i)
any prepayment of amounts owing by CPC under the Settlement Agreement if as a
result of such prepayment there would occur any breach of or 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 Contract to which the
Company or any of its Subsidiaries is a party or by which any of their
respective assets is bound, or (ii) any early reimbursement payment under the
Reimbursement Agreement without, in either case, the prior written consent of
Parent.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.01 Access to Information; Confidentiality. The Company
shall, and shall cause each of its Subsidiaries to, throughout the period from
the date hereof to the Effective Time, (i) provide Parent and its
Representatives with full access, upon reasonable prior notice and during normal
business hours, to all officers, employees, agents and accountants of the
Company and its Subsidiaries and their respective assets, properties, books and
records, but only to the extent that such access does not unreasonably interfere
with the business and operations of the Company and its Subsidiaries, and (ii)
furnish promptly to such persons (x) a copy of each report, statement, schedule
and other document filed or received by the Company or any of its Subsidiaries
pursuant to the requirements of federal or state securities laws and each
report, statement, schedule and other document filed with any other Governmental
or Regulatory Authority, and (y) all other information and data (including,
without limitation, copies of Contracts, Company Employee Benefit Plans and
other books and records) concerning the business and operations of the Company
and its Subsidiaries as Parent or any of such other persons reasonably may
request. No investigation pursuant to this paragraph or otherwise shall affect
any representation or warranty contained in this Agreement or any condition to
the obligations of the parties hereto. Any such information or material obtained
pursuant to this Section 7.01 that constitutes "Evaluation Material" (as such
term is defined in the letter agreement dated July 24, 1997 and as extended on
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March 10, 1999 between the Company and Parent (the "Confidentiality Agreement"))
shall be governed by the terms of the Confidentiality Agreement.
7.02 Preparation of Proxy Statement. If required by applicable
law, the Company shall prepare and file with the SEC the Proxy Statement as soon
as reasonably practicable after the first to occur of the purchase of and
payment for shares of Class A Common Stock pursuant to the Offer or the Merger
Trigger, and shall use its best efforts to have the Proxy Statement cleared by
the SEC. If at any time prior to the Effective Time any event shall occur that
should be set forth in an amendment of or a supplement to the Proxy Statement,
the Company shall prepare and file with the SEC such amendment or supplement as
soon thereafter as is reasonably practicable. Parent, Sub and the Company shall
cooperate with each other in the preparation of the Proxy Statement, and the
Company shall notify Parent of the receipt of any comments of the SEC with
respect to the Proxy Statement and of any requests by the SEC for any amendment
or supplement thereto or for additional information, and shall provide to Parent
promptly copies of all correspondence between the Company or any representative
of the Company and the SEC with respect to the Proxy Statement. The Company
shall give Parent and its counsel the opportunity to review the Proxy Statement
and all responses to requests for additional information by and replies to
comments of the SEC before their being filed with, or sent to, the SEC. Each of
the Company, Parent and Sub agrees to use its best efforts, after consultation
with the other parties hereto, to respond promptly to all such comments of and
requests by the SEC and to cause the Proxy Statement to be mailed to the holders
of Company Common Stock entitled to vote at the Company Stockholders' Meeting at
the earliest practicable time.
7.03 Approval of Stockholders. (a) If required by applicable
law in order to consummate the Merger and the transactions contemplated hereby,
the Company shall, through its Board of Directors, duly call, give notice of,
convene and hold a meeting of its stockholders (the "Company Stockholders'
Meeting") for the purpose of voting on the adoption of this Agreement (the
"Company Stockholders' Approval") as soon as reasonably practicable after the
purchase of and payment for shares of Class A Common Stock pursuant to the
Offer. At such meeting, Parent shall, and shall cause its Subsidiaries to, cause
all shares of Class A Common Stock purchased pursuant to the Offer and all other
shares of Company Common Stock owned by Parent or any such Subsidiary to be
voted in favor of the adoption of this Agreement.
(b) Notwithstanding the foregoing, in the event that Sub
shall acquire at least 90% of the then outstanding shares of Class A Common
Stock pursuant to the Offer and no shares of Class C Common Stock shall then
remain outstanding, the parties hereto shall, subject to Article VIII, at the
request of Sub take all necessary and appropriate action to cause the Merger to
become effective in accordance with Section 253 of the DGCL, as soon as
reasonably practicable after such acquisition, without a meeting of the
stockholders of the Company.
7.04 Regulatory and Other Approvals. Subject to the terms and
conditions of this Agreement and without limiting the provisions of Sections
7.02 and 7.03, each of the Company and Parent will proceed diligently and in
good faith to, as promptly as practicable, (a) obtain all consents, approvals or
actions of, make all filings with and give all notices to Governmental or
Regulatory Authorities or any other public or private third parties required of
Parent, the Company or any of their Subsidiaries to consummate the Offer, the
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Merger and the other matters contemplated hereby, and (b) provide such other
information and communications to such Governmental or Regulatory Authorities or
other public or private third parties as the other party or such Governmental or
Regulatory Authorities or other public or private third parties may reasonably
request in connection therewith. In addition to and not in limitation of the
foregoing, each of the parties will (x) take promptly all actions necessary to
make the filings required of Parent and the Company or their affiliates under
the HSR Act, (y) comply at the earliest practicable date with any request for
additional information received by such party or its affiliates from the Federal
Trade Commission (the "FTC") or the Antitrust Division of the Department of
Justice (the "Antitrust Division") pursuant to the HSR Act, and (z) cooperate
with the other party in connection with such party's filings under the HSR Act
and in connection with resolving any investigation or other inquiry concerning
the Merger or the other matters contemplated by this Agreement commenced by
either the FTC or the Antitrust Division or state attorneys general; provided,
however, that nothing herein shall obligate Parent to agree to hold separate,
sell or otherwise dispose of any Subsidiary of Parent or of the Company or any
assets or properties thereof which, individually or in the aggregate would be
material to the Company and its Subsidiaries taken as a whole or would be
reasonably likely to materially diminish the value of the transaction to Parent.
7.05 Employee Benefit Plans; Prior Service. (a) Parent shall
cause the Company Employee Benefit Plans (other than equity-based Plans and
incentive compensation) in effect at the date of this Agreement to remain in
effect until the first anniversary of the Effective Time or, to the extent such
Company Employee Benefit Plans are not continued, Parent will maintain until
such date benefit plans (other than equity-based Plans and incentive
compensation) which are not materially less favorable, in the aggregate, to the
employees covered by such Company Employee Benefit Plans; provided, however,
that nothing contained herein shall be construed as requiring the Company or the
Surviving Corporation to continue any specific plan or the employment of any
employee or group of employees.
(b) Parent will, and will cause the Surviving Corporation to,
honor without modification all employee severance plans (or policies) and
employment and severance agreements of the Company or any of its Subsidiaries in
existence on the date hereof as such agreements shall be in effect in accordance
with the terms of this Agreement at the Effective Time, including, without
limitation, the plans and agreements specified in Section 7.05 of the Company
Disclosure Letter.
(c) With respect to any medical and dental benefits provided
to employees of the Company and its Subsidiaries who remain employed with Parent
and its Subsidiaries as of or following the Effective Time, Parent agrees that
it will waive waiting periods and pre-existing condition requirements under such
plans (to the extent waived under the plans of the Company and its
Subsidiaries), and will give such employees credit for any co-payments and
deductibles actually paid by such employees under the medical and dental plans
of the Company and its Subsidiaries during the calendar year in which the
Effective Time occurs. In addition, service with the Company and its
Subsidiaries shall be recognized (to the extent recognized by the Company
Employee Benefit Plans) for all purposes under Parent's compensation and benefit
plans, programs, policies and arrangements, except where crediting such service
would result in a duplication of benefits. Without limiting the generality of
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the foregoing, Parent will honor all vacation, personal and sick days accrued by
such employees under the plans, policies, programs and arrangements of the
Company and its Subsidiaries immediately prior to the Effective Time.
7.06 Directors' and Officers' Indemnification and Insurance.
(a) Except as set forth in Section 7.06 of the Company Disclosure Letter, from
and until the sixth anniversary of the Effective Time and for so long thereafter
as any claim for indemnification asserted on or prior to such date has not been
fully adjudicated, Parent shall, and shall cause the Surviving Corporation to,
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date hereof or who becomes prior to the Effective Time, a
director or officer of the Company or any of its Subsidiaries (the "Indemnified
Parties") against (i) all losses, claims, damages, costs and expenses (including
reasonable attorneys' fees), liabilities, judgments and settlement amounts that
are paid or incurred in connection with any claim, action, suit, proceeding or
investigation (whether civil, criminal, administrative or investigative and
whether asserted or claimed prior to, at or after the Effective Time) that is
based on, or arises out of, the fact that such Indemnified Party is or was a
director or officer of the Company or any of its Subsidiaries and relates to or
arises out of any action or omission occurring at or prior to the Effective Time
("Indemnified Liabilities"), and (ii) all Indemnified Liabilities based on, or
arising out of, or pertaining to this Agreement or the transactions contemplated
hereby, in each case to the full extent a corporation is permitted under
applicable law to indemnify its own directors or officers; provided that the
Surviving Corporation shall not be liable for any settlement of any claim
effected without its written consent, which consent shall not be unreasonably
withheld; and provided, further, that the Surviving Corporation shall not be
liable for any Indemnified Liabilities which occur as a result of the gross
negligence or willful misconduct of any Indemnified Party. Without limiting the
foregoing, in the event that any such claim, action, suit, proceeding or
investigation is brought against any Indemnified Party (whether arising prior to
or after the Effective Time), (x) the Surviving Corporation will pay expenses in
advance of the final disposition of any such claim, action, suit, proceeding or
investigation to each Indemnified Party to the full extent permitted by
applicable law; provided that the person to whom expenses are advanced provides
any undertaking required by applicable law to repay such advance if it is
ultimately determined that such person is not entitled to indemnification; (y)
the Surviving Corporation shall pay all reasonable fees and expenses of counsel
for the Indemnified Parties (subject to the final sentence of this paragraph)
promptly as statements therefor are received; and (z) the Surviving Corporation
shall use all commercially reasonable efforts to assist in the defense of any
such matter. Any Indemnified Party wishing to claim indemnification under this
Section, upon learning of any such claim, action, suit, proceeding or
investigation, shall notify the Surviving Corporation, but the failure so to
notify the Surviving Corporation shall not relieve the Surviving Corporation
from any liability which it may have under this paragraph except to the extent
such failure materially prejudices the Surviving Corporation. The Indemnified
Parties as a group may retain only one law firm to represent them with respect
to each such matter unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two or
more Indemnified Parties in which case, the Indemnified Parties may retain more
than one law firm. Any such law firm must be reasonably acceptable to the
Surviving Corporation.
(b) Except to the extent required by law, until the sixth
anniversary of the Effective Time, Parent will not take any action so as to
amend, modify or repeal the provisions for indemnification of directors,
officers or employees contained in the certificates or articles of incorporation
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or bylaws (or other comparable charter documents) of the Surviving Corporation
and its Subsidiaries (which as of the Effective Time shall be no more favorable
to such individuals than those maintained by the Company and its Subsidiaries on
the date hereof) in such a manner as would adversely affect the rights of any
individual who shall have served as a director, officer or employee of the
Company or any of its Subsidiaries prior to the Effective Time to be indemnified
by such corporations in respect of their serving in such capacities prior to the
Effective Time.
(c) The Surviving Corporation shall, until the sixth
anniversary of the Effective Time and for so long thereafter as any claim for
insurance coverage asserted on or prior to such sixth anniversary has not been
fully adjudicated, cause to be maintained in effect the policies of directors'
and officers' liability insurance maintained by the Company and its Subsidiaries
as of the date hereof (or policies of at least the same coverage and amounts
containing terms that are no less advantageous to the insured parties) with
respect to claims arising from facts or events that occurred on or prior to the
Effective Time; provided that in no event shall the Surviving Corporation be
obligated to expend in order to maintain or procure insurance coverage pursuant
to this paragraph any amount per annum in excess of 200% of the aggregate
premiums payable by the Company and its Subsidiaries for the current fiscal year
(on an annualized basis) for such purpose.
(d) The provisions of this Section 7.06 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party and each
party entitled to insurance coverage under paragraph (c) above, respectively,
and his or her heirs and legal representatives, and shall be in addition to any
other rights an Indemnified Party may have under the certificate or articles of
incorporation or bylaws (or similar charter documents) of the Surviving
Corporation or any of its Subsidiaries, under applicable law or otherwise.
7.07 Expenses. Except as set forth in Section 9.02, whether
or not the Offer or the Merger is consummated, all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such cost or expense.
7.08 Brokers or Finders. Each of Parent and the Company
represents, as to itself and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement (except for
PaineWebber, whose fees and expenses will be paid by the Company in accordance
with the Company's agreement with such firm, and for Lazard Freres & Co. LLC,
whose fees and expenses will be paid by Parent in accordance with Parent's
agreement with such firm), and each of Parent and the Company shall indemnify
and hold the other harmless from and against any and all claims, liabilities or
obligations with respect to any such fee or commission or expenses related
thereto asserted by any person on the basis of any act or statement alleged to
have been made by such party or its affiliate.
7.09 Takeover Statutes. If any "fair price", "moratorium",
"control share acquisition" or other form of antitakeover statute or regulation
shall become applicable to the transactions contemplated hereby, the Company and
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the members of the Board of Directors of the Company shall grant such approvals
and take such actions as are reasonably necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
such statute or regulation on the transactions contemplated hereby.
7.10 Conveyance Taxes. The Company and Parent shall cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become
payable in connection with the transactions contemplated by this Agreement that
are required or permitted to be filed on or before the Effective Time.
7.11 Conduct of Business of Sub. Prior to the Effective Time,
except as may be required by applicable law and subject to the other provisions
of this Agreement, Parent shall cause Sub to (a) perform its obligations under
this Agreement in accordance with its terms, (b) not incur directly or
indirectly any liabilities or obligations other than those incurred in
connection with the Offer and the Merger, and (c) not engage directly or
indirectly in any business or activities of any type or kind and not enter into
any agreements or arrangements with any person, or be subject to or bound by any
obligation or undertaking, which is not contemplated by this Agreement.
7.12 Notice and Cure. Each of Parent and the Company will
notify the other of, and will use all commercially reasonable efforts to cure
before the Closing, any event, development or circumstance, as soon as practical
after it becomes known to such party, that causes or will cause any covenant or
agreement of Parent or the Company under this Agreement to be breached or any of
the conditions to the Offer not to be satisfied or that renders or will render
untrue any representation or warranty of Parent or the Company contained in this
Agreement as of the date hereof or as of any subsequent date. Each of Parent and
the Company also will notify the other in writing of, and will use all
commercially reasonable efforts to cure, before the Closing, any violation or
breach, as soon as practical after it becomes known to such party, of any
representation, warranty, covenant or agreement made by the other party. No
notice given pursuant to this Section shall have any effect on the
representations, warranties, covenants or agreements contained in this Agreement
for purposes of determining satisfaction of any condition contained herein.
7.13 Fulfillment of Conditions. Subject to the terms and
conditions of this Agreement, each of Parent and the Company will take or cause
to be taken all commercially reasonable steps necessary or desirable and proceed
diligently and in good faith to satisfy each condition to the other's
obligations contained in this Agreement and to consummate and make effective the
transactions contemplated by this Agreement, and neither Parent nor the Company
will, nor will it permit any of its Subsidiaries to, take or fail to take any
action that could be reasonably expected to result in the nonfulfillment of any
such condition, except as otherwise expressly permitted by this Agreement.
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ARTICLE VIII
CONDITIONS
8.01 Conditions to Each Party's Obligation to Effect the
Merger if the Offer has been Consummated. The respective obligation of each
party to effect the Merger is subject to the fulfillment, at or prior to the
Closing, of each of the following conditions:
(a) Stockholder Approval. Unless the Merger may be consummated
pursuant to Section 253 of the DGCL as contemplated by Section 7.03(b), this
Agreement shall have been adopted by the requisite vote of the stockholders of
the Company under the DGCL.
(b) HSR Act. Any waiting period (and any extension thereof)
applicable to the consummation of the transactions contemplated by this
Agreement and the Stockholders Agreement under the HSR Act shall have expired or
been terminated.
(c) No Injunctions or Restraints. No court of competent
jurisdiction or other competent Governmental or Regulatory Authority shall have
enacted, issued, promulgated, enforced or entered any law or order (whether
temporary, preliminary or permanent) which is then in effect and has the effect
of making illegal or otherwise restricting, preventing or prohibiting
consummation of the Offer or the Merger or the other transactions contemplated
by this Agreement or the Stockholders Agreement.
(d) Consummation of Offer. Sub shall have purchased any and
all shares of Class A Common Stock validly tendered and not withdrawn pursuant
to the Offer; provided, however, that this condition shall not be applicable to
the obligations of Parent or Sub if, in breach of this Agreement or the terms of
the Offer, Sub fails to purchase any shares of Class A Common Stock validly
tendered and not withdrawn pursuant to the Offer.
8.02 Condition to Parent's and Sub's Obligation to Effect the
Merger if the Merger Trigger is Invoked. The respective obligation of each party
to effect the Merger if the Merger Trigger is invoked is subject to the
fulfillment, at or prior to the Closing, of the conditions set forth in Sections
8.01(a), (b) and (c) and also the conditions set forth in paragraphs (a) through
(e) of Annex A hereto.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.01 Termination. Subject, in the case of the Company, to
Section 1.03(c), this Agreement may be terminated, and the transactions
contemplated hereby may be abandoned, at any time prior to the Effective Time,
whether prior to or after the Company Stockholders' Approval:
(a) By mutual written agreement of the parties hereto duly
authorized by action taken by or on behalf of their respective Boards of
Directors;
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(b) By either the Company or Parent upon notification to the
non-terminating party:
(i) at any time after July 31, 2000 if, on or prior to such
date, either (x) the purchase of shares of Class A Common Stock
pursuant to the Offer shall not have occurred and such failure is not
caused by a breach of this Agreement by the terminating party and the
Merger Trigger shall not have been invoked or (y) the Merger Trigger
shall have been invoked and the Merger shall have not been consummated
and such failure is not caused by a breach of this Agreement by the
terminating party;
(ii) if the Offer shall have terminated or expired in
accordance with its terms without Sub having accepted for payment and
paid for any shares of Class A Common Stock pursuant to the Offer;
provided, however, that Parent may not terminate this Agreement
pursuant to this Section 9.01(b)(ii) if Sub's termination of, or
failure to accept for payment or pay for any shares of Class A Common
Stock tendered pursuant to, the Offer does not follow the occurrence,
or failure to occur, as the case may be, of any condition to the Offer
set forth in Annex A hereto (other than the Minimum Condition) or if
Parent or Sub is otherwise in breach of the terms of the Offer or this
Agreement; or
(iii) if any court of competent jurisdiction or other
competent Governmental or Regulatory Authority shall have issued an
order making illegal or otherwise restricting, preventing or
prohibiting the Merger or the other transactions contemplated by this
Agreement or the Stockholders Agreement and such order shall have
become final and nonappealable;
(c) By the Company if (i) there has been a material breach
of any representation, warranty, covenant or agreement on the part of Parent or
Sub set forth in this Agreement, which breach is not curable or, if curable, has
not been cured within 60 days following receipt by Parent of notice of such
breach from the Company; or (ii) if the Offer has not been timely commenced
in accordance with Section 1.01(a); or
(d) By Parent if, prior to the purchase of shares of Class A
Common Stock pursuant to the Offer or, if the Merger Trigger has been invoked,
the Merger, there has been a breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, which breach
(A) would give rise to the failure of a condition to the Offer set forth in
paragraph (c) or (d) of Annex A hereto and (B) is not curable or, if curable,
has not been cured within 60 days following receipt by the Company of notice of
such breach from Parent.
9.02 Effect of Termination. If this Agreement is validly
terminated by either the Company or Parent pursuant to Section 9.01, this
Agreement will forthwith become null and void and there will be no liability or
obligation on the part of either the Company or Parent (or any of their
respective Representatives or affiliates), except (i) that the provisions of
Sections 7.07 and 7.08 and this Section 9.02 will continue to apply following
any such termination, and (ii) that nothing contained herein shall relieve any
party hereto from liability for willful breach of its representations,
warranties, covenants or agreements contained in this Agreement.
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9.03 Amendment. Subject to Section 1.03(c), this Agreement
may be amended, supplemented or modified by action taken by or on behalf of the
respective Boards of Directors of the parties hereto at any time prior to the
Effective Time, whether prior to or after the Company Stockholders' Approval
shall have been obtained, but after such adoption and approval only to the
extent permitted by applicable law. No such amendment, supplement or
modification shall be effective unless set forth in a written instrument duly
executed by or on behalf of each party hereto.
9.04 Waiver. Subject to Section 1.03(c), at any time prior to
the Effective Time any party hereto, by action taken by or on behalf of its
Board of Directors, may to the extent permitted by applicable law (i) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties of the other parties hereto contained herein or in any document
delivered pursuant hereto or (iii) waive compliance with any of the covenants,
agreements or conditions of the other parties hereto contained herein. No such
extension or waiver shall be effective unless set forth in a written instrument
duly executed by or on behalf of the party extending the time of performance or
waiving any such inaccuracy or non-compliance. No waiver by any party of any
term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion.
ARTICLE X
GENERAL PROVISIONS
10.01 Non-Survival of Representations, Warranties, Covenants
and Agreements. The representations, warranties, covenants and agreements
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall not survive the Merger but shall terminate at the Effective
Time, except for the agreements contained in Article II and Article III, in
Sections 7.05, 7.06, 7.07, 7.08 and 7.10 and this Article X, which shall survive
the Effective Time.
10.02 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
If to Parent or Sub, to:
Cosmair, Inc.
575 Fifth Avenue
New York, NY 10017
Facsimile No.: (212) 984-4946
Attn: John D. Sullivan
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with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Facsimile No.: (212) 310-8007
Attn: Stephen E. Jacobs, Esq. and
Ellen J. Odoner, Esq.
If to the Company, to:
Carson, Inc.
64 Ross Road
Savannah, GA 31405
Facsimile No.: (912) 651-3424
Attn: Malcolm R. Yesner
with a copy to:
MCG Global, LLC
One Morningside Drive North
Suite 200
Westport, CT 06880
Facsimile No.: (203) 226-8011
Attn: Vincent A. Wasik
and
Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, NY 10005
Facsimile No.: (212) 530-5219
Attn: Lawrence Lederman, Esq. and
Robert S. Reder, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other parties hereto.
10.03 Entire Agreement; Incorporation of Exhibits. (a) This
Agreement supersedes all prior discussions and agreements among the parties
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hereto with respect to the subject matter hereof, other than the Confidentiality
Agreement, which shall survive the execution and delivery of this Agreement in
accordance with its terms, and contains, together with the Confidentiality
Agreement, the sole and entire agreement among the parties hereto with respect
to the subject matter hereof.
(b) The Company Disclosure Letter and any Exhibit attached to
this Agreement and referred to herein are hereby incorporated herein and made a
part hereof for all purposes as if fully set forth herein.
10.04 Public Announcements. Except as otherwise required by
law or the rules of any applicable securities exchange or national market system
on which the Class A Common Stock is listed or admitted, so long as this
Agreement is in effect, Parent and the Company will not, and will not permit any
of their respective Representatives to, issue or cause the publication of any
press release or make any other public announcement with respect to the
transactions contemplated by this Agreement without the consent of the other,
which consent shall not be unreasonably withheld or delayed. Parent and the
Company will cooperate with each other in the development and distribution of
all press releases and other public announcements with respect to this Agreement
and the transactions contemplated hereby, and will furnish the other with drafts
of any such releases and announcements as far in advance as practicable.
10.05 No Third Party Beneficiary. The terms and provisions of
this Agreement (including without limitation Section 7.05) are intended solely
for the benefit of each party hereto and their respective successors or
permitted assigns, and, except as provided in Section 7.06(d), it is not the
intention of the parties to confer third-party beneficiary rights upon any other
person.
10.06 No Assignment; Binding Effect. Neither this Agreement
nor any right, interest or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other parties hereto and any
attempt to do so will be void, except that Sub may assign any or all of its
rights, interests and obligations hereunder, including the right to purchase all
or any portion of the shares of Class A Common Stock tendered pursuant to the
Offer, to a direct or indirect wholly-owned Subsidiary of Parent, provided that
any such Subsidiary agrees in writing to be bound by all of the terms,
conditions and provisions contained herein and no such assignment shall be made
if it would materially delay or impede the transactions contemplated thereby.
Subject to the preceding sentence, this Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
10.07 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define, modify or limit
the provisions hereof.
10.08 Invalid Provisions. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under any present or future law
or order, and if the rights or obligations of any party hereto under this
Agreement will not be materially and adversely affected thereby, (i) such
provision will be fully severable, (ii) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, and (iii) the remaining provisions of this Agreement
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will remain in full force and effect and will not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom.
10.09 Governing Law; Consent to Jurisdiction. (a) This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware applicable to a contract executed and performed in such State,
without giving effect to the conflicts of laws principles thereof.
(b) Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated by this Agreement may be brought
against any of the parties in any federal court located in the State of Delaware
or any Delaware state court, and each of the parties hereto hereby consents to
the exclusive jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and waives any
objection to venue laid therein. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or without the
State of Delaware. Without limiting the generality of the foregoing, each party
hereto agrees that service of process upon such party at the address referred to
in Section 10.02, together with written notice of such service to such party,
shall be deemed effective service of process upon such party.
10.10 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specified terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of competent
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
10.11 Certain Definitions. As used in this Agreement:
(a) the term "affiliate," as applied to any person, shall
mean any other person directly or indirectly controlling, controlled by, or
under common control with, that person; for purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise;
(b) a person will be deemed to "beneficially" own securities
if such person would be the beneficial owner of such securities under Rule 13d-3
under the Exchange Act, including securities which such person has the right to
acquire (whether such right is exercisable immediately or only after the passage
of time);
(c) the term "business day" means a day other than Saturday,
Sunday or any day on which banks located in the States of New York or Georgia
are authorized or obligated to close;
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(d) the term "knowledge" or any similar formulation of
"knowledge" shall mean, with respect to the Company, the knowledge of the
individuals listed in Section 10.11(d) of the Company Disclosure Letter.
(e) the term "person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is defined in Section 13(d)(3) of the Exchange Act);
(f) the "Representatives" of any entity means such entity's
directors, officers, employees, legal, investment banking and financial
advisors, accountants and any other agents and representatives;
(g) the term "Subsidiary" means, with respect to any party,
any corporation or other organization, whether incorporated or unincorporated,
of which more than 50% of either the equity interests in, or the voting control
of, such corporation or other organization is, directly or indirectly through
Subsidiaries or otherwise, beneficially owned by such party and includes,
without limitation, CHL.
10.12 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
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IN WITNESS WHEREOF, each party hereto has caused this
Agreement to be signed by its officer thereunto duly authorized as of the date
first above written.
Attest: COSMAIR, INC.
/s/John Sullivan By: /s/Roger Dolden
Asst. Secretary Name: Roger Dolden
Title: Executive Vice President
and Chief Administrative
Officer
Attest: CRAYON ACQUISITION CORP.
/s/John Sullivan By: /s/Roger Dolden
Asst.Secretary Name: Roger Dolden
Title: Executive Vice President
and Chief Administrative
Officer
Attest: CARSON, INC.
/s/Robert W. Pierce By: /s/Malcolm R. Yesner
Secretary Name: Malcolm R. Yesner
Title: President and Chief
Executive Officer
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Annex A
CONDITIONS TO THE OFFER
The capitalized terms used in this Annex A shall have the
meanings ascribed to them in the Agreement and Plan of Merger to which it is
attached, except that the term "Merger Agreement" shall be deemed to refer to
such Agreement and Plan of Merger.
Notwithstanding any other provision of the Offer, Sub shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Sub's obligation to pay for or return tendered shares of Class A Common Stock
promptly after termination or withdrawal of the Offer), pay for, and may
(subject to any such rule or regulation) delay the acceptance for payment of any
tendered shares of Class A Common Stock, and may (except as provided in the
Merger Agreement) amend or terminate the Offer as to any shares of Class A
Common Stock not then paid for, if (i) there shall not have been validly
tendered and not withdrawn prior to the time the Offer shall otherwise expire a
number of shares of Class A Common Stock which represents a majority of the
voting power of the Company Common Stock then issued and outstanding on a
fully-diluted basis on the date of purchase (the "Minimum Condition") or (ii)
any waiting period applicable to the consummation of the transactions
contemplated by this Agreement and the Stockholders Agreement under the HSR Act
and the South African Competition Act shall not have expired or terminated or
(iii) at any time on or after the date of the Merger Agreement and before the
time of payment for any such shares of Class A Common Stock (whether or not any
shares of Class A Common Stock have theretofore been accepted for payment or
paid for pursuant to the Offer), any of the following events shall have occurred
and remain in effect:
(a) there shall have been any law or order promulgated,
entered, enforced, enacted, issued or deemed applicable to the Offer,
the Merger or the Stockholders Agreement by any court of competent
jurisdiction or other competent Governmental or Regulatory Authority
which (1) prohibits, or imposes any material limitations on, Parent's
or Sub's ownership or operation (or that of any of their respective
Subsidiaries or affiliates) of any portion of their or the Company's
businesses or assets which is material to the business of all such
entities taken as a whole, or compels Parent or Sub (or their
respective Subsidiaries or affiliates) to dispose of or hold separate
any portion of their or the Company's business or assets which is
material to the business of all such entities taken as a whole, (2)
prohibits, restrains or makes illegal the acceptance for payment,
payment for or purchase of shares of Class A Common Stock pursuant to
the Offer or the consummation of the Merger, (3) imposes material
limitations on the ability of Sub or Parent (or any of their respective
Subsidiaries or affiliates) effectively to acquire or to hold or to
exercise full rights of ownership of the shares of Company Common Stock
purchased pursuant to the Offer including, without limitation, the
right to vote such shares of Company Common Stock on all matters
properly presented to the Company's stockholders, or (4) imposes
A-1
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material limitations on the ability of Sub or Parent (or any of their
respective Subsidiaries or affiliates) effectively to control in any
material respect any material portion of the business or assets of the
Company and its Subsidiaries taken as a whole;
(b) there shall be threatened, instituted or pending any
action, suit or proceeding brought by a Governmental or Regulatory
Authority challenging the acquisition by Parent or Sub of shares of
Company Common Stock or otherwise seeking to restrain or prohibit the
making or consummation of the Offer, the Merger or the Stockholders
Agreement or seeking to result in any of the consequences referred to
in clauses (1) through (4) of paragraph (a) above;
(c) the representations and warranties made by the Company in
the Merger Agreement that are subject to, or qualified by, "Company
Material Adverse Effect" or other materiality qualification shall not
be true and correct, or the representations and warranties made by the
Company in the Merger Agreement that are not so qualified shall not be
true and correct in any respect which could reasonably be expected to
have a Company Material Adverse Effect, in either case as of the date
of the consummation of the Offer as though made on and as of such date
or, in the case of representations and warranties made as of a specific
date earlier than the date of the consummation of the Offer, on and as
of such earlier date;
(d) the representation and warranty made by the Company in
Section 4.11(c) of the Merger Agreement shall not be true and correct
in any respect as of the date of the consummation of the Offer as
though made on and as of such date, or there shall be instituted or
pending any action, suit or proceeding challenging the validity or
enforceability of the Releases, the Settlement Agreement or any of the
transactions contemplated thereby;
(e) the Company shall not have performed and complied with,
in all material respects, each agreement and covenant required by the
Merger Agreement to be performed or complied with by it; or
(f) the Merger Agreement shall have been terminated in
accordance with its terms.
The foregoing conditions are for the sole benefit of Parent
and Sub, may be asserted by Parent and Sub regardless of the circumstances
giving rise to any such condition and, subject to the terms and conditions of
the Merger Agreement, may be waived by Parent and Sub, in whole or in part at
any time and from time to time in the sole discretion of Parent and Sub. The
failure by Parent and Sub at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to time.
A-2
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT dated as of February 25, 2000 by
and among Cosmair, Inc., a Delaware corporation ("Parent"), Crayon Acquisition
Corp., a Delaware corporation wholly owned by Parent ("Sub"), Carson, Inc., a
Delaware corporation (the "Company"), and the stockholders of the Company
signatory hereto (individually, a "Stockholder" and, collectively, the
"Stockholders").
WITNESSETH:
WHEREAS, concurrently herewith, Parent, Sub and the Company are
entering into an Agreement and Plan of Merger (as such agreement may hereafter
be amended from time to time, the "Merger Agreement") pursuant to which Sub will
be merged with and into the Company (the "Merger");
WHEREAS, in furtherance of the Merger, Parent and the Company desire
that as soon as practicable (and not later than eight business days) after the
execution and delivery of the Merger Agreement, Sub commence a cash tender offer
to purchase any and all outstanding shares of Class A Common Stock (as defined
in Section 1.1); and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Company and Stockholders agree, and the
Company and Stockholders have agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions. For purposes of this Agreement:
1.1 "Class A Common Stock" shall mean the Class A Common
Stock, $.01 par value, of the Company.
1.2 "Class C Common Stock" shall mean the Class C Common
Stock, $.01 par value, of the Company.
1.3 "Company Common Stock" shall mean, collectively, the Class
A Common Stock and the Class C Common Stock.
1.4 "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated organization,
limited liability company or other entity.
Other capitalized terms used and not defined herein have the respective
meanings ascribed to them in the Merger Agreement.
<PAGE>
2. Tenders of Shares.
2.1 Tender Requirement. Promptly following receipt of written
notice from Parent and Sub that at least 565,857 shares of Class A Common Stock
have been validly tendered in (and not withdrawn from) the Offer and that Parent
and Sub are prepared to accept for payment and pay for all shares of Class A
Common Stock so tendered and not withdrawn, each Stockholder shall (provided
that the Offer has not been amended in a manner adverse to such Stockholder)
convert all of their shares of Class C Common Stock into shares of Class A
Common Stock and validly tender (and not withdraw) all of such Stockholder's
shares of Class A Common Stock pursuant to and in accordance with the terms of
the Offer. Each Stockholder hereby acknowledges and agrees that the obligation
of Parent or Sub to accept for payment and pay for Company Common Stock in the
Offer, including the Shares, is subject to the terms and conditions of the
Offer. Each Stockholder shall be entitled to receive the highest price paid by
Sub pursuant to the Offer, the Merger or otherwise.
2.2 Permission to Disclose. Each Stockholder hereby agrees to
permit Parent and Sub to publish and disclose in any documents filed with any
Governmental or Regulatory Authority in connection with the Offer and the
Merger, including, if Company Stockholders' Approval is required under
applicable law, the Proxy Statement (including all documents and schedules filed
with the SEC), Stockholder's identity and ownership of Company Common Stock and
the nature of Stockholder's commitments, arrangements and understandings under
this Agreement.
3. Voting of Company Common Stock. Each Stockholder hereby agrees
that, during the period commencing on the date hereof and continuing until the
first to occur of the Effective Time or termination of this Agreement in
accordance with Section 7, at any meeting of the holders of Company Common
Stock, however called, or in connection with any written consent of the holders
of Company Common Stock, such Stockholder shall vote (or cause to be voted) the
number of shares of Company Common Stock set forth opposite such Stockholder's
name on Schedule 1 hereto (the "Existing Shares") and any shares of Company
Common Stock acquired by such Stockholder after the date hereof (collectively
with the Existing Shares, the "Shares"): (i) in favor of the Merger, the
execution and delivery by the Company of the Merger Agreement and the approval
of the terms thereof and each of the other actions contemplated by the Merger
Agreement and this Agreement and any actions required in furtherance thereof and
hereof; (ii) against any action, any failure to act, or agreement that would
result in a breach in any respect of any covenant, representation or warranty or
any other obligation or agreement of the Company under the Merger Agreement or
this Agreement; and (iii) except as otherwise agreed to in writing in advance by
Parent, against the following actions (other than the Merger and the
transactions contemplated by the Merger Agreement): (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or its Subsidiaries; (B) a sale, lease or
transfer of a material amount of assets of the Company or its Subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its Subsidiaries; (C) (1) any change in a majority of the persons who constitute
the board of directors of the Company; (2) any change in the present
capitalization of the Company or any of its Subsidiaries or any amendment of the
Company's or any Subsidiary's Certificate of Incorporation or Bylaws (or
comparable organizational documents); (3) any other material change in the
Company's or any Subsidiary's corporate structure or business; or (4) any other
2
<PAGE>
action involving the Company or its Subsidiaries which is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone, or adversely
affect the Merger and the transactions contemplated by this Agreement and the
Merger Agreement. Each Stockholder agrees that it shall not enter into any
agreement or understanding with any person or entity the effect of which would
be to violate the provisions and agreements contained in this Section 3.
4. Other Covenants, Representations and Warranties. Each
Stockholder hereby represents and warrants to Parent with respect to such
Stockholder as follows:
4.1. Ownership of Shares. Stockholder is the record or
beneficial owner of the number of Shares set forth opposite Stockholder's name
on Schedule I hereto. On the date hereof, the Existing Shares set forth opposite
Stockholder's name on Schedule I hereto constitute all of the Shares owned of
record and beneficially by Stockholder. Stockholder has sole voting power and
sole power to issue instructions with respect to the matters set forth in this
Agreement and the Proxy (as defined in Section 8), sole power of disposition,
sole power of conversion, sole power to demand appraisal rights and sole power
to agree to all of the matters set forth in this Agreement and Proxy, in each
case with respect to all of the Existing Shares set forth opposite Stockholder's
name on Schedule I hereto, with no limitations, qualifications or restrictions
on such rights, subject to applicable securities laws and the terms of this
Agreement and the Proxy.
4.2 Power; Binding Agreement. Stockholder has the legal
capacity, power and authority to enter into and perform all of Stockholder's
obligations under this Agreement and the Proxy. The execution, delivery and
performance of this Agreement and the Proxy do not and will not violate any
other agreement to which Stockholder is a party including, without limitation,
any voting agreement, stockholders agreement or voting trust. This Agreement and
the Proxy have been duly and validly executed and delivered by Stockholder and
constitute valid and binding agreements of Stockholder, enforceable against
Stockholder in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law). There is no beneficiary or holder of a voting
trust certificate or other interest of any trust of which Stockholder is trustee
whose consent is required for the execution and delivery of this Agreement, the
Proxy or the consummation by the Stockholder of the transactions contemplated
hereby and thereby.
4.3 No Conflicts. Except for filings under the Exchange Act,
the HSR Act and any applicable state antitrust laws (i) no filing with, and no
permit, authorization, consent or approval of, any state or federal public body
or authority or any other person is necessary for the execution of this
Agreement and the Proxy by Stockholder and the consummation by Stockholder of
the transactions contemplated hereby and thereby and (ii) none of the execution
and delivery of this Agreement and the Proxy by Stockholder, the consummation by
Stockholder of the transactions contemplated hereby and thereby or compliance by
Stockholder with any of the provisions hereof or thereof shall (A) conflict with
or result in any breach of any organizational documents applicable to
Stockholder, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
3
<PAGE>
indenture, license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation of any kind to which Stockholder is a party or
by which Stockholder or any of Stockholder's properties or assets may be bound,
or (C) violate any order, writ, injunction, decree, judgment, order, statute,
rule or regulation applicable to Stockholder or any of Stockholder's properties
or assets.
4.4 No Encumbrances. Except pursuant to this Agreement and
the Proxy, Stockholder's Shares and the certificates representing such Shares
are now, and at all times during the term hereof will be, held by Stockholder,
or by a nominee or custodian for the benefit of Stockholder, free and clear of
all liens, hypothecations, claims, security interests, proxies, voting trusts or
agreements, understandings or arrangements or any other encumbrances whatsoever,
except for any such encumbrances or proxies arising hereunder. The transfer by
Stockholder of the Shares to Sub in the Offer shall pass to and unconditionally
vest in Sub good and valid title to the Shares so transferred by Stockholder
free and clear of all claims, liens, restrictions, security interests, pledges,
hypothecations, limitations and encumbrances whatsoever.
4.5 No Solicitation. Until the earlier of the Effective Time
or termination of this Agreement in accordance with its terms, Stockholder (a)
shall not, in Stockholder's capacity as such, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or implementation of any
proposal or offer (including, without limitation, any proposal or offer to the
stockholders of the Company) with respect to any transaction relating to the
Company or any of its Subsidiaries that constitutes an Alternative Proposal, or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any Person relating to an Alternative
Proposal (excluding Parent and its affiliates and the transactions contemplated
by the Merger Agreement), or otherwise facilitate any effort or attempt to make
or implement an Alternative Proposal; (b) shall immediately cease and cause to
be terminated any existing activities, discussions or negotiations with any
Person with respect to any of the foregoing; and (c) shall promptly inform
Parent if any such inquiry or proposal or offer is received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with Stockholder, and will identify the
party making such inquiry, proposal, offer or request and, if an offer has been
received, will describe the material terms thereof.
4.6 Restriction on Conversion and Transfer, Proxies and
Non-Interference. Beginning on the date hereof and ending on the earlier of the
Effective Time or termination of this Agreement, except as required to comply
with the provisions of this Agreement or the Proxy, Stockholder shall not (i)
directly or indirectly, convert into Class A Common Stock, offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with respect to
or consent to the conversion into Class A Common Stock, offer for sale, sale,
transfer, tender, pledge, encumbrance, assignment or other disposition of, any
or all of Stockholder's Shares or any interest therein; (ii) grant any proxies
or powers of attorney, deposit any Shares into a voting trust or enter into a
voting agreement with respect to any Shares; or (iii) take any action that would
make any representation or warranty of Stockholder contained herein untrue or
incorrect or have the effect of preventing or disabling Stockholder from
performing Stockholder's obligations under this Agreement or the Proxy.
4
<PAGE>
4.7 Waiver of Appraisal Rights. Stockholder hereby waives any
rights of appraisal or rights to dissent from the Merger that Stockholder may
have.
4.8 Reliance by Parent. Stockholder understands and
acknowledges that Parent is entering into, and causing Sub to enter into, the
Merger Agreement in reliance upon Stockholder's execution and delivery of this
Agreement and the Proxy.
4.9 Further Assurances. From time to time, at Parent's
request and without further consideration, Stockholder shall execute and deliver
such additional documents and take all such further lawful action as may be
reasonably necessary or desirable to consummate and make effective the
transactions contemplated by this Agreement and the Proxy.
4.10 No Finder's Fees; No Payments to Stockholders. Other
than existing financial advisory and investment banking arrangements and
agreements entered into by the Company, no broker, investment banker, financial
adviser or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Stockholder.
Except as set forth on Schedule 4.10, there are no payments due or to become due
to the Stockholder or any of the Stockholder's Subsidiaries or affiliates from
the Company or any of its Subsidiaries in connection with or as a result of the
consummation of the transactions contemplated by the Merger Agreement or this
Agreement or otherwise.
5. Stop Transfer; Changes in Shares. Each Stockholder agrees
with, and covenants to, Parent that beginning on the date hereof and ending on
the date of termination of the Agreement, such Stockholder shall not request
that the Company, and the Company hereby agrees with, and covenants to, Parent
that beginning on the date hereof and ending on the date of termination of this
Agreement it will not, register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of such Stockholder's
Shares, unless such transfer is made in compliance with this Agreement. In the
event of a dividend or distribution, or any change in the Company Common Stock
by reason of any dividend, split-up, recapitalization, combination, exchange of
shares or the like, the term "Shares" shall be deemed to refer to and include
the Shares as well as all such dividends and distributions and any shares into
which or for which any or all of the Shares may be changed or exchanged.
6. Conduct as a Director. Notwithstanding anything in this
Agreement to the contrary, the covenants and agreements set forth herein shall
not prevent any of the Stockholders' designees serving on the Company's Board of
Directors from taking any action, subject to the applicable provisions of the
Merger Agreement, while acting in such designee's capacity as a director of the
Company; provided that such action shall not in any manner affect Stockholder's
obligations under this Agreement or the Proxy.
7. Termination. This Agreement shall terminate, and the
transactions contemplated hereby shall be abandoned, automatically upon the
termination of the Merger Agreement in accordance with its terms. In addition,
any Stockholder may terminate this Agreement at any time if the Effective Time
shall not have occurred on or prior to July 31, 2000.
5
<PAGE>
8. Irrevocable Proxy. Each Stockholder acknowledges that,
concurrently with the execution of this Agreement, Stockholder has executed and
delivered to Parent an Irrevocable Proxy in the form attached as Exhibit A
hereto (the "Proxy").
9. Miscellaneous.
9.1 Entire Agreement. This Agreement, the Proxy and the
Merger Agreement 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 any of the parties with respect to
the subject matter hereof.
9.2 Certain Events. Each Stockholder agrees that this
Agreement and the Proxy and the obligations hereunder and thereunder shall
attach to such Stockholder's Shares and shall be binding upon any person or
entity to which legal or beneficial ownership of such Shares shall pass, whether
by operation of law or otherwise, including, without limitation, such
Stockholder's heirs, guardians, administrators or successors. Notwithstanding
any transfer of Shares, the transferor shall remain liable for the performance
of all obligations of the transferor under this Agreement.
9.3 Assignment. This Agreement shall not be assigned without
the prior written consent of the other parties hereto and no rights, or any
direct or indirect interest herein, shall be transferable hereunder without the
prior written consent of the other parties hereto; provided that Parent and Sub
may assign or transfer their rights hereunder to any wholly-owned subsidiary of
Parent, or any corporation that owns all of the outstanding stock of Parent,
directly or indirectly, which assignment shall not relieve Parent or Sub of any
of their respective obligations hereunder.
9.4 Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties to be bound thereby.
9.5 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given if
delivered personally or by facsimile transmission or mail (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
If to Stockholders: At the addresses set forth on Schedule
1 hereto
with a copy to: Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, NY 10005
Attention: Lawrence Lederman, Esq. and
Robert S. Reder, Esq.
Telephone: (212) 530-5000
Telecopy: (212) 530-5219
6
<PAGE>
If to the Company: Carson, Inc.
64 Ross Road
Savannah, GA 31405
Attention: Malcolm R. Yesner
Telephone: (912) 651-3400
Telecopy: (912) 651-3424
with a copy to: Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, NY 10005
Attention: Lawrence Lederman, Esq. and
Robert S. Reder, Esq.
Telephone: (212) 530-5000
Telecopy: (212) 530-5219
If to Parent or Sub: Cosmair, Inc.
575 Fifth Avenue
New York, NY 10017
Attention: John D. Sullivan
Telephone: (212) 984-4181
Telecopy: (212) 984-4946
with a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Stephen E. Jacobs, Esq. and
Ellen J. Odoner, Esq.
Telephone: (212) 310-8000
Telecopy: (212) 310-8007
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
9.6 Severability. Whenever possible, each provision or portion
of any provision of this Agreement and the Proxy will be interpreted in such
manner as to be effective and valid under applicable law but if any provision or
portion of any provision of this Agreement or the Proxy is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement and the Proxy will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision or portion
of any provision had never been contained herein.
9.7 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specified terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
7
<PAGE>
enforce specifically the terms and provisions hereof in any court of competent
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
9.8 Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or the Proxy or otherwise available in respect
hereof at law or in equity shall be cumulative and not alternative, and the
exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
9.9 No Waiver. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or the Proxy or
otherwise available in respect hereof at law or in equity, or to insist upon
compliance by any other party hereto with its obligations hereunder or
thereunder, and any custom or practice of the parties at variance with the terms
hereof or thereof, shall not constitute a waiver by such party of its right to
exercise any such or other right, power or remedy or to demand such compliance.
9.10 No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
9.11 Governing Law. This Agreement and the Proxy shall be
governed by and construed in accordance with the laws of the State of Delaware,
without giving effect to the principles of conflicts of law thereof.
9.12 Consent to Jurisdiction. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated by this
Agreement may be brought against any of the parties in any federal court located
in the State of Delaware or any Delaware state court, and each of the parties
hereto hereby consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and waives any objection to venue laid therein. Process in any such suit, action
or proceeding may be served on any party anywhere in the world, whether within
or without the State of Delaware. Without limiting the generality of the
foregoing, each party hereto agrees that service of process upon such party at
the address referred to in Section 9.5, together with written notice of such
service to such party, shall be deemed effective service of process upon such
party.
9.13 Descriptive Headings. The descriptive headings used
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.
9.14 Counterparts; Effectiveness. This Agreement may be
executed in counterparts, each of which shall be deemed to be an original, but
all of which, taken together, shall constitute one and the same Agreement.
Notwithstanding the foregoing, this Agreement shall not be effective as to any
Stockholder until executed by all Stockholders.
8
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by each
party hereto as of the date first above written.
COSMAIR, INC.
By: /s/Roger Dolden
Name: Roger Dolden
Title: Executive Vice President,
Chief Administrative Officer
CRAYON ACQUISITION CORP.
By: /s/Roger Dolden
Name: Roger Dolden
Title: Executive Vice President,
Chief Administrative Officer
CARSON, INC.
By: /s/Malcolm R. Yesner
Name: Malcolm R. Yesner
v Title: Chief Executive Officer
DNL PARTNERS LIMITED PARTNERSHIP
By: DNL Group, L.L.C.
General Partner
By: /s/Vincent A. Wasik
Name: Vincent A. Wasik
Title: Manager
/s/Lawrence E. Bathgate, II
Lawrence E. Bathgate, II
9
<PAGE>
/s/Abbey J. Butler
Abbey J. Butler
/s/Melvyn J. Estrin
Melvyn J. Estrin
/s/James L. Hudson
James L. Hudson
/s/Leroy Keith
Leroy Keith
/s/Jack Kemp
Jack Kemp
/s/Suzanne de Passe
Suzanne de Passe
/s/John L. Sabre
John L. Sabre
/s/Vincent A. Wasik
Vincent A. Wasik
/s/Malcolm R. Yesner
Malcolm R. Yesner
/s/S. Garrett Stonehouse
S. Garrett Stonehouse
/s/Robert W. Pierce
Robert W. Pierce
/s/Arthur Gnann
Arthur Gnann
10
<PAGE>
/s/Julia E. Hudson
Julia E. Hudson
/s/Joyce Roche
Joyce Roche
NORTHWEST CAPITAL INC.
By: /s/Bradford N. Creswell
Name: Bradford N. Creswell
Title: President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as trustee and in other fiduciary capacities
By: /s/ Joan L. Huggins-
Name: Joan L. Huggins
Title: Vice President
M&A INVESTMENTS, INC.
By: /s/Abbey J. Butler-
Name: Abbey J. Butler
Title:
NII HEALTH CARE CORPORATION
By: /s/Abbey J. Butler
Name: Abbey J. Butler
Title:
11
<PAGE>
C.B. EQUITIES CAPITAL CORP. LLC
By: /s/Abbey J. Butler
Name: Abbey J. Butler
Title: Portfolio Manager
OXFORD CAPITAL MANAGEMENT LLC
By: /s/Abbey J. Butler
Name: Abbey J. Butler
Title: Portfolio Manager
C.B. EQUITIES RETIREMENT TRUST
By: /s/Abbey J. Butler
Name: Abbey J. Butler
Title: Portfolio Manager
12
<PAGE>
Schedule I
- --------------------------------------- ------------------- --------------------
Existing Class A Existing Class C
Name Shares (a) Shares
---- ------ ------
- --------------------------------------- ------------------- --------------------
DNL Partners Limited Partnership 0 3,015,463
- --------------------------------------- ------------------- --------------------
Lawrence E. Bathgate, II 32,835 (b) 0
- --------------------------------------- ------------------- --------------------
Abbey J. Butler 143,335 (c) 11,540
- --------------------------------------- ------------------- --------------------
Melvyn J. Estrin 26,335 (d) 11,540
- --------------------------------------- ------------------- --------------------
James L. Hudson 36,135 (e) 0
- --------------------------------------- ------------------- --------------------
Leroy Keith 23,500 (f) 341,100
- --------------------------------------- ------------------- --------------------
Jack Kemp 26,335 (g) 46,139
- --------------------------------------- ------------------- --------------------
Suzanne de Passe 22,835 (h) 11,540
- --------------------------------------- ------------------- --------------------
John L. Sabre 38,336 (i) 23,069
- --------------------------------------- ------------------- --------------------
Vincent A. Wasik 52,170 (j) 0
- --------------------------------------- ------------------- --------------------
Malcolm R. Yesner 149,467 0
- --------------------------------------- ------------------- --------------------
S. Garrett Stonehouse 0 159,180
- --------------------------------------- ------------------- --------------------
Robert W. Pierce 18,000 0
- --------------------------------------- ------------------- --------------------
Arthur Gnann 0 29,677
- --------------------------------------- ------------------- --------------------
Julia E. Hudson 0 11,540
- --------------------------------------- ------------------- --------------------
Joyce Roche 0 118,713
- --------------------------------------- ------------------- --------------------
Northwest Capital Inc. 0 159,180
- --------------------------------------- ------------------- --------------------
Morgan Guaranty Trust Company
of New York 0 1,187,482
- --------------------------------------- ------------------- --------------------
M&A Investments, Inc. 1,359,690 0
- --------------------------------------- ------------------- --------------------
NII Health Care Corporation 372,000 0
- --------------------------------------- =================== ====================
C.B. Equities Capital Corp. LLC 262,500 0
- --------------------------------------- =================== ====================
Oxford Capital Management LLC 212,500 0
- --------------------------------------- =================== ====================
C.B. Equities Retirement Trust 100,000 0
- --------------------------------------- =================== ====================
TOTAL 2,875,973 5,126,163
- --------------------------------------- ------------------- --------------------
(a) The Directors have received restricted share grants in each of the last
three years which vest one-third each year on the anniversary date of
the grant. Vested shares may be voted and transferred; unvested shares
may be voted but may not be transferred; all unvested shares will vest
when the Director leaves office in connection with the transactions
contemplated by this Agreement. The notes below set forth the number of
vested Class A Shares held by each Director; the remainder are
unvested.
(b) 6,849 vested.
(c) 109,182 vested.
(d) 5,182 vested.
(e) 29,982 vested.
(f) 5,000 vested.
(g) 5,182 vested.
(h) 5,182 vested.
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(i) 9,182 vested.
(j) 22,619 vested.
For purposes of Section 9.5, the address for each Stockholder
is as follows:
DNL Partners Limited Partnership
c/o MCG Global, LLC
One Morningside Drive North
Suite 200
Westport, CT 06880
Lawrence E. Bathgate, II
c/o Bathgate, Wegener & Wolf
One Airport Road
Lakewood, NJ 08701
Abbey J. Butler
207 Dune Road
Box 137
Westhampton Beach, NY 11978
Melvyn J. Estrin
7200 Wisconsin Avenue
Suite 600
Bethesda, MD 20814
James L. Hudson
2200 20th Street
Washington, DC 20009
Leroy Keith
64 Ross Road
Savannah, GA 31405
Jack Kemp
Empower America
1776 I Street N.W.
Washington, DC 20006
Suzanne de Passe
de Passe Entertainment
5750 Wilshire Boulevard
Suite 640
Los Angeles, CA 90036
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John L. Sabre
1060 First Avenue
New York, NY 10128
Vincent A. Wasik
c/o MCG Global, LLC
One Morningside Drive North
Suite 200
Westport, CT 06880
Malcolm R. Yesner
64 Ross Road
Savannah, GA 31405
S. Garrett Stonehouse
MCG Global, LLC
One Morningside Drive North
Suite 200
Westport, CT 06880
Robert W. Pierce
64 Ross Road
Savannah, GA 31405
Arthur Gnann
10 Sherborne Road
Savannah, GA 31419
Julia E. Hudson
622 G Street S.W.
Washington, DC 20024
Joyce Roche
2 Flowing Wells Lane
Savannah, GA 31411
Northwest Capital Inc.
1201 3rd Avenue
Suite 2765
Seattle, WA 98101
Morgan Guaranty Trust Company of New York
522 Fifth Avenue
New York, NY 10036
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M&A Investments, Inc.
5910 North Central Expressway
Suite 1780
Dallas, TX 75206
NII Health Care Corporation
5910 North Central Expressway
Suite 1780
Dallas, TX 75206
C.B. Equities Capital Corp. LLC
Oxford Capital Management LLC
C.B. Equities Retirement Trust
c/o Abbey J. Butler, Portfolio Manager
207 Dune Road
Box 137
Westhampton Beach, NY 11978
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Schedule 4.10
1. Subscription and Registration Rights Agreement among the Company and
each of Joyce Roche and Arthur P. Gnann III, each dated as of August
15, 1996, which relate to the stock securing the Promissory Notes
described in Section 4.11(b) of this Company Disclosure Letter.
2. The Promissory Notes of Joyce Roche and Arthur P. Gnann III, payable to
the Company, each dated as of August 15, 1996. See Section 4.11(b) of
this Company Disclosure Letter.
3. 1996 Non-Employee Directors Equity Incentive Program, as amended and
restated November 20, 1998.
4. 1996 Long-Term Incentive Plan.
5. Amended and Restated Employment Agreement by and among the Company and
Malcolm Yesner, dated as of November 1, 1999.
6. Noncompetition Agreement by and between the Company and Malcolm Yesner,
dated November 1, 1999.
7. Employment Agreement by and between the Company's wholly-owned
subsidiary, Carson Products Company ("CPC"), and Robert W. Pierce,
dated as of May 9, 1997, as amended March 18, 1999.
8. Settlement Agreement by and between CPC, AM Cosmetics Corp. and AM
Products Company, dated as of February 25, 2000.
9. Separation Agreement and General Release by and among Joyce M. Roche
and CPC, dated as of September 16, 1998. The Company is currently
making severance payments to be completed by March 31, 2000.
10. CPC Retirement Plan with Diversified Investment Advisors, effective as
of October 31, 1955, with amendments.
11. Diversified Investment Advisors Pension Services Agreement for Johnson
Products Co., Inc., Account No.: QK61442, effective as of September 1,
1998.
12. Carson Group Health Benefit Plan with USI Administrators, effective
January 1, 2000, includes Administrative Services Contract with Jones,
Hill & Mercer and a Utilization Review Services Agreement with
Intracorp.
13. Carson Group Health Plan- Eye Care Plan of America, Group No.: CARPC,
effective as of March 11, 1998.
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14. Cigna Healthcare Group Services Agreements, effective as of October 1
1999.:
o Cigna HealthCare Group of Florida, Inc. Agreement No. J012-01 and
JX10-01
o Cigna HealthCare Group of Georgia, Inc. Agreement No. 1112-01 and
2070-01
o Cigna HealthCare Group of Illinois, Inc. Agreement No. 0903-01
and H371-01
o Cigna HealthCare Mid-Atlantic, Inc. Agreement No. BB10-01 and
H373-01
o Cigna HealthCare Group of New Jersey, Inc. Agreement No. 1582-20
and 6449-20
o Cigna HealthCare Group of New York, Inc. Agreement No. 1582-60
and 6449-60
o Cigna HealthCare Group of St. Louis, Inc. Agreement No. 1449-01
and 6197-01
o Cigna HealthCare Group of Tennessee, Inc. Agreement No. 1730 and
6083-01
15. Johnson Group Health Plan- Prudential Dental Plan Contract, Group
Contract No.: G-77691, effective as of September 1, 1998.
16. Flexible Benefit Plan, effective as of April 1, 1997.
17. Stop Loss (Excessive Loss Coverage) Agreement with Elite Underwriters
Agency, effective January 1, 2000.
18. Savannah Business Group Membership Agreement, effective as of January
1985.
19. Colonial Cancer & Accident Plans (Supplemental Benefits), effective
January 1, 2000.
20. Supplemental Cigna Accident Policy, No. OK817053, effective January 1,
1998.
21. Cigna Group Insurance Group Universal Life Insurance (Supplemental),
Employer No. 2403220.
22. The Standard Insurance Company, basic life insurance policies and
short/long term disability (for Carson and Johnson).
23. Atlantic Mutual Workers' Compensation Insurance.
24. A. Gnann is being provided post-retirement health care benefits. See
Item 32 of Section 4.13(a) of this Company Disclosure Letter.
25. Rights of Indemnification and Insurance pursuant to Section 7.06 of the
Merger Agreement.
26. Payment for Company Common Stock pursuant to Section 3.01(c) of the
Merger Agreement.
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27. Payment for Company Stock Options pursuant to Section 3.01(e) of the
Merger Agreement.
28. Reimbursement to Vincent Wasik for $25,000 in legal fees paid to
Skadden, Arps, Slate, Meagher & Flom LLP.
29. Management Assistance Agreement between Carson Products Company and MCG
Global, LLC, dated September 1, 1999. No payments will be made under
the Management Assistance Agreement between the date hereof and the
Control Date, except for the accrued monthly fees and reimbursement of
expenses, which reimbursement of expenses is not expected to exceed
$50,000.
30. Letter of Credit Reimbursement Agreement from the Company to Lawrence
E. Bathgate, II, Abbey J. Butler, Melvyn J. Estrin, John L. Sabre,
Vincent A. Wasik and Malcolm R. Yesner, dated February 25, 2000, as
agreed and accepted by DNL Partners Partnership Limited.
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EXHIBIT A
TO STOCKHOLDERS AGREEMENT
IRREVOCABLE PROXY
The undersigned stockholder of Carson, Inc., a Delaware
corporation (the "Company"), hereby irrevocably (to the fullest extent provided
by law, but subject to automatic termination and revocation as provided below)
appoints Crayon Acquisition Corp., a Delaware corporation ("Sub"), the attorney
and proxy of the undersigned, with full power of undersigned's rights with
respect to the shares of capital stock of the Company owned beneficially or of
record by the undersigned, which shares are listed on the final page of this
Proxy, and any and all other shares or securities of the Company issued or
issuable with respect thereof or otherwise acquired by stockholder on or after
the date hereof, until the termination date specified in the Stockholders
Agreement referred to below (the "Shares"). Upon the execution hereof, all prior
proxies given by the undersigned with respect to the Shares are hereby revoked
and no subsequent proxies will be given as to the matters covered hereby prior
to the date of termination of the Stockholders Agreement (the "Termination
Date"). This proxy is irrevocable (to the fullest extent provided by law, but
subject to automatic termination and revocation as provided below), coupled with
an interest, and is granted in connection with the Stockholders Agreement, dated
as of February __, 2000, among the Company, Cosmair, Inc., a Delaware
corporation ("Parent"), Sub and the Stockholders party thereto, including the
undersigned stockholder (the "Stockholders Agreement"; capitalized terms not
otherwise defined herein being used herein as therein defined), and is granted
in consideration of Parent and Sub entering into the Merger Agreement referred
to therein.
The attorney and proxy named above will be empowered at any
time prior to the Termination Date to exercise all voting and other rights with
respect to the Shares (including, without limitation, the power to execute and
deliver written consents with respect to the Shares) of the undersigned at every
annual, special or adjourned meeting of stockholders of the Company and in every
written consent in lieu of such a meeting, or otherwise: (i) in favor of the
Merger, the execution and delivery by the Company of the Merger Agreement and
the approval of the terms thereof and each of the other actions contemplated by
the Merger Agreement and the Stockholders Agreement and any actions required in
furtherance thereof; (ii) against any action, any failure to act, or agreement
that would result in a breach in any respect of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement or the Stockholders Agreement; and (iii) except as otherwise agreed to
in writing in advance by Parent, against the following actions (other than the
Merger and the transactions contemplated by the Merger Agreement): (A) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving the Company or its Subsidiaries; (B) a sale,
lease or transfer of a material amount of assets of the Company or its
Subsidiaries, or a reorganization, recapitalization, dissolution or liquidation
of the Company or its Subsidiaries; (C) (1) any change in a majority of the
persons who constitute the board of directors of the Company; (2) any change in
the present capitalization of the Company or any of its Subsidiaries or any
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amendment of the Company's or any Subsidiary's Certificate of Incorporation or
Bylaws (or comparable organizational documents); (3) any other material change
in the Company's or any Subsidiary's corporate structure or business; or (4) any
other action involving the Company or its Subsidiaries which is intended, or
could reasonably be expected, to impede, interfere with, delay, postpone, or
adversely affect the Merger and the transactions contemplated by this Agreement
and the Merger Agreement.
The attorney and proxy named above may only exercise this
proxy to vote the Shares subject hereto in accordance with the preceding
paragraph, and may not exercise this proxy in respect of any other matter. The
undersigned stockholder may vote the Shares (or grant one or more proxies to
vote the Shares) on all other matters.
Any obligation of the undersigned hereunder shall be binding
upon the successors and assigns of the undersigned.
This proxy is irrevocable, but shall automatically terminate
and be revoked and be of no further force and effect on and after the
Termination Date.
Dated: February __, 2000 [STOCKHOLDER]
By: _____________________
Name:
Title:
Shares Owned: __________________
21
SETTLEMENT AGREEMENT
SETTLEMENT AGREEMENT (the "Settlement Agreement"), dated as of February
25, 2000, between AM Products Company, formerly known as AM Cosmetics, Inc.
("AM"), a corporation duly organized and existing pursuant to the laws of the
State of Delaware with its principal place of business located in North
Arlington, New Jersey, AM Cosmetics Corp., formerly known as PAM Acquisition
Corp. ("AM Cosmetics"), a corporation duly organized and existing pursuant to
the laws of the State of Delaware with its principal place of business in North
Arlington, New Jersey, and Carson Products Company ("Carson"), a corporation
duly organized and existing pursuant to the laws of the State of Delaware with
its principal place of business located in Savannah, Georgia.
WHEREAS, AM commenced an arbitration proceeding against Carson before
the American Arbitration Association, entitled AM Cosmetics, Inc. v. Carson
Products Company, Case No. 13-181-01123-98 (the "Arbitration"); and
WHEREAS, Carson commenced a lawsuit against AM in the Superior Court of
Fulton County, State of Georgia, entitled Carson Products Company, a Delaware
Corporation v. AM Cosmetics, Inc., a Delaware Corporation, Civil Action No.
1999CV08276 (the "Lawsuit"); and
WHEREAS, Carson filed a Verified Complaint for Declaratory Judgment
against AM Cosmetics and AM in the Superior Court of the State of New Jersey,
Chancery Division, for Bergen County on or about May 13, 1999, entitled Carson
Products Company v. AM Cosmetics Corp. and AM Products Company, (the "New Jersey
Action"); and
<PAGE>
WHEREAS, AM, AM Cosmetics and Carson have now agreed to settle and
resolve all disputes, claims and counterclaims of any kind whatsoever asserted
by each of them in, or otherwise arising out of, the Lawsuit, the New Jersey
Action and the Arbitration;
NOW, THEREFORE, the parties hereby agree as follows:
1. Carson shall pay to AM, by wire transfer, the sum of two million
dollars ($2,000,000.00) as follows: (a) one million dollars ($1,000,000.00) on
or before February 25, 2000, and (b) one million dollars ($1,000,000.00) (the
"Second Payment") on or before the Second Payment Date (as defined below).
"Second Payment Date" means the earlier of July 31, 2000 or the closing of the
merger (the "Merger") whereby Crayon Acquisition Corp. ("Sub"), a wholly-owned
subsidiary of Cosmair, Inc. ("Parent"), will merge with and into Carson's parent
corporation, Carson, Inc. ("CIC"), pursuant to an Agreement and Plan of Merger
dated as of February 25, 2000 by and among Parent, Sub and CIC (the "Merger
Agreement").
2. Concurrently with the execution and delivery of this Settlement
Agreement, as a condition to the performance by AM and AM Cosmetics of their
obligations hereunder, six directors of CIC have caused GrandBank (the "Bank")
to issue an irrevocable letter of credit for the benefit of AM, a copy of which
is attached hereto as Annex A (the "Letter of Credit"), providing for the
payment by the Bank of up to $690,000 to AM upon presentation of the documents
described in the Letter of Credit to the Bank no sooner than March 31, 2000 in
the event that, as of March 31, 2000 at 5:00 P.M., AM has not received full and
final payment of the $2 million settlement amount described in paragraph 1
hereinabove. In that event, AM shall be entitled to demand payment from the Bank
under the Letter of Credit for any and all portion(s) of such $2 million owed to
AM by Carson that AM has not received as of March 31, 2000 at 5:00 P.M. up to
2
<PAGE>
the maximum amount of $690,000. Nothing contained herein is intended to limit or
affect, nor should it be construed to limit or affect, the provisions of the
Letter of Credit.
3. Carson is presently the owner of 358.679399 shares of Payment In Kind
Preferred Shares (the "Preferred Shares") of AM Cosmetics. Carson purchased
certain preferred shares pursuant to an agreement entitled "Subscription
Agreement dated as of June 26, 1996 by and among MORNINGSIDE AM ACQUISITION
CORP. and CARSON PRODUCTS COMPANY with respect to the shares of the capital
stock of MORNINGSIDE AM ACQUISITION CORP." ("Subscription Agreement"), and on or
about June 27, 1997, exchanged such shares for the Preferred Shares issued by AM
Cosmetics. Pursuant to this Settlement Agreement, on or before February 25,
2000, Carson shall deliver and surrender to AM Cosmetics for cancellation
(without further payment of any consideration by AM Cosmetics or AM to Carson)
stock certificates evidencing its ownership of certain of the Preferred Shares
together with a stock transfer form duly executed in blank, together with a
Certificate and Agreement Covering Lost Stock Certificates with respect to the
remainder of its Preferred Shares in form and substance reasonably satisfactory
to AM with respect to any certificates for the Preferred Shares which cannot be
located by Carson. Carson agrees to waive and relinquish, and hereby does waive
and relinquish, any and all of its rights and remedies with respect to and/or in
connection with the Preferred Shares, whether set forth in the Subscription
Agreement, under the Certificate of Incorporation of AM Cosmetics or otherwise.
4. AM shall transfer to Carson all of the "Cutex" brand products in AM's
custody or possession as of the date of this Settlement Agreement that are in
containers that bear "Cutex" trademarks or trade names (the "Cutex products").
In exchange, Carson shall pay to AM, on or before March 2, 2000, by certified or
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<PAGE>
bank check or by wire transfer, the sum of one dollar ($1.00). Delivery of all
the Cutex products shall be effective upon Carson or its carrier picking up said
products at AM's warehouse at 4014 First Avenue, Brooklyn, New York 11232 ("AM's
warehouse"), during normal business hours, and the risk of loss of said products
shall be borne by AM until such delivery. Carson shall bear the risk of loss
upon delivery of the aforesaid inventory and products to the carrier. Carson
agrees to cause the Cutex products to be picked up by March 2, 2000, after which
AM's obligation to transfer said products to Carson, and Carson's right to
delivery of, possession of and/or title to the Cutex products, shall terminate.
Carson acknowledges and agrees that the Cutex products that AM transfers to
Carson pursuant to this Settlement Agreement represents and constitutes all of
the Cutex products in AM's possession.
5. AM shall transfer to Carson all of the "Dark & Lovely" brand products
in AM's custody or possession as of the date of this Settlement Agreement that
are in containers that bear "Dark & Lovely" trademarks or trade names (the "Dark
& Lovely products"). In exchange, Carson shall pay to AM, on or before March 2,
2000, by certified or bank check or by wire transfer, the sum of one dollar
($1.00). Delivery of all the Dark & Lovely products shall be effective upon
Carson or its carrier picking up said products at AM's warehouse during normal
business hours, and the risk of loss of said products shall be borne by AM until
such delivery. Carson shall bear the risk of loss upon delivery of the aforesaid
inventory and products to the carrier. Carson agrees to cause the Dark & Lovely
products to be picked up March 2, 2000, after which AM's obligation to transfer
the Dark & Lovely products to Carson, and Carson's right to delivery of,
possession of and/or title to the Dark & Lovely products, shall terminate.
Carson acknowledges and agrees that the Dark & Lovely products that AM transfers
to Carson pursuant to this Settlement Agreement represents and constitutes all
of the Dark & Lovely products in AM's possession.
4
<PAGE>
6. AM shall bear no responsibility for any costs relating to, arising from
or associated with returns by customers of any of the Cutex products or the Dark
& Lovely products after February 25, 2000, including, without limitation,
reimbursement to said customers for returned Cutex or Dark & Lovely products.
Although Carson bears responsibility for all costs relating to, arising from or
associated with returns by customers of any of the Cutex products or the Dark &
Lovely products prior to February 25, 2000, including, without limitation,
reimbursement to said customers for returned Cutex or Dark & Lovely products, AM
shall not seek reimbursement from Carson for any such costs arising from or
associated with returns of the Cutex products or Dark & Lovely products that
occurred prior to February 25, 2000.
7. Simultaneously with the exchange between the parties of executed copies
of this Settlement Agreement, the parties shall, in addition, execute, or cause
their respective counsel to execute, and exchange the following documents: (i) a
Consent Order of Dismissal With Prejudice, a copy of which is annexed hereto as
Exh. A, terminating the Lawsuit with prejudice; (ii) a Stipulation of Dismissal
With Prejudice, a copy of which is annexed hereto as Exh. B, terminating the
Arbitration with prejudice; (iii) a Notice of Voluntary Dismissal With
Prejudice, a copy of which is annexed hereto as Exh. C, terminating the New
Jersey Action with prejudice; and (iv) Releases, copies of which are annexed
collectively hereto as Exh. D (the "Releases").
8. Simultaneously with or immediately following the exchange between the
parties of executed copies of this Settlement Agreement, AM's attorneys, Baker &
McKenzie, 805 Third Avenue, New York, New York 10022 will cause to be filed the
Consent Order of Dismissal With Prejudice, terminating the Lawsuit with
prejudice; the Stipulation of Dismissal With Prejudice, terminating the
Arbitration with prejudice; and the Notice of Voluntary Dismissal With
Prejudice, terminating the New Jersey Action with prejudice, copies of which are
5
<PAGE>
annexed hereto as Exhs. A, B and C, respectively (collectively, the
"Stipulations of Dismissal"), in the appropriate fora.
9. The following agreements between AM and/or AM Cosmetics, on the one
hand, and Carson, on the other, are hereby cancelled and terminated as of the
date of this Settlement Agreement (to the extent that any of them has not
already been terminated prior thereto): (i) Management Agreement dated as of
June 26, 1996, as amended, a copy of which is annexed hereto as Exh. E, (ii)
Manufacturing Agreement dated as of April 30, 1997, a copy of which is annexed
hereto as Exh. F, (iii) Broker Agreement dated as of September 19, 1997, a copy
of which is annexed as Exh. G, (iv) Subscription Agreement, a copy of which is
annexed hereto as Exh. H, and (v) Commission Agreement dated as of August 1,
1996, a copy of which is annexed hereto as Exh. I, and (vi) any and all other or
further agreements (excluding this Settlement Agreement) between Carson, CIC
and/or any of their parents, subsidiaries, affiliates, divisions, joint venture
partners, predecessors, successors, assignees or grantees, on the one hand, and
AM, AM Cosmetics and/or any of their parents, subsidiaries, affiliates,
divisions, joint venture partners, predecessors, successors, assignees or
grantees, on the other.
10. Carson represents and warrants to AM and AM Cosmetics that: (a) (i)
Carson is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to enter into this Settlement Agreement and the Release to be
issued by Carson to AM (the "Carson Release") and to carry out its obligations
hereunder and thereunder, (ii) the execution and delivery of this Settlement
Agreement and the Carson Release by Carson and the consummation by Carson of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Carson and CIC and no other corporate
proceedings on the part of Carson or CIC are necessary to authorize this
6
<PAGE>
Settlement Agreement or the Carson Release or any of the transactions
contemplated hereby or thereby and (iii) each of this Settlement Agreement and
the Carson Release has been duly executed and delivered by Carson and
constitutes a legal, valid and binding obligation of Carson, enforceable against
Carson in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws relating to or affecting creditors' rights and remedies generally,
and except as the enforceability thereof is subject to the application of
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(b) Neither the execution and delivery of this Settlement
Agreement or the Carson Release by Carson nor the consummation of the
transactions contemplated hereby or thereby will: (i) conflict with or violate
any provision of the certificate of incorporation or bylaws of Carson, CIC or
any of their respective subsidiaries, (ii) conflict with or violate any statute,
law, rule, regulation, order, writ, injunction, judgment or decree applicable to
Carson, CIC or any of their respective subsidiaries or any of their respective
assets or (iii) conflict with or result in any violation or breach of,
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in or give to any person any right of
payment or reimbursement (other than reimbursement arrangements entered into in
connection with the issuance of the Letter of Credit), termination,
cancellation, modification or acceleration of, or result in the creation of any
lien pursuant to, any note, bond, mortgage, security agreement, indenture,
contract, agreement or other instrument or obligation to which Carson, CIC or
any of their respective subsidiaries is a party or by which any of their
respective assets is bound.
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<PAGE>
(c) Except for the filings expressly contemplated by this
Settlement Agreement, 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 public or
private third party, including any stockholder or creditor, is required to be
given, made or obtained by Carson, CIC or any of their respective subsidiaries
in connection with the execution, delivery or performance of this Settlement
Agreement or the Carson Release.
(d) Pursuant to the Merger Agreement and the applicable
provisions of the General Corporation Law of the State of Delaware, upon the
consummation of the Merger, Sub will be merged with and into CIC, the corporate
existence of CIC and Carson will continue and Carson's obligations under this
Settlement Agreement, the Carson Release and the Confession of Judgment (as
defined below in paragraph 16) will not be limited or otherwise affected by the
Merger.
11. AM and AM Cosmetics each represents and warrants to Carson that: (a)
(i)each of AM and AM Cosmetics is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to enter into this Settlement Agreement
and the Release to be issued by AM to Carson (the "AM Release") and to carry out
its obligations hereunder and thereunder, (ii) the execution and delivery of
this Settlement Agreement and the AM Release and the consummation by AM and AM
Cosmetics of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of AM and AM Cosmetics
and no other corporate proceedings on the part of AM and AM Cosmetics are
necessary to authorize this Settlement Agreement or the AM Release or any of the
transactions contemplated hereby or thereby and (iii) each of this Settlement
8
<PAGE>
Agreement and the AM Release has been duly executed and delivered by each of AM
and AM Cosmetics and constitutes a legal, valid and binding obligation of AM and
AM Cosmetics, enforceable against AM and AM Cosmetics in accordance with their
terms, except as may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws relating to or affecting
creditors' rights and remedies generally, and except as the enforceability
thereof is subject to the application of general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity).
(b) Neither the execution and delivery of this Settlement
Agreement or the AM Release by AM or AM Cosmetics nor the consummation of the
transactions contemplated hereby or thereby will: (i) conflict with or violate
any provision of the certificate of incorporation or bylaws of AM, AM Cosmetics
or any of their respective subsidiaries, (ii) conflict with or violate any
statute, law, rule, regulation, order, writ, injunction, judgment or decree
applicable to AM, AM Cosmetics or any of their respective subsidiaries or any of
their respective assets, or (iii) conflict with or result in any violation or
breach of, constitute a default (or an event that with notice or lapse of time
or both would become a default) under, result in or give to any person any right
of payment or reimbursement, termination, cancellation, modification or
acceleration of, or result in the creation of any lien pursuant to, any note,
bond, mortgage, security agreement, indenture, contract, agreement or other
instrument or obligation to which AM, AM Cosmetics or any of their respective
subsidiaries is a party or by which any of their respective assets is bound.
(c) Except for the filings expressly contemplated by this
Settlement Agreement, no notice, declaration, report or other filing or
registration with, and no waiver, consent, approval or authorization of, any
9
<PAGE>
governmental or regulatory authority or instrumentality or any other public or
private third party, including any stockholder or creditor, is required to be
given, made or obtained by AM, AM Cosmetics or any of their respective
subsidiaries in connection with the execution, delivery or performance of this
Settlement Agreement or the AM Release, except for the consent of holders of
shares of common stock of AM Cosmetics representing a majority of the voting
power of the outstanding shares of common stock, voting together as a single
class, which has been obtained.
12. Concurrently with the execution and delivery of this Settlement
Agreement, (a) Milbank, Tweed, Hadley & McCloy LLP, counsel to Carson, has
delivered a written opinion to AM in the form attached as Annex B hereto
(together with a reliance letter addressed to Parent); and (b) Baker & McKenzie,
counsel to AM and AM Cosmetics, has delivered a written opinion to Carson and
Cosmair, Inc., a Delaware corporation, in the form attached as Annex C hereto.
13. Neither AM nor Carson owes any past, present or future obligations
and/or duties over to the other under or pursuant to any of the agreements
described in paragraph 9 hereinabove, copies of which are annexed hereto as
Exhs. E, F, G, H and I.
14. Nothing contained in this Settlement Agreement, and no act undertaken
in contemplation or pursuant to this Settlement Agreement, should be construed
as, nor is intended to be, an admission of fault or liability by any party
hereto.
15. This Settlement Agreement and the documents annexed hereto constitute
the entire agreement between the parties hereto and supersede any and all prior
agreements or understandings between the parties hereto, whether written or
oral.
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16. As security for Carson's payments to AM described in paragraph 1
hereinabove, Carson, simultaneously with the execution of this Settlement
Agreement, shall execute and deliver to AM a confession of judgment with an
accompanying affidavit, a copy of which is annexed hereto as Exh. J (the
"Confession of Judgment"), in the amount of $325,500, representing the amount of
the Second Payment less the original face amount of the Letter of Credit (the
"Remainder"), plus a five percent addition as the agreed reasonable costs of
collection. In the event that AM has not received the Remainder on or before the
Second Payment Date, then, and in that event, AM shall be entitled to file,
record and enforce the Confession of Judgment at any time following the Second
Payment Date. The judgment shall bear interest at the rate of 12 percent per
annum beginning on the date set forth in the Confession of Judgment until AM
receives from Carson full payment of the amount of the judgment, including said
interest. In the event that AM has received the Remainder on or before the
Second Payment Date, then , and in that event, AM shall forthwith return to
Carson the original Confession of Judgment (and all executed copies thereof).
17. This Settlement Agreement may not be modified, altered, amended or
changed, except by written agreement signed by the parties hereto.
18. This Settlement Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective parents, subsidiaries and
affiliates.
19. This Settlement Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without reference to
conflicts of laws principles.
11
<PAGE>
20. This Settlement Agreement may be executed in counterparts, each
executed counterpart constituting an original but all counterparts together
constituting only one instrument.
21. Each of the parties hereto agrees to keep confidential and not to
disclose (and to cause its officers, directors, employees, agents and
representatives to keep confidential and not to disclose) the contents of this
Settlement Agreement and each of the documents executed in connection herewith
(collectively, the "Information"). Notwithstanding the foregoing, each of the
parties hereto shall be permitted to disclose Information (i) to the extent
required by applicable laws and regulations (including in connection with any
filings required under the rules and regulations of the Securities and Exchange
Commission with respect to the tender offer contemplated by the Merger Agreement
or the Merger) or by any subpoena or similar process, provided, however, that it
is agreed and understood that (x) Carson may deliver the Information to Parent
and its agents and representatives and Parent may also disclose the information
as permitted by clause (i) above and (y) each of the parties hereto may, on ten
(10) business days' prior written notice to the other parties hereto, disclose
any Information in any legal or court proceeding in which it is or may become a
party or party-in-interest; (ii) to the extent such Information (A) becomes
publicly available other than as a result of a breach of this Settlement
Agreement or (B) was available to such party on a non-confidential basis as of
the date hereof, or (iii) to the extent the parties hereto shall have consented
to such disclosure in writing.
IN WITNESS WHEREOF, the parties have executed this Settlement Agreement
as of the date first above written.
[remainder of page intentionally left blank]
12
<PAGE>
AM COSMETICS CORP.
formerly known as PAM ACQUISITION CORP.
By: /s/Stephen A. Heit
Stephen A. Heit, Executive Vice
President and Chief Financial Officer
Dated: February 25, 2000
AM PRODUCTS COMPANY
formerly known as AM COSMETICS, INC.
By: /s/Stephen A. Heit
Stephen A. Heit, Executive Vice
President and Chief Financial Officer
Dated: February 25, 2000
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
On the 25th day of February, 2000, before me personally came Stephen A.
Heit to me known, who, being by me duly sworn, did depose and say that he
resides at 57 Drum Hill Road, Wilton, Connecticut 06897; that he is the
Executive Vice President and Chief Financial Officer of AM COSMETICS CORP.,
formerly known as PAM ACQUISITION CORP., and of AM PRODUCTS COMPANY, formerly
known as AM COSMETICS, INC., the corporations described in and which executed
the foregoing instrument; and that deponent is authorized to execute the
foregoing instrument.
Sworn to before me this
25th day of February, 2000
/s/Robert S. Reder
Notary Public
13
<PAGE>
CARSON PRODUCTS COMPANY
By: /s/Malcolm R. Yesner
Malcolm R. Yesner, Chief Executive Officer
Dated: February 25, 2000
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
On the 25th day February, 2000, before me personally came Malcolm R.
Yesner, to me known, who, being by me duty sworn, did depose and say that he
resides at 4 Modena Road, Savannah, Georgia 31411; that he is Chief Executive
Officer of CARSON PRODUCTS COMPANY, the corporation described in and which
executed the foregoing instrument; and that deponent is authorized to execute
the foregoing instrument.
Sworn to before me this
25th day of February, 2000
/s/Sue J. Doyle
Notary Public
RELEASE
KNOW ALL MEN BY THESE PRESENTS:
That AM PRODUCTS COMPANY, formerly known as AM COSMETICS
COMPANY, INC. ("AM"), and AM COSMETICS CORP., formerly known as PAM ACQUISITION
CORP. ("AM Cosmetics"), designated as the "Releasor" as that term is defined
below, for and in consideration of the sum of One Million Dollars ($1,000,000)
to the Releasor in hand paid by CARSON PRODUCTS COMPANY ("Carson"), designated
as the "Releasee" as that term is defined below, and for the delivery of an
irrevocable letter of credit in the face amount of $690,000 and a confession of
judgement in the amount of $325,500 and of other good and valuable consideration
the receipt of which is hereby acknowledged by Releasor, has released, remised
and forever discharged, and by these presents does release, remise and forever
discharge the Releasee of and from all debts, obligations, liabilities,
remedies, reckonings, promises, covenants, agreements, contracts, endorsements,
bonds, specialties, controversies, suits, actions, causes of action, trespasses,
variances, judgments, extents, executions, damages, claims, counterclaims or
demands, in law or equity (collectively, "claims"), which against the Releasee
the Releasor ever had, now has or hereafter can, shall or may have from the
beginning of the world to the date of this Release, for, upon or by reason of
those arising out of or related to claims (a) asserted or which could have been
asserted in the action entitled Carson Products Company, a Delaware Corporation
v. AM Cosmetics, Inc., a Delaware Corporation, Civil Action No. 1999CV08276,
pending in the Superior Court of Fulton County, State of Georgia; and/or in an
arbitration proceeding, entitled AM Cosmetics, Inc. v. Carson Products Company,
Case No. 13-181-01123-98, pending before the American Arbitration Association;
and/or in the action entitled Carson Products Company v. AM Cosmetics Corp. and
AM Products Company, pending in the Superior Court of the State of New Jersey,
Chancery Division, for Bergen County; and/or (b) arising out of or relating to
any or all of the following agreements: a Management Agreement dated as of June
26, 1996 between AM and Carson, as amended, a Manufacturing Agreement dated as
of April 30, 1997 between AM and Carson, a Broker Agreement dated as of
September 19, 1997 between AM and Carson, a Subscription Agreement dated as of
June 26, 1996 by and among Morningside AM ACQUISITION CORP. and CARSON PRODUCTS
COMPANY with respect to the shares of the capital stock of MORNINGSIDE AM
ACQUISITION CORP.; and/or a Commission Agreement dated as of August 1, 1996
between AM and Carson, copies of which are annexed to the Settlement Agreement
dated as of February 25, 2000 by and among AM, AM Cosmetics and Carson (the
"Settlement Agreement") as Exhs. E, F., G, H and I, respectively, and/or any
other agreements between AM or AM Cosmetics or any of their respective
subsidiaries, on the one hand, and Carson or its parent corporation, Carson,
Inc. ("CIC"), or any of their respective subsidiaries, on the other hand; and/or
(c) relating to or arising from any business relationship between AM or AM
Cosmetics or any of their respective subsidiaries, on the one hand, and Carson
or CIC or any of their respective subsidiaries, on the other hand.
The term "Releasor" is defined to include AM and AM Cosmetics
and the term "Releasee" is defined to include Carson, and the terms "Releasor"
and "Releasee" shall also be deemed to include all of their respective current
and former partners, directors, officers, employees, agents, representatives,
servants, attorneys, parents, subsidiaries, affiliates, divisions, shareholders,
<PAGE>
joint venture partners, predecessors, successors, assignees, grantees and
fiduciaries, provided, however, that except as further modified by the terms of
the first paragraph herein, the Release given by the Releasors to the Releasees
(with the sole exception of Carson and its subsidiaries, predecessors and
successor entities) shall be without prejudice to any claims against any person
or entity that any of the Releasors has or may have preserved pursuant to or in
accordance with, and subject to the limitations set forth in, Section 6.2 of
that certain Restructuring Agreement dated as of June 1, 1999 by and among AM,
AM Cosmetics, certain of their affiliates and certain of their senior creditors
and equity interest holders (the "Restructuring Agreement"), the terms of which
are incorporated herein, provided, however, that, notwithstanding anything to
the contrary contained in this paragraph or in any other provision in this
Release or the Restructuring Agreement, this Release is intended to release, and
shall be deemed to release, claims based upon, arising out of or attributable
to, act(s) committed by any present or former officer or director of Carson
(including but not limited to Vincent A. Wasik and S. Garrett Stonehouse)
arising from, related to or in connection with that person's role and position
as officer or director or shareholder of Carson, CIC or any of their respective
subsidiaries.
In all references herein to any parties, persons, entities or
corporations, the use of any particular gender or the plural or singular number
is intended to include the appropriate gender or number as the text may require.
This Release may not be changed orally.
IN WITNESS HEREOF, the said Releasor has executed this Release
as of the date set forth below.
Dated: February 25, 2000
[remainder of page intentionally left blank]
<PAGE>
AM PRODUCTS COMPANY,
formerly known as AM
Cosmetics, Inc.,
RELEASOR
By: /s/Stephen A. Heit
Stephen A. Heit,
Executive Vice President
and Chief Financial Officer
AM COSMETICS CORP.,
formerly known as PAM
ACQUISITION CORP.,
RELEASOR
By: /s/Stephen A. Heit
Stephen A. Heit, Executive
Vice President and Chief
Financial Officer
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss:
On the 25th day of February, 2000, before more personally came Stephen
A. Heit to me known, who, being by me duly sworn, did depose and say that he
resides at 57 Drum Hill Road, Wilton, Connecticut 06897; that he is the
Executive Vice President Chairman and Chief Financial Officer of AM COSMETICS
CORP., formerly known as PAM ACQUISITION CORP., and of AM PRODUCTS COMPANY,
formerly known as AM COSMETICS, INC., the corporations described in and which
executed the foregoing RELEASE and that deponent is authorized to execute the
foregoing RELEASE.
Sworn to before me this
25th day of February, 2000
/s/ Robert S. Reder
Notary Public
RELEASE
KNOW ALL MEN BY THESE PRESENTS:
That CARSON PRODUCTS COMPANY ("Carson"), designated as the "Releasor"
as that term is defined below, for and in consideration of the sum of One Dollar
($1.00) to the Releasor in hand paid by AM PRODUCTS COMPANY, formerly known as
AM COSMETICS COMPANY, INC. ("AM"), and AM COSMETICS CORP., formerly known as PAM
ACQUISITION CORP. ("AM Cosmetics"), and of other good and valuable consideration
the receipt of which is hereby acknowledged by Releasor, has released, remised
and forever discharged, and by these presents does release, remise and forever
discharge the "Releasees," as that term is defined below, of and from all debts,
obligations, liabilities, remedies, reckonings, promises, covenants, agreements,
contracts, endorsements, bonds, specialties, controversies, suits, actions,
causes of action, trespasses, variances, judgments, extents, executions,
damages, claims, counterclaims or demands, in law or equity (collectively,
"claims"), which against the Releasee the Releasor ever had, now has or
hereafter can, shall or may have from the beginning of the world to the date of
this Release, for, upon or by reason of those arising out of or related to
claims (a) asserted or which could have been asserted in the action entitled
Carson Products Company, a Delaware Corporation v. AM Cosmetics, Inc., a
Delaware Corporation, Civil Action No. 1999CV08276, pending in the Superior
Court of Fulton County, State of Georgia; and/or in an arbitration proceeding,
entitled AM Cosmetics, Inc. v. Carson Products Company, Case No.
13-181-01123-98, pending before the American Arbitration Association; and/or in
the action entitled Carson Products Company v. AM Cosmetic Corp. and AM Products
Company, pending in the Superior Court of the State of New Jersey, Chancery
Division, for Bergen County; and/or (b) arising out of or relating to any or all
of the following agreements: a Management Agreement dated as of June 26, 1996
between AM and Carson, as amended, a Manufacturing Agreement dated as of April
30, 1997 between AM and Carson, a Broker Agreement dated as of September 19,
1997 between AM and Carson, a Subscription Agreement dated as of June 26,1996 by
and among MORNINGSIDE AM ACQUISITION CORP. and CARSON PRODUCTS COMPANY with
respect to the shares of the capital stock of MORNINGSIDE AM ACQUISITION CORP.
and/or a Commission Agreement dated as of August 1, 1996 between AM and Carson,
copies of which are annexed to the Settlement Agreement dated as of February 25,
2000 by and among AM, AM Products and Carson as Exhs. E, F, G, H and I,
respectively, and/or any other agreements between AM or AM Cosmetics or any of
their respective subsidiaries, on the one hand, and Carson or its parent
corporation, Carson, Inc. ("CIC"), or any of their respective subsidiaries, on
the other hand; and/or (c) relating to or arising from any business relationship
between AM or AM Cosmetics or any of their respective subsidiaries, on the one
hand, and Carson or CIC or any of their respective subsidiaries, on the other
hand.
The term "Releasor" is defined to include Carson and the term
"Releasee" is defined to include AM and AM Cosmetics, and the terms "Releasor"
and "Releasee" shall also be deemed to include all of their respective current
and former partners, directors, officers, employees, agents, representatives,
servants, attorneys, parents, subsidiaries, affiliates, divisions, shareholders,
joint venture partners, predecessors, successors, assignees, grantees and
fiduciaries.
<PAGE>
In all references herein to any parties, persons, entities or
corporations, the use of any particular gender or the plural or singular number
is intended to include the appropriate gender or number as the text may require.
This Release may not be changed orally.
IN WITNESS HEREOF, the said Releasor has executed this Release as of
the date set forth below.
Dated: February 25, 2000
CARSON PRODUCTS COMPANY,
RELEASOR
By: /s/Malcolm R. Yesner
Malcolm R. Yesner,
Chief Executive Officer
STATE OF GEORGIA )
COUNTY OF CHATHAM ) ss.:
On the 25th day February, 2000, before me personally came Malcolm R.
Yesner, to me known, who, being by me duly sworn, did depose and say that he
resides at 4 Modena Road, Savannah, Georgia 31411; that he is Chief Executive
Officer of CARSON PRODUCTS COMPANY, the corporation described in and which
executed the foregoing RELEASE and that deponent is authorized to execute the
foregoing RELEASE.
Sworn to before me this
25th day of February, 2000
/s/Sue J. Doyle
Notary Public
CARSON, INC.
64 Ross Road
Savannah, GA 31405
February 25, 2000
Lawrence E. Bathgate, II
c/o Bathgate, Wegener & Wolf
One Airport Road
Lakewood, NJ 08701
Abbey J. Butler
207 Dune Road
Box 137
Westhampton Beach, NY 11978
Melvyn J. Estrin
7200 Wisconsin Avenue
Suite 600
Bethesda, MD 20814
John L. Sabre
1060 Fifth Avenue
New York, NY 10128
Vincent A. Wasik
c/o MCG Global, LLC
One Morningside Drive North
Suite 200
Westport, CT 06880
Malcolm R. Yesner
64 Ross Road
Savannah, GA 31405
Dear Sirs:
We understand that you have each deposited $116,150 with
GrandBank to be used as collateral by GrandBank for its issuance of an
irrevocable letter of credit due March 31, 2000 to guarantee a portion of
Carson's undertaking to pay the $2 million litigation settlement amount due to
AM Products Company by March 31, 2000 (the "Litigation Settlement"). If Carson
pays the full $2 million on or prior to March 31, 2000, there will be no draw
down on the letter of credit, the letter of credit will terminate and the bank
will return each of your deposits together with any interest payments due, as
arranged with GrandBank. Thereafter, you can request reimbursement of your pro
rata portion of GrandBank's $6,900 letter of credit fee from Carson.
<PAGE>
In the event that amounts are drawn down on the letter of
credit, your pro rata portion of the amount drawn down (plus GrandBank's $6,900
letter of credit fee) will be repaid from one of two sources as follows: (i) if
Cosmair's tender offer for Carson's shares of common stock is consummated, up to
$531,492 or such less amount as has been drawn down (which amount shall
constitute full and complete contribution of DNL Partners Limited Partnership to
the Litigation Settlement) of the repayments will be paid by DNL Partners
Limited Partnership out of the proceeds received by them from their tender of
shares of common stock in the Cosmair, Inc. tender offer, and any remaining
amount will be paid by Carson, or (ii) if the merger with Cosmair, Inc. has not
been completed by July 31, 2000, the full amount of the repayments will be paid
by Carson. In either case, any amounts owed to you will accrue interest at the
rate of 12% per annum from and including April 1, 2000 to the date of repayment.
Any amounts owing to you by Carson under this Letter Agreement shall constitute
senior unsecured indebtedness of Carson. Any portion of your deposit not drawn
down will be returned to you by GrandBank as described above.
This Letter 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. This Letter Agreement may be executed in any
number of counterparts and by the parties hereunder 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. Neither this Letter
Agreement nor any terms hereof may be changed, waived, discharged or terminated
unless such change, waiver, discharge or termination is in writing signed by the
parties hereto.
Sincerely,
CARSON, INC.
By: /s/Robert W. Pierce
Name: Robert W. Pierce
Title: Chief Financial
Officer
AGREED TO AND ACCEPTED:
DNL PARTNERS LIMITED PARTNERSHIP
By: DNL Group, L.L.C.
By: /s/ Vincent A. Wasik
Name: Vincent A. Wasik
Title: Manager
By: /s/Lawrence E. Bathgate, II
Name: Lawrence E. Bathgate, II
Title: Member
2
Carson, Inc.
64 Ross Road
Savannah, GA 31405
FOR IMMEDIATE RELEASE
CARSON, INC. SIGNS MERGER AGREEMENT TO BE ACQUIRED BY SUBSIDIARY OF L'OREAL
---------------------------------------------------------------------------
NEW YORK, NY, February 28, 2000 - Carson, Inc. (NYSE:CIC), announced today it
has signed a definitive merger agreement with Cosmair, Inc., the U.S. subsidiary
of L'Oreal, S.A., of Paris, France, under which Cosmair will acquire Carson. The
merger agreement provides for a cash tender offer, to commence in approximately
one week, in which Cosmair will acquire all of the outstanding shares of common
stock of Carson at $5.20 net per share.
The offer will be conditioned on the satisfaction of customary conditions,
including the expiration or termination of the waiting period under
Hart-Scott-Rodino Antitrust Improvements Act and the receipt of a majority of
the shares of Company common stock.
The board of directors of Carson has unanimously approved the merger agreement
and recommended that stockholders tender their shares in the offer. PaineWebber
Incorporated, acting as Carson's financial advisor, has delivered its opinion to
the board of directors that the price to be paid in the tender offer is fair to
Carson's stockholders from a financial point of view.
If the offer is successfully completed Carson will become a wholly-owned
subsidiary of Cosmair. In the merger, all shares of Carson common stock not
tendered in the offer will be converted into the right to receive the cash
amount payable in the offer.
Certain stockholders of Carson who together own shares representing a majority
of the outstanding shares of Company common stock (which command over 80 percent
of the voting power) have entered into a stockholders agreement with Cosmair
requiring them to tender their shares in the offer. In the event that the offer
is not successful, these stockholders have agreed to vote their shares in favor
of a merger of Carson into a Cosmair subsidiary in which Carson stockholders
would receive the same cash consideration per share as is payable in the offer.
"We believe this transaction to be in the best interests of Carson, its
shareholders, its customers and its employees," said Malcolm Yesner, CEO, and
Dr. Roy Keith, Chairman. "L'Oreal is an outstanding company in the worldwide
personal care market, and while Carson has continued to make impressive progress
it will have an even greater opportunity to achieve its potential than
otherwise, given the increasingly highly competitive and changing nature of the
global personal care market."
-- more --
<PAGE>
Carson - 2
Carson is the leading global manufacturer and marketer of hair and skin
care products, which are specifically formulated to address the unique
characteristics of people of color. 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 Ultra Sheen.
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.
###
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF
AN OFFER TO SELL SHARES OF CARSON. AT THE TIME COSMAIR COMMENCES ITS OFFER, IT
WILL FILE A TENDER OFFER STATEMENT WITH THE U.S. SECURITIES AND EXCHANGE
COMMISION AND CARSON WILL FILE A SOLICIATION/RECOMMENDATION STATEMENT WITH
RESPECT TO THE OFFER. THE TENDER OFFER STATEMENT (INCLUDING AN OFFER TO
PURCHASE, A RELATED LETTER OF TRANSMITTAL AND OTHER OFFER DOCUMENTS) AND THE
SOLICITATION/RECOMMENDATION STATEMENT WILL CONTAIN IMPORTANT INFORMATION WHICH
SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER.
THE OFFER TO PURCHASE, THE RELATED LETTER OF TRANSMITTAL AND CERTAIN OTHER OFFER
DOCUMENTS, AS WELL AS THE SOLICATION/RECOMMENDATION STATEMENT, WILL BE MADE
AVAILABLE TO ALL SHAREHOLDERS OF CARSON, AT NO EXPENSE TO THEM. THE TENDER OFFER
STATEMENT (INCLUDING THE OFFER TO PURCHASE, THE RELATED LETTER OF TRANSMITTAL
AND ALL OTHER OFFER DOCUMENTS FILED WITH THE COMMISSION) AND THE
SOLICITATION/RECOMMENDATION STATEMENT WILL ALSO BE AVAILABLE FOR FREE AT THE
COMMISSION'S WEBSITE AT WWW.SEC.GOV.
================================================================================
Contact: Robert Pierce, CFO Steven S. Anreder
Carson, Inc. Anreder Hirschhorn Silver & Co.
(912) 651-3808 (212) 532-3232
[email protected]
================================================================================
