<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 4, 1998
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CDRJ INVESTMENTS (LUX) S.A.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
LUXEMBOURG 2844 98-0185444
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
---------------
10, RUE ANTOINE JANS
L-1820 LUXEMBOURG
LUXEMBOURG
(352) 476-867-1
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
JAFRA COSMETICS INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2844 13-3998453
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
---------------
2451 TOWNSGATE ROAD
WESTLAKE VILLAGE, CALIFORNIA 91361
(805) 449-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
UNITED MEXICAN STATES 2844 98-0185480
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NUMBER)
OF INCORPORATION) CLASSIFICATION CODE
NUMBER)
---------------
BLVD. ADOLFO LOPEZ MATEOS #515
COLONIA TLACOPAC, 01040
MEXICO, D.F.
(525) 490-1800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
COPY TO:
RALPH S. MASON, III PAUL S. BIRD, ESQ.
JAFRA COSMETICS INTERNATIONAL, INC. DEBEVOISE & PLIMPTON
2451 TOWNSGATE ROAD 875 THIRD AVENUE
WESTLAKE VILLAGE, CALIFORNIA 91361 NEW YORK, NEW YORK 10022
(805) 449-3000 (212) 909-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities of an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of earlier effective registration statement for
the same offering. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE OF EACH CLASS AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER SECURITY(1) OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 3/4% Senior Subordi-
nated Notes due 2008.. $100,000,000 100% $100,000,000 $29,500
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Parent Guarantee....... -- -- -- (2)
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Cross Guarantees....... -- -- -- (2)
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Jafra S.A. Subsidiary
Guarantees(3)......... -- -- -- (2)
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</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Pursuant to rule 457(n), no separate fee is required.
(3) The obligations of Jafra Cosmetics International, S.A. de C.V. relating to
the 11 3/4% Senior Subordinated Notes due 2008 being registered hereby
will be guaranteed by each of Jafra Cosmetics International, S.A. de
C.V.'s subsidiaries: Consultoria Jafra, S.A. de C.V.; Dirsamex, S.A. de
C.V.; Distribuidora Venus, S.A. de C.V.; Jafra Cosmetics S. de R.L. de
C.V.; Qualifax, S.A. de C.V.; and Reday, S.A. de C.V.
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
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<PAGE>
OTHER REGISTRANTS
<TABLE>
<CAPTION>
PRIMARY ADDRESS, INCLUDING ZIP
STANDARD CODE, AND TELEPHONE
JURISDICTION OF INDUSTRIAL I.R.S. EMPLOYER NUMBER, INCLUDING AREA
INCORPORATION CLASSIFICATION IDENTIFICATION CODE, OF PRINCIPAL
NAME OF CORPORATION OR FORMATION CODE NUMBER NUMBER EXECUTIVE OFFICE
------------------- --------------------- -------------- --------------- ------------------------
<S> <C> <C> <C> <C>
Consultoria Jafra, S.A. United Mexican States 2844 None Blvd. Adolfo Mateos #515
de C.V. Colonia Tlacopac, 01040
Mexico, D.F.
(525) 490-1800
Dirsamex, S.A. de C.V. United Mexican States 2844 None Blvd. Adolfo Mateos #515
Colonia Tlacopac, 01040
Mexico, D.F.
(525) 490-1800
Distribuidora Venus, United Mexican States 2844 None Blvd. Adolfo Mateos #515
S.A. de C.V. Colonia Tlacopac, 01040
Mexico, D.F.
(525) 490-1800
Jafra Cosmetics S. de United Mexican States 2844 None Blvd. Adolfo Mateos #515
R.L. de C.V. Colonia Tlacopac, 01040
Mexico, D.F.
(525) 490-1800
Qualifax, S.A. de C.V. United Mexican States 2844 None Blvd. Adolfo Mateos #515
Colonia Tlacopac, 01040
Mexico, D.F.
(525) 490-1800
Reday, S.A. de C.V. United Mexican States 2844 None Blvd. Adolfo Mateos #515
Colonia Tlacopac, 01040
Mexico, D.F.
(525) 490-1800
</TABLE>
ii
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1998
P R O S P E C T U S
JAFRA COSMETICS INTERNATIONAL
Offer To Exchange
11 3/4% Senior Subordinated Notes Due 2008,
Series A For Any And All Existing Notes (As Defined Below)
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 PM, NEW YORK CITY TIME, ON , 1998,
UNLESS EXTENDED.
-----------
Jafra Cosmetics International, Inc., a Delaware corporation ("U.S. Issuer"),
and Jafra Cosmetics International, S.A. de C.V., a sociedad anonima de capital
variable organized under the laws of the United Mexican States ("Jafra S.A."
and, together with the U.S. Issuer, the "Issuers"), hereby offer (the
"Exchange Offer"), upon the terms and subject to the conditions set forth in
this Prospectus (this "Prospectus") and the accompanying Letter of
Transmittal (the "Letter of Transmittal") to exchange up to $100,000,000
aggregate principal amount of the 11 3/4% Senior Subordinated Notes due
2008, Series A (the "New Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this Prospectus is a part, for a like
principal amount of the issued and outstanding 11 3/4% Senior Subordinated
Notes due 2008 of the Issuers (the "Existing Notes"). The New Notes and the
Existing Notes, as the case may be, are referred to herein as the "Notes."
The Existing Notes were originally issued and sold in a transaction that
was exempt from registration under the Securities Act (the "Offering")
and resold to certain qualified institutional buyers in reliance on, and
subject to the restrictions imposed pursuant to, Rule 144A under the
Securities Act ("Rule 144A"). The terms of the New Notes are identical
in all material respects to the terms of the Existing Notes for which
they may be exchanged pursuant to the Exchange Offer, except that (i)
the New Notes will have been registered under the Securities Act, and
thus will not bear restrictive legends restricting their transfer
pursuant to the Securities Act and will not contain certain provisions
providing for an increase in the interest rate on the Existing Notes
under certain circumstances described in the Registration Rights
Agreement (as defined), which provisions will terminate upon the
consummation of the Exchange Offer, and (ii) holders of New Notes
will not be entitled to certain registration rights that holders of
Existing Notes have under the Registration Rights Agreement, except
under limited circumstances.
Interest on each New Note issued pursuant to the Exchange Offer will accrue
from the last interest payment date on which interest was paid on the Existing
Notes surrendered in exchange therefor or, if no interest has been paid, from
the original date of issuance of the Existing Notes.
The Exchange Offer is not conditioned upon any minimum number of Existing
Notes being tendered for exchange. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1998, unless extended by the Issuers (such date as
it may be so extended, the "Expiration Date"). The date of acceptance for
exchange of the Existing Notes (the "Exchange Date") will be the first business
day following the Expiration Date, upon surrender of the Existing Notes.
Existing Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date; otherwise such tenders are irrevocable. New
Notes to be issued in exchange for properly tendered Existing Notes will be
delivered through the facilities of The Depository Trust Company by the
Exchange Agent (as defined) promptly after the acceptance thereof.
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
<PAGE>
(Continued from front cover)
Each Note will represent the several obligations of the Issuers. The U.S.
Issuer will be severally liable with respect to the payment of $600 of each
$1,000 principal amount of the Notes, together with interest on such amount
(the "U.S. Issuer's Obligations"), and Jafra S.A. will be severally liable
with respect to the payment of $400 of each $1,000 principal amount of the
Notes, together with interest on such amount ("Jafra S.A.'s Obligations" and,
together with the U.S. Issuer's Obligations, the "Obligations"). Each Issuer
is an indirect, wholly owned subsidiary of CDRJ Investments (Lux) S.A., a
Luxembourg societe anonyme ("Parent"), which will fully and unconditionally
guarantee the Notes on a senior subordinated basis on the terms provided in
the indenture governing the Notes (the "Parent Guarantee").
Each Issuer's Obligations will also be guaranteed by the other Issuer on a
senior subordinated basis on the terms provided in the Indenture (as defined),
including a 30-day standstill period prior to enforcement of such guarantee
(such guarantee by Jafra S.A., the "Jafra S.A. Cross Guarantee," and such
guarantee by the U.S. Issuer, the "U.S. Issuer Cross Guarantee;" such
guarantees collectively, the "Cross Guarantees"). The U.S. Issuer's
Obligations, including the U.S. Issuer Cross Guarantee, will also be fully and
unconditionally guaranteed by each subsequently acquired or organized U.S.
subsidiary of the U.S. Issuer (together with the Parent Guarantee and the
Jafra S.A. Cross Guarantee, the "U.S. Guarantees"), subject to certain
exceptions. Jafra S.A.'s Obligations, including the Jafra S.A. Cross
Guarantee, will also be fully and unconditionally guaranteed by each existing
and subsequently acquired or organized subsidiary of Jafra S.A. (the "Jafra
S.A. Subsidiary Guarantees" and, together with the Parent Guarantee and the
U.S. Issuer Cross Guarantee, the "Jafra S.A. Guarantees," and together with
the U.S. Guarantees, the "Guarantees;" each guarantor thereunder being a "Note
Guarantor"). The U.S. Issuer is an operating company in the United States that
conducts its non-U.S. operations through non-U.S. subsidiaries and that, at
present, has no U.S. subsidiaries. Each of Parent and Jafra S.A. is a holding
company that conducts all of its operations through subsidiaries.
Except as described below, the Notes will not be redeemable at the option of
the Issuers prior to May 1, 2003. On or after such date, the Issuers may
concurrently redeem the Notes in whole or in part on a pro rata basis (based
on the relative proportions of the JCI Portion (as defined) and the Jafra S.A.
Portion (as defined)) at any time at the redemption prices set forth herein
plus accrued and unpaid interest, if any, to the date of redemption. In
addition, at any time and from time to time on or prior to May 1, 2001, the
Issuers may concurrently redeem the Notes on a pro rata basis (based on the
relative proportions of the JCI Portion and the Jafra S.A. Portion) in an
aggregate principal amount equal to up to 35% of the original principal amount
of the Notes with the proceeds of one or more Equity Offerings (as defined),
at a redemption price set forth herein, provided that an aggregate principal
amount of Notes equal to at least 65% of the original aggregate principal
amount of the Notes remains outstanding immediately after each such
redemption. The Notes will not be subject to any sinking fund requirement.
Upon the occurrence of a Change of Control (as defined), if the Issuers do not
redeem the Notes, the holders of the Notes will have the right, subject to
certain exceptions, to require the Issuers to make an offer to repurchase the
Notes at a purchase price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of repurchase. The Jafra S.A.
Portion may be redeemed, at the option of Jafra S.A., at any time at a
redemption price equal to 100% of the principal amount thereof, together with
accrued and unpaid interest to the date fixed for redemption, if any, if, as a
result of any change in, or amendment to applicable treaties or laws of
Mexico, Jafra S.A., any successor of Jafra S.A. or any Note Guarantor of such
Jafra S.A. Portion would be obligated to pay Additional Amounts (as defined)
in excess of the Additional Amounts that Jafra S.A., any successor to Jafra
S.A. or such Note Guarantor would be required to pay if payments by Jafra
S.A., any successor to Jafra S.A. or such Note Guarantor were subject to a 15%
Mexican withholding tax. See "Description of Notes."
The Notes and the Guarantees will be unsecured Senior Subordinated
Indebtedness (as defined) of the Issuers or the relevant Note Guarantor. The
Notes and the Guarantees will be subordinated in right of payment to all
existing and future Senior Indebtedness (as defined) of the Issuers or the
relevant Note Guarantor including such Person's (as defined) obligations under
the Senior Credit Agreement (as defined). The Notes will rank pari passu in
right of payment with all existing and future Senior Subordinated Indebtedness
of the Issuers or the
ii
<PAGE>
relevant Note Guarantor, and will be senior in right of payment to all
existing and future Subordinated Obligations (as defined) of the Issuers or
the relevant Note Guarantor. The Notes and the Guarantees will also be
effectively subordinated to any Secured Indebtedness (as defined) of the
Issuers or the relevant Note Guarantor to the extent of the value of the
assets securing such Indebtedness. The Indenture permits the Company to incur
additional indebtedness, including Senior Indebtedness, subject to certain
limitations. As of June 30, 1998, the Issuers and the Note Guarantors had
approximately $40 million in Senior Indebtedness outstanding and approximately
$100 million in Senior Subordinated Indebtedness outstanding. See "Description
of Notes--Ranking."
The Existing Notes were originally issued and sold in a transaction not
registered under the Securities Act (the "Offering") in reliance upon an
exemption from the registration requirements thereof. In general, the Existing
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act. The New Notes are being offered hereby in order to satisfy
certain obligations of the Issuers contained in the Registration Rights
Agreement. Based on interpretations by the staff of the Securities and
Exchange Commission (the "Commission") as set forth in no-action letters
issued to third parties, the Issuers believe that New Notes issued pursuant to
the Exchange Offer in exchange for the Existing Notes may be offered for
resale, resold or otherwise transferred by holders thereof (other than any
such holder that is a broker-dealer or an "affiliate" of the Issuers within
the meaning of Rule 405 of the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such holder represents to the Company that (i) any New Notes
received by such holder will be acquired in the ordinary course of business,
(ii) such holder will have no arrangements or understanding with any person to
participate in the distribution of the Existing Notes or the New Notes within
the meaning of the Securities Act, (iii) such holder is not an "affiliate," as
defined in Rule 405 of the Securities Act, of the Issuers or if it is an
affiliate, such holder will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable, (iv) if
such holder is not a broker-dealer, that it is not engaged in, and does not
intend to engage in the distribution of the New Notes, (v) if such holder is a
broker-dealer, that it will receive New Notes for its own account in exchange
for Existing Notes that were acquired as a result of market-making activities
or other trading activities and that it will deliver a prospectus in
connection with any resale of such New Notes, and (vi) that it is not acting
on behalf of any person who could not truthfully make the foregoing
representations. If a holder of Existing Notes is unable to make the foregoing
representations, such holder may not rely on the applicable interpretation of
the staff of the Commission as set forth in such no-action letters and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction. In
addition, since the Issuers have not sought, and do not intend to seek, a no-
action letter, there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer.
Notwithstanding the foregoing, each broker-dealer that receives New Notes
for its own account pursuant to the Exchange Offer in exchange for Existing
Notes, where such Existing Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities must
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act and that it has not entered into any arrangement or
understanding with the Issuers or an affiliate of the Issuers to distribute
the New Notes in connection with any resale of such New Notes. A broker-dealer
that acquired Existing Notes in a transaction other than as part of its
market-making activities or other trading activities will not be able to
participate in the Exchange Offer. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Notes received in exchange for Existing Notes where such Existing Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Issuers and the Note Guarantors have agreed
that, for a period of 90 days after the Expiration Date (as defined herein),
they will make this Prospectus available to any broker-dealer for use in
connection with any such resale. Any holder that cannot rely upon such
interpretations by the staff of the Commission as set forth in such no-action
letters must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale transaction. See
"The Exchange Offer" and "Plan of Distribution."
iii
<PAGE>
The New Notes will be represented by one or more Global Securities (as
defined) registered in the name of a nominee of The Depository Trust Company,
as Depositary. Beneficial interest in the Global Securities will be shown on,
and transfers will be effected only through, records maintained by the
Depositary and its participants. See "Description of New Notes--Book-Entry,
Delivery and Form."
There has not previously been any public market for the New Notes. The
Issuers do not intend to list the New Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. There can
be no assurance that an active market for the New Notes will develop.
Moreover, to the extent that Existing Notes are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered, and tendered but
unaccepted, Existing Notes could be adversely affected. See "Risk Factors--
Lack of Established Market for the Existing Notes."
The Issuers will not receive any proceeds from the Exchange Offer. The
Issuers have agreed to pay the expenses of the Exchange Offer. No dealer
manager is being utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE, NOR WILL THE ISSUERS ACCEPT SURRENDER
FOR EXCHANGE FROM HOLDERS OF EXISTING NOTES, IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES AND BLUE SKY LAWS OF SUCH JURISDICTION.
----------------
AVAILABLE INFORMATION
The Issuers and the Note Guarantors have filed with the Commission a
Registration Statement (which term includes any amendments thereto, the
"Registration Statement") on Form S-4 under the Securities Act, with respect
to the New Notes offered hereby. As permitted by the rules and regulations of
the Commission, this Prospectus does not contain all of the information
included in the Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to herein or therein and filed as an exhibit to the
Registration Statement are not necessarily complete and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. For further information with respect to the
Issuers and the Note Guarantors and the New Notes, reference is hereby made to
the Registration Statement and the exhibits and schedules thereto.
The Issuers and the Note Guarantors are not currently subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Pursuant to the
Indenture, the Issuers and the Note Guarantors have agreed to file with the
Commission and provide to the holders of the Notes annual reports and the
information, documents and other reports that are specified in Sections 13 and
15 (d) of the Exchange Act. Such reports and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, 13th Floor, New York, New York 10048 and Suite 1400,
Northwestern Atrium Center, 14th Floor, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can also be obtained at prescribed
rates by writing to the Commission, Public Reference Section, 450 Fifth
Street, N.W., Washington, D.C. 20549 and such material is contained on the
World Wide Web site maintained by the Commission at http://www.sec.gov.
iv
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the notes thereto appearing elsewhere in this Prospectus. Unless the
context otherwise requires, prior to the consummation of the Acquisition (as
defined), the terms "Jafra" and the "Company" refer to the various subsidiaries
and divisions of The Gillette Company ("Gillette") conducting the worldwide
Jafra cosmetics business (the "Jafra Business"), and, following the
consummation of the acquisition of the Jafra Business from Gillette (the
"Acquisition"), to Parent and its subsidiaries. The market share and
competitive position data contained in this Prospectus are approximations
derived from industry sources, which the Company has not independently
verified, or from Company estimates which the Company believes to be
reasonable. Adorisse, Advanced Time Protector, Always Color, Aromascape, Daily
Essentials, Eau D'Aromes, Fm Force Magnetique, Jafra, JF9, Legend for Men, Le
Moire, Optimascara, Optimeyes, Precious Protein, Rediscover, Royal Almond,
Royal Jelly Body Complex, Royal Jelly Milk Balm Moisture Lotion, Skin Firming
Complex Time Corrector and Time Protector are trademarks or registered
trademarks of the Company.
THE COMPANY
Jafra is a leading direct seller of premium skin and body care products,
color cosmetics, fragrances, nutritional supplements and other personal care
products. Jafra currently operates in ten countries directly and in a number of
additional countries through distributors, although approximately 86% of the
Company's sales in 1997 were in the United States, Mexico and Germany. Jafra
markets its products through a direct selling, multi-level distribution system
comprised of approximately 235,100 self-employed salespersons (known as "sales
representatives"). The Company seeks to provide its sales representatives
attractive and flexible career opportunities selling quality products at
affordable prices. Jafra's sales representatives have the opportunity to earn
significant income and to receive non-financial awards designed to motivate and
recognize individual achievement.
The Company believes that it enjoys high brand recognition and product
acceptance in the markets where its products are sold. For example, in 1996,
Jafra was identified by respondents to an A.C. Nielsen survey of Mexican
consumers as the most recognized cosmetics brand in Mexico. The Company
believes that it has the potential to realize significant growth by increasing
the number of its sales representatives and improving sales representative
productivity. In 1997, the Company's worldwide sales representative base grew
5.9%, to approximately 220,800 at year end, with average sales per sales
representative during such year totaling $1,070. As of June 30, 1998, the
Company's worldwide sales representative base had increased to 235,100, an
increase of 6.5% over December 31, 1997. The Company generated $229.5 million
in revenues in 1997 and $118.3 million in the first six months of 1998, with
pro forma adjusted EBITDA of $30.3 million in 1997 and of $16.0 million in the
first six months of 1998 and generated cash flow from operations of $26.7
million in 1997 and $0.2 million in the first six months of 1998. Pro forma
adjusted EBITDA reflects (i) the elimination of certain non-recurring items
that affected 1997 historical amounts and (ii) certain changes in the cost
structure of the Company that are expected to occur following the consummation
of the Transactions. See "Summary Historical and Pro Forma Combined Financial
and Operating Data" and "Unaudited Pro Forma Combined Financial Statements."
According to the World Federation of Direct Selling Associations ("WFDSA"),
the global direct selling industry generated sales of $79 billion worldwide in
1996 and has grown at a compound annual rate of 11% since 1991. In 1996, total
direct sales in the United States were $21 billion and total sales of skin care
products, cosmetics and similar items were approximately $9 billion. The growth
of direct sales has outpaced overall retail growth in the United States in
eight of the past ten years. In 1996, for example, direct sales grew at 16% in
the United States, as compared to a 5% growth for retail sales generally in the
same year.
Jafra believes that as a result of the strong infrastructure created to date,
it is well positioned to increase sales and profitability under the Company's
new, focused ownership and management. As more fully set forth
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below, this existing infrastructure consists of four primary elements: first,
Jafra's motivated, well-trained and loyal base of sales representatives
through whom the Company reaches its customers; second, the Company's diverse
and high quality product line and its ability to satisfy changing demand
through its "fast follower" product development strategy; third, the Company's
operating infrastructure, including state-of-the-art manufacturing and
distribution facilities; and finally, the geographic diversity of the
Company's sales and operations, which the Company believes will help produce
consistent cash flow and help insulate the Company's financial performance
against changes in individual markets.
The Parent's principal executive offices are located at 10, rue Antione
Jans, L-1820 Luxembourg, Luxembourg and its telephone number is (352) 476-867-
1. The U.S. Issuer's principal executive offices are located at 2451 Townsgate
Road, Westlake Village, California, U.S.A. and its telephone number is (805)
449-3000. Jafra S.A.'s principal executive offices are located at Blvd. Adolfo
Lopez Mateos #515, Colonia Tlacopac, 01040, Mexico, D.F. and its telephone
number is (525) 490-1800.
OPERATING STRENGTHS
Motivated and Loyal Sales Representative Base. Jafra has built a motivated,
well-trained and loyal direct sales force of approximately 235,100 self-
employed independent sales representatives. The average Jafra sales
representative has been affiliated with the Company for approximately four
years, which the Company believes is among the highest average tenure in the
direct selling industry. The Company offers its sales representatives
attractive opportunities for career development and significant potential for
financial rewards. Jafra sales representatives earn income on their own sales
and can also earn commissions on sales made by the sales representatives they
recruit. In 1997, Jafra sales representatives earned aggregate direct sale
income of over $190 million and total commissions of more than $35 million,
with the highest paid Jafra sales representative earning total compensation of
over $250,000. In addition to such financial benefits, the Company also offers
non-financial rewards, such as international travel, regional and national
conventions and incentive awards, all designed to motivate and recognize
individual achievement. Unlike many of its competitors, the Company requires
little or no start-up costs from new sales representatives, imposes no
inventory maintenance requirements, has low minimum order sizes and provides
retail discounts on all orders. The Company's worldwide sales representative
base grew 5.9% to approximately 220,800 at the end of 1997 from approximately
208,500 at the end of 1996. As of June 30, 1998, the Company's worldwide sales
representative base had increased to 235,100, an increase of 6.5% over
December 31, 1997.
Prestige Quality Product Offerings. The Company offers diverse, prestige
quality product lines that it believes appeal to a wide customer base, build
brand equity and product loyalty, and lead to repeat purchases. The Company
positions its products to appeal to middle income, value oriented consumers,
generally pricing below the prestige level. The Company tries to develop
integrated products and actively promotes products that bridge between
categories, thus encouraging multi-product sales and repeat purchases. In
order to meet changing consumer demand, the Company employs a "fast follower"
product development strategy that minimizes research costs and focuses
development efforts on products that have proven successful in the
marketplace. In 1997, approximately 70% of sales resulted from products
introduced in the last five years. The Company estimates that this percentage
will remain the same in 1998.
Significant Investment in Operating Infrastructure. Over the last three
years, Jafra has invested approximately $30 million in new infrastructure,
including a customer service and office facility in Mexico, new machinery and
equipment, and upgraded data processing capabilities. The Company's
manufacturing facilities in Westlake Village, California, which produces skin
care products, and in Naucalpan, Mexico, which produces color cosmetics, are
equipped with some of the latest manufacturing technologies. Jafra also has
ten major distribution facilities worldwide and is generally able to fill
orders within four days from the time of receipt with 98% accuracy, a rate
which the Company believes is among the highest in the industry. In addition,
the Company has made significant improvements in sourcing raw materials
locally since 1995, and has recently implemented
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several programs to standardize product packaging, including in-house bottle
decorating. As a result of these recent investments and the current strength of
the Company's infrastructure, Jafra expects that it will have relatively low
maintenance capital requirements over the next several years.
Geographic Diversification. The Company currently operates in ten countries
directly and through distributors in a number of additional countries, and
expects to expand its operations to include approximately four additional
countries (primarily in Latin America and Europe) over the next several years.
The Company's most important markets to date have been the United States,
Mexico and Germany, which represented approximately 31%, 43% and 13%,
respectively, of total 1997 sales and 31%, 46% and 10%, respectively, of 1998
sales as of June 30, 1998. With significant revenue coming from each of the
United States, Latin America and Europe, the Company believes that it is less
vulnerable to adverse economic developments in any particular market. The
Company expects that future growth in the United States and in new markets will
lead to greater diversification of the sources of revenue.
STRATEGY
The Company's new owners and management intend to build on Jafra's strong
existing infrastructure and to increase the Company's sales and profitability
by refocusing the Company on growing its sales representative base and
productivity in new and existing markets and by leveraging the Company's
comparative strengths. To this end, the Company intends to pursue the following
strategy:
Deploy New Senior Management Team with Significant Direct Selling
Experience. In connection with the Acquisition, Ronald B. Clark joined the
Company as its Chairman and Chief Executive Officer, Gonzalo R. Rubio joined as
its President and Chief Operating Officer, Michael DiGregorio joined as its
President of United States Operations, Eugenio Lopez Barrios joined as its
President of Mexican Operations, Jose Luis Peco joined as its President of
European Operations, Jaime Lopez Guirao joined as its President of Global
Operations and Alan Fearnley joined as its Senior Vice President of Global
Marketing. Messrs. Clark and Rubio both have purchased equity, and it is
expected that other members of senior management will purchase equity, in
Parent. See "Management." Messrs. Clark, Rubio, DiGregorio, Barrios, Peco,
Guirao and Fearnley have an average of over 20 years of direct selling industry
experience, including various senior management positions with Jafra
competitors Avon and Mary Kay. Jafra's new Chief Executive Officer also served
as the President of Jafra's United States operations from 1985 to 1988, and
Jafra's new Senior Vice President of Global Marketing served in the same
position at Jafra from 1987 to 1995. Jafra believes that this new team will
provide the dynamic leadership required to attract new sales representatives
and management talent, inspire new and existing sales representatives to
greater productivity and execute the Company's new market development strategy.
Grow Sales Representative Base in Existing Markets. Jafra plans to expand its
sales representative base in existing markets by (i) targeting U.S. expansion
into new geographic areas and demographic groups, (ii) streamlining the
commission structure to provide more rewards to those sales representatives who
actively recruit other sales representatives, (iii) providing more training in
business skills and recruiting techniques to sales representative managers, and
(iv) initiating programs to reactivate former or inactive sales
representatives. Although Jafra operates in all fifty states, approximately 55%
of its 1997 U.S. sales were concentrated in four states and Puerto Rico. The
Company believes that it has a significant opportunity to expand its
distribution reach to include new geographic areas, particularly in the United
States, and demographic segments such as baby boomers and minority groups.
Increase Sales Representative Productivity. The Company plans to focus on
increasing the productivity, as measured by sales per sales representative, of
its existing sales representatives by (i) expanding the Company's product
lines, (ii) initiating better-targeted marketing activities and (iii)
decreasing lead time on new product introductions. Over the next two years, the
Company plans to expand product offerings to include other complementary
merchandise that would be introduced into specific regions after test marketing
to establish the presence of sufficient demand. The Company believes that sales
representative productivity can also be increased
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through targeted marketing efforts to increase brand and product awareness of
existing product lines. The Company intends to provide its sales
representatives with increased product knowledge and financial incentives to
sell more products through greater training, internal "advertising" and
promotion. Finally, the Company intends to adopt a shorter lead time on product
development to get new products to its sales representative base more quickly,
decreasing the Company's current time to market by up to one-third.
Develop New Markets. The Company believes that its existing distribution and
manufacturing capabilities provide a strong platform for Jafra to expand into
new markets. The Company expects that it will be able to implement its new
market development strategy with limited additional capital expenditures and
without diverting focus from the Company's core markets. The Company's new
senior management team has extensive experience and a proven track record in
developing new markets in Latin America and Central and Eastern Europe. The
Company intends to focus its expansion efforts on markets that the Company
believes (i) do not require high start-up costs, such as markets contiguous to
the Company's existing markets, (ii) have proven receptive to direct selling
techniques, (iii) demonstrate promising economic demographics, including
population size, growth of gross domestic product and an expanding middle
class, and (iv) evidence demand for quality cosmetic products.
Once a new target market has been identified, the Company will recruit local
management with demonstrated knowledge of the local market. Operations will
typically begin in one of the larger cities within the target market. The
Company plans to hold seminars conducted by successful sales representatives
and senior managers from existing markets to recruit and train local sales
representatives and to identify potential leaders. In addition, the Company
will use distribution capabilities from appropriate existing operations until
the target market is able to support its own distribution capabilities.
The Company intends to re-enter Brazil and to start new operations in Poland
in 1998. According to the WFDSA, in 1996 Brazil was the fourth largest direct
selling country in the world, with $3.5 billion in sales and nearly 900,000
salespeople. There are currently approximately 4,000 direct sellers in Brazil
selling Jafra products; however, they currently operate through a local
distributor and the Company intends to establish a direct relationship with
these direct sellers. The Company believes that Poland is the largest potential
market in Central Europe. The Company expects to enter Poland by leveraging off
of its established operations in Western Europe, consistent with the Company's
strategy for entering new markets with minimum start-up costs.
Improve Operating Efficiency. The Company's new management team believes that
opportunities exist to improve operating efficiency through cost-cutting,
better inventory management, and streamlining of marketing efforts and product
lines. The Company expects these measures, when fully implemented, to result in
net annual savings of at least $6.0 million. Over the past several years, the
Company has turned its inventory approximately 1.6 times per year. By the end
of 2000, the Company expects to increase inventory turns to approximately three
times per year, consistent with industry norms, which the Company expects will
reduce significantly its future working capital requirements.
THE SPONSOR
Clayton, Dubilier & Rice, Inc. ("CD&R") is a private investment firm
specializing in acquisitions that involve management participation. The firm
currently manages a pool of equity capital of approximately $1.5 billion. Since
its founding in 1978, CD&R has sponsored the acquisition of 29 businesses,
primarily divisions of large corporations, with combined annual sales in excess
of $17 billion. The firm has successfully worked with the management teams of
acquired companies to substantially improve their operations and profitability.
Like Jafra, several of these companies were owned by large corporations and did
not represent core strategic businesses for their respective owners. Examples
of such CD&R acquisitions include: Allison Engine Company Inc. (formerly owned
by General Motors), Lexmark International, Inc. (formerly owned by IBM), WESCO
Distribution, Inc. (formerly owned by Westinghouse Corp.) and Alliant
Foodservice, Inc. (formerly
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owned by Kraft General Foods). CD&R has worked successfully with these
companies to refocus core operations, which has led to significant gains in
productivity and profitability, although there can be no assurance that CD&R
will realize similar success with the Company.
THE TRANSACTIONS
On April 30, 1998, Parent completed the Acquisition of the Jafra Business
pursuant to an Acquisition Agreement, dated January 26, 1998, as amended (the
"Acquisition Agreement") between Parent, an affiliate of Parent and Gillette.
Parent was organized to effect the Acquisition. Parent and certain of its
subsidiaries were formed by Clayton, Dubilier & Rice Fund V Limited
Partnership, a Cayman Islands exempted limited partnership ("CD&R Fund V")
managed by CD&R. See "The Sponsor."
Concurrently with and as part of the financing for the Acquisition, (i) CD&R
Fund V and certain members of new management made an equity investment of $78.9
million in Parent, (ii) the Issuers issued the Existing Notes pursuant to the
Offering and (iii) Parent and the Issuers entered into a credit agreement (the
"Senior Credit Agreement") with certain lenders providing for senior secured
credit facilities, including a $25.0 million term loan facility (the "Term Loan
Facility") (all of which was drawn at the Closing) and a $65.0 million
revolving credit facility (the "Revolving Credit Facility," and, together with
the Term Loan Facility, the "Credit Facilities") (approximately $15.0 million
of which has been drawn in connection with the Transactions). See "Description
of the Senior Credit Agreement." The Offering and the initial borrowings under
the Senior Credit Agreement are referred to collectively as the "Financings."
The Acquisition, the Financings, the equity contribution by CD&R Fund V and
certain members of new management and the payment of related transaction fees
and expenses are referred to collectively as the "Transactions."
The following chart depicts the organizational structure of Parent and its
subsidiaries (omitting certain intermediate holding companies).
CDRJ
Investments
(Lux) S.A.
(Parent)
Jafra Cosmetics Jafra Cosmetics
International, Inc. International, S.A. de C.V.
(U.S. Issuer) (Jafra S.A.)
U.S. Operations
Western European Mexican Other Subsidiaries
Subsidiaries Subsidiaries
USE OF PROCEEDS OF OFFERING
The Company will not receive any proceeds from the Exchange Offer. As
described under "The Transactions," the net proceeds of the Offering, together
with other sources of financing, were used to fund the purchase price of the
Acquisition and pay related transaction fees and expenses.
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THE EXCHANGE OFFER
REGISTRATION AGREEMENT...... The Existing Notes were issued on April 30, 1998
to Credit Suisse First Boston and Chase
Securities Inc. (together, the "Initial
Purchasers"). The Initial Purchasers resold the
Existing Notes to certain qualified institutional
buyers in reliance on, and subject to the
restrictions imposed pursuant to, Rule 144A of
the Securities Act. In connection therewith, the
Company and the Initial Purchasers entered into
the Registration Rights Agreement, dated as of
April 30, 1998 (the "Registration Rights
Agreement"), providing, among other things, for
the Exchange Offer. See "The Exchange Offer."
THE EXCHANGE OFFER.......... New Notes are being offered in exchange for an
equal principal amount of Existing Notes. As of
the date hereof, $100,000,000 aggregate principal
amount of Existing Notes is outstanding. Existing
Notes may be tendered only in integral multiples
of $1,000.
RESALE OF NEW NOTES......... Based on interpretations by the staff of the
Securities and Exchange Commission (the
"Commission") as set forth in no-action letters
issued to third parties, the Issuers believe that
New Notes issued pursuant to the Exchange Offer
in exchange for the Existing Notes may be offered
for resale, resold and otherwise transferred by
holders thereof (other than any such holder that
is a broker-dealer or an "affiliate" of the
Issuers within the meaning of Rule 405 of the
Securities Act) without compliance with the
registration and prospectus delivery provisions
of the Securities Act, provided that such holder
represents to the Company that (i) any New Notes
received by such holder will be acquired in the
ordinary course of business, (ii) such holder
will have no arrangements or understanding with
any person to participate in the distribution of
the Existing Notes or the New Notes within the
meaning of the Securities Act, (iii) such holder
is not an "affiliate," as defined in Rule 405 of
the Securities Act, of the Issuers or if it is an
affiliate, such holder will comply with the
registration and prospectus delivery requirements
of the Securities Act to the extent applicable,
(iv) if such holder is not a broker-dealer, that
it is not engaged in, and does not intend to
engage in the distribution of the New Notes, (v)
if such holder is a broker-dealer, that it will
receive New Notes for its own account in exchange
for Existing Notes that were acquired as a result
of market-making activities or other trading
activities and that it will deliver a prospectus
in connection with any resale of such New Notes,
and (vi) that it is not acting on behalf of any
person who could not truthfully make the
foregoing representations. If a holder of
Existing Notes is unable to make the foregoing
representations, such holder may not rely on the
applicable interpretation of the staff of the
Commission as set forth in such no-action letters
and must comply with the registration and
prospectus delivery requirements of the
Securities Act in connection
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<PAGE>
with any secondary resale transaction. In
addition, since the Issuers have not sought, and
do not intend to seek, their own no-action
letter, there can be no assurance that the staff
of the Commission would make a similar
determination with respect to the Exchange Offer.
Notwithstanding the foregoing, each broker-dealer
that receives New Notes for its own account
pursuant to the Exchange Offer in exchange for
Existing Notes, where such Existing Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities must acknowledge that it will deliver
a prospectus meeting the requirements of the
Securities Act and that it has not entered into
any arrangement or understanding with the Issuers
or an affiliate of the Issuers to distribute the
New Notes in connection with any resale of such
New Notes. A broker- dealer that acquired
Existing Notes in a transaction other than as
part of its market-making activities or other
trading activities will not be able to
participate in the Exchange Offer. The Letter of
Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a broker-dealer in connection with
resales of New Notes received in exchange for
Existing Notes where such Existing Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities. The Issuers and the Note Guarantors
have agreed that, for a period of 90 days after
the Expiration Date (as defined herein), it will
make this Prospectus available to any broker-
dealer for use in connection with any such
resale. Any holder that cannot rely upon such
interpretations by the Staff of the Commission as
set forth in such no-action letters must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection
with a secondary resale transaction. See "The
Exchange Offer" and "Plan of Distribution."
CONSEQUENCES OF FAILURE TO
EXCHANGE EXISTING NOTES.... Upon consummation of the Exchange Offer, subject
to certain limited exceptions, holders of
Existing Notes who do not exchange their Existing
Notes for New Notes in the Exchange Offer will no
longer be entitled to registration rights and
will not be able to offer or sell their Existing
Notes, unless such Existing Notes are
subsequently registered under the Securities Act
(which, subject to certain limited exceptions,
the Issuers and the Note Guarantors will have no
obligation to do), except pursuant to an
exemption from, or in a transaction not subject
to, the Securities Act and applicable state
securities laws. See "The Exchange Offer--Terms
of the Exchange Offer" and "--Consequences of
Failure to Exchange."
EXPIRATION DATE............. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998 ( business days
following the commencement of the Exchange
Offer), unless the Exchange Offer is extended, in
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<PAGE>
which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer
is extended.
INTEREST ON THE NEW NOTES... The New Notes will accrue interest at a rate of
11 3/4% per annum from April 30, 1998, the issue
date of the Existing Notes. Interest on the New
Notes is payable on May 1 and November 1 of each
year, commencing on November 1, 1998. See
"Registration Rights" and "Description of Notes--
Terms of the Notes."
CONDITIONS TO THE EXCHANGE The Exchange Offer is not conditioned upon any
OFFER....................... minimum principal amount of Existing Notes being
tendered for exchange. However, the Exchange
Offer is subject to certain customary conditions,
which may be waived by the Issuers. See "The
Exchange Offer--Conditions." Except for the
requirements of applicable federal and state
securities laws, there are no federal or state
regulatory requirements to be complied with or
obtained by the Issuers in connection with the
Exchange Offer.
PROCEDURES FOR TENDERING
EXISTING NOTES............. Each holder of Existing Notes wishing to accept
the Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or
such facsimile, together with any other required
documentation to the Exchange Agent (as defined
herein) at the address set forth herein and
effect a tender of Existing Notes pursuant to the
procedures for book entry transfer as provided
for herein. See "The Exchange Offer Procedures
for Tendering" and "--Book Entry Transfer."
GUARANTEED DELIVERY Holders of Existing Notes who wish to tender
PROCEDURES.................. their Existing Notes and who cannot deliver their
Existing Notes and a properly completed Letter of
Transmittal or any other documents required by
the Letter of Transmittal to the Exchange Agent
prior to the Expiration Date may tender their
Existing Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS........... Tenders of Existing Notes may be withdrawn to any
time prior to 5:00 p.m., New York City time, on
the Expiration Date. To withdraw a tender of
Existing Notes, a written or facsimile
transmission notice of withdrawal must be
received by the Exchange Agent at its address set
forth herein under "The Exchange Offer-- Exchange
Agent" prior to 5:00 p.m., New York City time, on
the Expiration Date.
ACCEPTANCE OF EXISTING
NOTES AND DELIVERY OF NEW Subject to certain conditions, any and all
NOTES...................... Existing Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date will be accepted for
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<PAGE>
exchange. The New Notes issued pursuant to the
Exchange Offer will be delivered promptly
following the Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
CERTAIN U.S. TAX The exchange of Existing Notes for New Notes
CONSEQUENCES................ should not constitute a taxable exchange for U.S.
federal income tax purposes. See "Taxation."
EXCHANGE AGENT/TRUSTEE...... The State Street Bank and Trust Company is
serving as exchange agent (the "Exchange Agent"
and the "Trustee") in connection with the
Exchange Offer.
FEES AND EXPENSES........... All expenses incident to the Issuers'
consummation of the Exchange Offer and compliance
with the Registration Agreement will be borne by
the Issuers. See "The Exchange Offer--Fees and
Expenses."
USE OF PROCEEDS............. The Issuers will not receive any proceeds from
the Exchange Offer. The net proceeds from the
Offering, together with other sources of
financing, were used to fund the purchase price
of the Acquisition and pay transaction-related
fees and expenses. See "The Transactions."
SUMMARY OF TERMS OF NEW NOTES
The Exchange Offer relates to the exchange of up to $100,000,000 aggregate
principal amount of Existing Notes for an equal aggregate principal amount of
New Notes. New Notes will be entitled to the benefits of the same Indenture (as
defined therein) that governs the Existing Notes and will govern the New Notes.
The form and terms of the New Notes are identical in all material respects to
the form and terms of the Existing Notes, except that (i) the New Notes will
have been registered under the Securities Act, and thus will not bear
restrictive legends restricting their transfer pursuant to the Securities Act
and will not contain certain provisions providing for an increase in the
interest rate on the Existing Notes under certain circumstances described in
the Registration Rights Agreement (as defined), which provisions will terminate
upon the consummation of the Exchange Offer and (ii) holders of New Notes will
not be entitled to certain registration rights that holders of Existing Notes
have under the Registration Rights Agreement, except under limited
circumstances . See "Description of Notes."
ISSUERS..................... The U.S. Issuer and Jafra S.A., on a several
basis.
MATURITY.................... May 1, 2008.
INTEREST PAYMENT DATES...... May 1 and November 1 of each year, commencing
November 1, 1998.
U.S. ISSUER'S OBLIGATIONS
UNDER THE NOTES............ The U.S. Issuer will be severally liable with
respect to the payment of $600 of each $1,000
principal amount of the Notes, together with
interest on such amount.
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JAFRA S.A.'S OBLIGATIONS
UNDER THE NOTES............ Jafra S.A. will be severally liable with respect
to the payment of $400 of each $1,000 principal
amount of the Notes, together with interest on
such amount.
PARENT GUARANTEE............ The Notes will be fully and unconditionally
guaranteed on a senior subordinated basis by
Parent on the terms provided in the Indenture.
CROSS GUARANTEES............ Each Issuer will guarantee the other Issuer's
payment obligations under the Notes on a senior
subordinated basis on the terms provided in the
Indenture, including a 30-day standstill period
prior to enforcement of its Cross Guarantee.
SUBSIDIARY GUARANTEES....... The U.S. Issuer's obligations under the Notes,
including the U.S. Issuer Cross Guarantee, will
be fully and unconditionally guaranteed on a
senior subordinated basis by each subsequently
acquired or organized U.S. subsidiary of the U.S.
Issuer on the terms provided in the Indenture,
subject to certain exceptions. At present, the
U.S. Issuer does not have any U.S. subsidiaries.
Jafra S.A.'s obligations under the Notes,
including the Jafra S.A. Cross Guarantee, will be
fully and unconditionally guaranteed by each
existing and subsequently acquired or organized
subsidiary of Jafra S.A. on the terms provided in
the Indenture. See "Description of Notes--Note
Guarantees."
OPTIONAL REDEMPTION......... The Notes will be concurrently redeemable at the
option of the Issuers (i) at any time and from
time to time prior to May 1, 2001, on a pro rata
basis (based on the relative proportions of the
JCI Portion and the Jafra S.A. Portion) in an
aggregate principal amount equal to up to 35% of
the original principal amount of the Notes with
the proceeds of one or more Equity Offerings, at
a redemption price set forth herein, provided
that an aggregate principal amount of Notes equal
to at least 65% of the original aggregate
principal amount of the Notes remains outstanding
immediately after each such redemption, and (ii)
in whole or in part at any time on or after May
1, 2003, at the redemption prices set forth
herein, in each case plus accrued and unpaid
interest, if any, to the date of redemption
(subject to the right of holders of record on the
relevant record date to receive interest due on
the relevant payment date). Any such partial
redemption will be made by both Issuers
concurrently on a pro rata basis (based on the
relative proportions of the JCI Portion and the
Jafra S.A. Portion). See "Description of Notes--
Optional Redemption."
REDEMPTION FOR TAX REASONS.. Jafra S.A.'s Obligations may be redeemed, at the
option of Jafra S.A., at any time at a redemption
price equal to 100% of the principal amount
thereof, together with accrued interest to the
date fixed for redemption, if any, if, as a
result of any change in, or amendment to
applicable treaties or laws of Mexico, Jafra
S.A., any
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<PAGE>
successor to Jafra S.A. or any Note Guarantor of
the Jafra S.A. Portion would be obligated to pay
Additional Amounts in excess of the Additional
Amounts that Jafra S.A., any successor to Jafra
S.A. or such Note Guarantor would be required to
pay if payments by Jafra S.A., any successor to
Jafra S.A. or such Note Guarantor were subject to
a 15% Mexican withholding tax. See "Description
of Notes--Redemption for Changes in Withholding
Taxes."
CHANGE OF CONTROL........... In the event of a Change of Control, if the
Issuers do not redeem the Notes, the holders of
the Notes will have the right, subject to certain
exceptions, to require the Issuers to repurchase
such holder's Notes at a purchase price equal to
101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date
of redemption (subject to the right of holders of
record on the relevant record date to receive
interest due on the relevant payment date). See
"Description of Notes--Change of Control."
RANKING..................... The Notes will be unsecured Senior Subordinated
Indebtedness of the Issuers or the relevant Note
Guarantor. The Notes will be subordinated in
right of payment to the payment when due of all
existing and future Senior Indebtedness of the
Issuers or the relevant Note Guarantor, including
such Person's obligations under the Senior Credit
Agreement. The Notes will rank pari passu in
right of payment with all existing and future
Senior Subordinated Indebtedness of the Issuers,
and will be senior in right of payment to all
existing and future Subordinated Obligations of
the Issuers or the relevant Note Guarantor. The
Notes will also be effectively subordinated to
any Secured Indebtedness of the Issuers or the
relevant Note Guarantor, to the extent of the
value of the assets securing such Indebtedness.
As of June 30, 1998, the Issuers and the Note
Guarantors had approximately $40 million in
Senior Indebtedness outstanding and approximately
$100 million in Senior Subordinated Indebtedness
outstanding, all of which would have been
guaranteed by, and would have constituted Senior
Indebtedness of, the Note Guarantors (other than
the Issuers). In addition, as of June 30, 1998
the Issuers had additional availability of
approximately $50 million for borrowings under
the Senior Credit Agreement, all of which would
have been Senior Indebtedness and none of which
would have been Senior Subordinated Indebtedness
(other than the indebtedness represented by the
Notes). See "Description of Notes--Ranking."
RESTRICTIVE COVENANTS....... The Indenture includes certain covenants that,
among other things, will limit: (i) the
incurrence of additional indebtedness by Parent
and its Restricted Subsidiaries (as defined);
(ii) the layering of indebtedness; (iii) the
payment of dividends on, and redemption of,
capital stock of Parent and its Restricted
Subsidiaries and the redemption of certain
subordinated obligations of Parent and its
Restricted Subsidiaries; (iv) investments; (v)
creation of restrictions on distributions from
Restricted Subsidiaries; (vi) sale of assets and
subsidiary stock; (vii) certain transactions with
affiliates; (viii)
11
<PAGE>
incurrence of liens and (ix) mergers and
consolidations. See "Description of Notes--
Certain Covenants" and "Description of Notes--
Merger and Consolidation."
ADDITIONAL AMOUNTS..........
Subject to certain exceptions, if Mexican taxes
are deducted or withheld from payments on the
Notes or the Guarantees, the Payor (as defined)
will pay Additional Amounts to the extent
necessary so that, after such deduction or
withholding, the holders of the Notes receive the
amount such holders would have received if such
taxes had not been deducted or withheld. See
"Description of Notes--Additional Amounts."
RISK FACTORS
Prospective investors in the Notes should carefully consider the matters set
forth in this Prospectus under "Risk Factors."
12
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL AND OPERATING DATA
The following table sets forth summary historical combined financial data
with respect to the Company for the periods ended and as of the dates
indicated. The summary historical combined statement of operations data for the
years ended December 31, 1995, 1996 and 1997 and the historical combined
balance sheet data as of December 31, 1996 and 1997 are derived from the
audited combined financial statements of the Company and the historical
combined statement of operations data for the six months ended June 30, 1997,
four months ended April 30, 1998 and the two months ended June 30, 1998 and the
historical combined balance sheet data as of June 30, 1997 and June 30, 1998
are derived from the unaudited combined financial statements of the Company
included elsewhere in this Prospectus. The summary historical combined balance
sheet data as of December 31, 1995 are derived from unaudited combined
financial statements of the Company that are not included in this Prospectus.
The unaudited financial statements include, in the opinion of management, all
adjustments consisting of normal recurring adjustments necessary to present
fairly the data for such periods. Prior to 1998, accounts of subsidiaries and
operations outside the United States are included in the summary historical and
pro forma combined financial data on the basis of fiscal years generally ending
November 30.
The following table also sets forth certain unaudited summary pro forma
combined financial data of the Company for the periods indicated. The unaudited
summary pro forma combined statement of operations data for the year ended
December 31, 1997 gives effect to the Transactions as if they had occurred as
of January 1, 1997. The unaudited summary pro forma statement of operations
data for the six months ended June 30, 1998 gives effect to the Transactions as
if they had occurred on January 1, 1997. See "The Transactions." The unaudited
summary pro forma combined financial data do not purport to represent what the
Company's results of operations would actually have been had the Transactions
in fact occurred as of such dates or to project the Company's results of
operations for any future period. The unaudited summary pro forma combined
financial data should be read in conjunction with the Unaudited Pro Forma
Combined Statements of Operations and the notes thereto appearing elsewhere in
this Prospectus.
13
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------ PRO SIX MONTHS FOUR MONTHS TWO MONTHS
ACTUAL FORMA(A) ENDED ENDED ENDED
1995 1996 1997 1997 JUNE 30, 1997 APRIL 30, 1998 JUNE 30, 1998
-------- -------- -------- -------- ------------- -------------- -------------
(IN MILLIONS, EXCEPT SALES REPRESENTATIVE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DA-
TA:
Net sales.................. $ 218.4 $ 224.5 $ 229.5 $ 229.5 $ 110.1 $ 77.3 $ 41.0
Cost of sales.............. 54.3 58.2 59.1 59.1 28.1 20.3 11.8
Gross profit............... 164.1 166.3 170.4 170.4 82.0 57.0 29.2
Selling, general and
administrative expenses (b). 154.0 155.8 149.4 154.4 73.6 51.6 25.6
Income from operations..... 10.1 10.5 21.0 16.0 8.4 5.4 3.6
Interest income (expense), net. 4.3 0.9 0.3 (17.1) 0.1 0.1 (2.7)
Other income (expense),
net....................... 24.5(c) (1.4) (1.0) (1.0) 0.1 1.5 (1.1)
Income (loss) before income
taxes and extraordinary
credit ................... 38.9 10.0 20.3 (2.1) 8.6 7.0 (0.2)
Net income (loss).......... 32.8 10.0 15.5 (1.4) 6.5 4.1 (0.6)
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents.. $ 7.5 $ 8.7 $ 10.2 $ 11.6 $ 1.9 $ 18.4
Total working capital (d).. 49.4 24.4 31.1 25.6 41.0 34.3
Property, plant and
equipment, net............ 43.7 41.8 43.7 44.0 39.6 56.2
Total assets............... 203.1 164.5 175.2 179.6 141.9 277.3
Total debt................. -- -- 8.5 140.0
Equity..................... 108.7 78.6 77.3 81.0 90.1 78.2
OTHER DATA:
EBITDA (e)................. $ 37.4 $ 15.9 $ 24.3 $ 22.1 $ 9.9 $ 8.3 $ 3.8
Net cash provided by (used
in) operating activities.. 27.5 5.4 26.7 5.2 (8.0) 8.2
Depreciation and amortization. 2.8 3.3 4.4 7.2 1.4 1.4 1.3
Capital expenditures....... 20.3 10.3 8.9 8.9 3.7 3.2 0.5
Sales representatives...... 216,700 208,500 220,800 220,800 211,400 220,000 235,100
Sales representative
productivity (f).......... $ 1,008 $ 1,056 $ 1,070 $ 1,070 $ 1,049 $ 1,052 $ 1,079
PRO FORMA DATA:
Adjusted EBITDA (g)........ $ 30.3
Ratio of adjusted EBITDA to
cash interest expense (h). 2.0x
Ratio of total debt to
adjusted EBITDA........... 4.5x
Ratio of total debt to
total capitalization...... 0.6x
Ratio of earnings to fixed
charges................... -- (i)
<CAPTION>
PRO FORMA (A)
-------------
SIX MONTHS
ENDED
JUNE 30, 1998
-------------
<S> <C>
STATEMENT OF OPERATIONS DA-
TA:
Net sales.................. $ 118.3
Cost of sales.............. 31.3
Gross profit............... 87.0
Selling, general and
administrative expenses (b). 78.9
Income from operations..... 8.1
Interest income (expense), net. (8.3)
Other income (expense),
net....................... (0.1)
Income (loss) before income
taxes and extraordinary
credit ................... 0.2
Net income (loss).......... (1.0)
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents..
Total working capital (d)..
Property, plant and
equipment, net............
Total assets...............
Total debt.................
Equity.....................
OTHER DATA:
EBITDA (e)................. $ 12.1
Net cash provided by (used
in) operating activities..
Depreciation and amortization. 3.6
Capital expenditures....... 4.3
Sales representatives...... 235,100
Sales representative
productivity (f).......... $ 1,079
PRO FORMA DATA:
Adjusted EBITDA (g)........ $ 16.0
Ratio of adjusted EBITDA to
cash interest expense (h). 2.1x
Ratio of total debt to
adjusted EBITDA........... --
Ratio of total debt to
total capitalization...... --
Ratio of earnings to fixed
charges................... 1.0
</TABLE>
- --------
(a) For a discussion of the transactions reflected in the pro forma
information set forth in the table, see "Unaudited Pro Forma Combined
Financial Statements," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "The Transactions."
(b) Selling, general and administrative expenses include the following non-
recurring items: for 1995, net reorganization charges of $9.6; for 1996, a
$5.4 non-cash charge for the write-off of certain computer systems and
related costs, and net reorganization charges of $0.7; and for 1997, net
reorganization charges of $3.5 that were partially offset by a cash
recovery of $2.3 relating to the $5.4 charge taken in 1996, resulting from
the settlement of a legal action brought by the Company against a computer
systems contractor, and a gain of $0.8 relating to the sale of a facility
that had previously been written-off.
14
<PAGE>
(c) Other income (expense), net for 1995 includes a $25.5 foreign exchange gain
in Jafra S.A. resulting from having had U.S. dollar denominated
intercompany receivables from affiliates at the time of the December 1994
peso devaluation.
(d) Total working capital is defined as current assets less current liabilities
excluding short term debt with third parties.
(e) EBITDA is defined as net income before net interest expense, income tax
expense, depreciation and amortization. EBITDA which was partially offset
by $9.6 of non-recurring charges relating to the reorganization and
restructuring of certain foreign operations. EBITDA for 1996 includes a
non-recurring charge in Jafra S.A. of $5.4 relating to the write-off of
certain computer systems and related costs, and net reorganization charges
of $0.7. EBITDA for 1997 includes $3.5 of cash severance costs relating to
realignment of certain foreign operations, which was partially offset by a
cash gain of $2.3 relating to a recovery under a legal settlement and $0.8
cash gain relating to the sale of a facility that was previously written-
off. EBITDA for the six months ended June 30, 1997 includes $1.2 of cash
severance costs relating to realignment of certain foreign operations,
which was more than offset by a cash gain of $2.1 relating to a recovery
under a legal settlement. The Company believes that EBITDA provides useful
information regarding the Company's ability to service debt but should not
be considered in isolation or as a substitute for the combined statement of
operations or cash flow data prepared in accordance with the generally
accepted accounting principles and included elsewhere in this Prospectus or
as a measure of the Company's operating performance, profitability or
liquidity. While EBITDA is frequently used as a measure of operations and
the ability to meet debt service requirements, it is not necessarily
comparable to other similarly titled captions of other companies due to
differences and methods of calculation.
(f) Sales representative productivity in any calendar year represents (i) sales
for such calendar year divided by (ii) the average of the number of sales
representatives at the commencement and the end of such calendar year.
(g) Pro forma adjusted EBITDA reflects (i) the elimination of certain non-
recurring items that affected 1997 historical amounts and (ii) certain
changes in the cost structure of the Company that are expected to occur
following the consummation of the Transactions, as set forth below:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------
<S> <C> <C> <C> <C>
Historical EBITDA:
Predecessor........................... $24.3 $8.3
Successor............................. 3.8
Pro forma adjustments................... (2.2)
Non-recurring items:
Reorganization expenses(1)............ 3.5 --
Gain from legal settlement(2)......... (2.3) --
Gain on sale of divested facility(3).. (0.8) --
--------
Total non-recurring items............. 0.4 --
--------- ---------
Cost savings:
Adjustment of existing employee bene-
fit plans(4)......................... 1.4 0.7
Restructuring/rationalization(5)...... 5.3 2.7
Elimination of expatriate benefits(6). 1.1 0.5
--------
Total cost savings(7)................. 7.8 3.9
--------- ---------
Pro forma adjusted EBITDA............. $ 30.3 $ 16.0
========= =========
</TABLE>
- --------
(1) In 1997, the Company incurred approximately $3.5 of cash severance
costs relating to the realignment of certain foreign operations. The
Company believes that such realignment has been completed and that such
severance costs are non-recurring.
(2) In 1997, the Company recorded a gain of approximately $2.3 relating to
a cash recovery under a legal settlement brought by the Company against
a software vendor.
(3) In 1997, the Company recorded a cash gain of approximately $0.8
relating to the sale of a facility that had been previously written-
off.
15
<PAGE>
(4) The Company has adjusted certain U.S. employee benefit plans which were
provided to employees, including defined benefit pension, retirement
savings, retiree medical and health and welfare plans, at an estimated
annual savings of $1.4.
(5) The Company plans to rationalize certain distribution, manufacturing
and administrative functions which the Company believes will reduce
annual expenses by $5.3. In addition, estimated non-recurring charges
of approximately $4.0 corresponding to the
restructuring/rationalization have not been reflected in the Unaudited
Pro Forma Combined Statement of Operations.
(6) The Company plans to convert to local status or replace certain
individuals currently employed on an expatriate basis. The Company
estimates that the annual cost savings compared to the existing
expatriate policy will be approximately $1.1.
(7) The anticipated cost savings included in pro forma adjusted EBITDA are
based on estimates and assumptions made by the Company that are
inherently uncertain, although considered reasonable by the Company,
and are subject to significant business, economic and competitive
uncertainties and contingencies, all of which are difficult to predict
and many of which are beyond the control of the Company. As a result,
there can be no assurance that such savings will be achieved.
(h) Cash interest expense represents interest expense less amortization of
debt issuance costs.
(i) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before income taxes and extraordinary
items, plus fixed charges. Fixed charges include interest expense on all
indebtedness, amortization of deferred financing fees, and one-third of
rental expense on operating leases representing that portion of rental
expense deemed to be attributable to interest. On a pro forma basis,
earnings before income taxes and fixed charges were insufficient to cover
fixed charges by $2.1 for the year ended December 31, 1997. The
calculation of pro forma earnings to fixed charges includes non-cash
depreciation and amortization expense of $7.4 and $3.8 and non-cash
amortization expense of deferred financing costs of $1.6 and $0.8 for the
year ended December 31, 1997 and the six months ended June 30, 1998,
respectively.
16
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, before tendering
their Existing Notes for New Notes, holders of Existing Notes should carefully
consider the following factors, which are generally applicable to the Existing
Notes and the New Notes.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
As a result of the Transactions, the Company is highly leveraged. As of June
30, 1998, the Company had approximately $140 million of consolidated
indebtedness, plus additional borrowing capacity under the Senior Credit
Agreement of approximately $50 million. The Senior Credit Agreement and the
Indenture permit the Company to incur or guarantee certain additional
indebtedness (subject to the limitations set forth therein). The Issuers are
required to repay the $25 million in term loans under the Senior Credit
Agreement over the six-year period following the Closing. All outstanding
revolving credit borrowings under the Senior Credit Agreement will become due
on the sixth anniversary of Closing. In addition, because the Issuers'
obligations under the Senior Credit Agreement bear interest at floating rates,
an increase in interest rates could adversely affect the Company's ability to
meet its debt service obligations, although the Company may enter into certain
interest rate protection arrangements following the Closing with respect to a
portion of its indebtedness under the Senior Credit Agreement. See "Unaudited
Pro Forma Combined Financial Statements," "Description of the Senior Credit
Agreement" and "Description of Notes."
The Company's high degree of leverage could have important consequences to
holders of the Notes, including: (i) a substantial portion of the Company's
cash flow from operations must be dedicated to debt service and is not be
available for other purposes; (ii) the Company's ability to obtain additional
debt financing in the future for working capital, capital expenditures or
acquisitions may be limited; (iii) the Company's leveraged position and the
covenants that are contained in the Indenture and the Senior Credit Agreement
could limit the Company's ability to compete, as well as its ability to expand
(including through acquisitions) and to make capital improvements, and (iv)
the Company's ability to refinance the Notes in order to pay the principal of
the Notes at maturity or upon a Change of Control may be adversely affected.
See "Description of the Senior Credit Agreement" and "Description of Notes."
The Company's ability to pay principal and interest on the Notes and to
satisfy its other debt obligations will depend upon its future operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, certain of which are beyond its
control. The Company anticipates that its operating cash flow, together with
borrowings under the Senior Credit Agreement, will be sufficient to meet its
operating expenses and to service its debt requirements as they become due. If
the Company is unable to service its indebtedness, it will be forced to take
actions such as reducing or delaying capital expenditures, selling assets,
restructuring or refinancing its indebtedness (which could include the Notes),
or seeking additional equity capital. There is no assurance that any of these
remedies can be effected on satisfactory terms, if at all. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources" and "Description of the Senior Credit
Agreement."
SUBORDINATION OF THE NOTES AND THE GUARANTEES
Each Issuer's Obligations under the Notes will be subordinated in right of
payment to all existing and future Senior Indebtedness of such Issuer,
including its obligations under the Senior Credit Agreement. Each Guarantee
will be subordinated in right of payment to all existing and future Senior
Indebtedness of the relevant Note Guarantor, including such Guarantor's
obligations with respect to the Senior Credit Agreement.
The Issuers and the Note Guarantors may not pay principal of, or premium or
interest on, the Notes, make any payment in respect of a Guarantee, make any
deposit pursuant to defeasance provisions, or repurchase, redeem or otherwise
retire the Notes if any Senior Indebtedness is not paid when due or any other
default on Senior Indebtedness occurs and the maturity of such Senior
Indebtedness is accelerated in accordance with its terms unless, in either
case, and until such default has been cured or waived or has ceased to exist,
any such
17
<PAGE>
acceleration has been rescinded or such Senior Indebtedness has been
discharged or paid in full. In addition, if a default exists with respect to
certain Senior Indebtedness and certain other conditions are satisfied, the
Issuers and the Note Guarantors may not make any payments on the Notes or on
the Guarantees until the earliest to occur of certain specified events or the
passage of 179 days from the receipt of a notice blocking such payment. In the
event of bankruptcy, liquidation, reorganization or any similar proceedings
against either Issuer or a Note Guarantor, or any default in payment or
acceleration of any debt thereof, the assets of such Issuer or Note Guarantor
will be available to pay obligations under the Notes or the Guarantees, as the
case may be, only after the Senior Indebtedness of such Issuer or Note
Guarantor has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on all or any of Notes. See "Description of
Notes-- Ranking."
SEVERAL OBLIGATIONS OF THE ISSUERS UNDER THE NOTES
Each Note will represent the several obligations of the Issuers. The U.S.
Issuer will be severally liable with respect to the payment of $600 of each
$1,000 principal amount of the Notes, together with interest on such amount,
and Jafra S.A. will be severally liable with respect to the payment of $400 of
each $1,000 principal amount of the Notes, together with interest on such
amount. Accordingly, the holders of the Notes will have a direct claim against
the U.S. Issuer only to the extent of the U.S. Issuer's Obligations and
against Jafra S.A. only to the extent of Jafra S.A.'s Obligations. Each of the
Obligations will be guaranteed by Parent and the other Issuer. However, each
Cross Guarantee is subject to certain limitations, in particular a 30-day
standstill period prior to its enforcement. See "Description of Notes--Note
Guarantees."
HOLDING COMPANY STRUCTURE
The U.S. Issuer conducts the non-U.S. part of its operations, and Jafra S.A.
and Parent conduct all of their operations, through various direct and
indirect subsidiaries. The Issuers and Parent are therefore dependent on
dividends or other distributions of funds from their respective subsidiaries
to meet their respective obligations, including obligations under the Senior
Credit Agreement, the Notes and the Guarantees. Such subsidiaries are separate
and distinct legal entities and, except for the subsidiaries of Jafra S.A. and
subsequently acquired or organized domestic subsidiaries of the U.S. Issuer
(which have guaranteed or will in the future guarantee the obligations of
Jafra S.A. or the U.S. Issuer, as the case may be), have no obligations under
the Notes or the Guarantees. The rights of the U.S. Issuer, Parent and their
respective creditors, including holders of the Notes, to participate in the
distribution of the assets of any subsidiary (other than the Note Guarantors)
upon such subsidiary's liquidation or reorganization will be subject to the
prior claims of such subsidiary's creditors, including trade creditors, except
to the extent that the U.S. Issuer or Parent itself may be a creditor with
enforceable claims against such subsidiary.
UNSECURED STATUS OF NOTES; ENCUMBRANCES TO SECURE SENIOR CREDIT AGREEMENT
In addition to being subordinated to all existing and future Senior
Indebtedness of the Issuers and of the relevant Note Guarantors, the Notes and
the Guarantees will not be secured by any of the Issuers' or the Guarantors'
assets. The Issuers' obligations under the Senior Credit Agreement and the
Guarantors' obligations under the related guarantees are secured as fully as
is permitted by applicable law (with certain exceptions) by substantially all
of the assets of Parent, the U.S. Issuer, Jafra S.A., each existing and
subsequently acquired or organized subsidiary of Jafra S.A., and each
subsequently acquired or organized U.S. subsidiary of the U.S. Issuer,
including, but not limited to, (a) a pledge of all the capital stock of the
Issuers, certain intermediate holding companies and each existing and each
subsequently acquired or organized direct subsidiary of each of the Issuers
(which pledge, in the case of any foreign subsidiary of the U.S. Issuer, shall
be limited to 65% of the capital stock of such foreign subsidiary) and (b)
security interests in, and mortgages on, substantially all tangible and
intangible assets of the Issuers and each existing and each subsequently
acquired or organized subsidiary of Jafra S.A. and each subsequently acquired
or organized domestic subsidiary of the U.S. Issuer. If an Issuer or a Note
Guarantor becomes insolvent or is liquidated, or if payment of the
indebtedness under the Senior Credit Agreement is accelerated, the lenders
thereof will be entitled to exercise the remedies available to a secured
18
<PAGE>
lender under applicable law and the instruments and agreements governing such
indebtedness. Accordingly, such lenders will have a prior claim over claims of
the holders of the Notes with respect to the assets securing such
indebtedness. In any such event, because the Notes and the Guarantees will not
be secured by such assets, it is possible that no assets would remain from
which claims of holders of the Notes could be satisfied or that, if any such
assets remained, such assets would be insufficient to satisfy such claims
fully. See "Description of the Senior Credit Agreement" and "Description of
Notes."
RESTRICTIVE FINANCING COVENANTS
The Senior Credit Agreement contains a number of significant covenants that,
among other things, restrict the ability of the Company to incur additional
indebtedness, pay dividends and other distributions, prepay other indebtedness
(including a specific restriction on prepayment of the Notes), create liens,
make capital expenditures, dispose of assets, make certain investments or
acquisitions, engage in certain transactions with affiliates and otherwise
restrict corporate activities. In addition, under the Senior Credit Agreement
the Company is required to satisfy specified financial covenants, including a
minimum EBITDA to cash interest expense coverage ratio and a maximum debt to
EBITDA ratio.
The Company's ability to comply with the covenants and restrictions
contained in the Senior Credit Agreement may be affected by events beyond its
control, including prevailing economic, financial and industry conditions, and
there can be no assurance that the Company will be able to comply with such
covenants or restrictions in the future. The breach of any such covenants and
restrictions as well as certain other events (including the occurrence of a
"Change in Control," as defined in the Senior Credit Agreement), could result
in an event of default under the Senior Credit Agreement which would permit
the lenders thereunder to declare all amounts outstanding thereunder to be
immediately due and payable, together with accrued and unpaid interest, and to
terminate their commitments to make further extensions of credit under the
Senior Credit Agreement. In addition, if the Issuers were unable to repay
their indebtedness to the lenders under the Senior Credit Agreement, such
lenders could proceed against the collateral securing such indebtedness, and
the Company could be prohibited from making any payments on the Notes. See
"Description of the Senior Credit Agreement." In addition, the Indenture
contains a number of restrictive covenants relating to the Company. See
"Description of Notes--Certain Covenants."
CHANGE OF CONTROL
The Indenture provides that upon a Change of Control, subject to certain
exceptions, each holder of the Notes may require the Company to repurchase all
or any part of such holder's Notes at a price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the date
of repurchase. The Senior Credit Agreement provides that in the event of a
Change of Control, the Issuers may not repurchase any Notes unless and until
such time as all amounts outstanding under the Senior Credit Agreement are
repaid in full. There can be no assurance that, in the event of a Change of
Control, the Issuers will have available sufficient funds to repay all amounts
outstanding under the Senior Credit Agreement or to repurchase the Notes. See
"Description of the Senior Credit Agreement" and "Description of Notes--Change
of Control."
HIGHLY COMPETITIVE MARKET
The direct selling cosmetic and personal care products business is highly
competitive. The Company competes with other direct sellers and other channels
of distribution for such products based on numerous factors, including the
quality and strength of the Company's marketing efforts, its geographic
penetration, its sales representative incentive system, brand recognition,
product quality, performance and price. The Company's sales representative
incentive system and party plan sales method influence consumers' choices
among competing products and brands and competing direct sellers. Promotion,
merchandising and packaging, and the timing and frequency of new product
introductions and line extensions, also influence buying decisions, and the
structure and quality of the sales representative sales force affect product
reception. A number of the Company's competitors, including Avon and Mary Kay,
are significantly larger and have substantially greater resources and
19
<PAGE>
less leverage than the Company, which may provide them greater flexibility to
respond to changing business and economic conditions than the Company. An
increase in the amount of competition faced by the Company, or the inability
of the Company to compete successfully, could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business--Competition."
DEPENDENCE ON CONSUMER SPENDING
The sale of cosmetics and other personal care products correlates strongly
to the level of consumer spending generally, and thus is significantly
affected by the general state of the economy and the ability and willingness
of consumers to spend on discretionary items. Reduced consumer confidence and
spending generally may result in reduced demand for the Company's products and
limitations on the ability of the Company to maintain or increase prices. A
decline in economic conditions or general consumer spending in any of the
Company's major markets could have a material adverse effect on the Company's
business, financial condition and results of operations.
INTERNATIONAL OPERATIONS
General
The Company's ability to conduct and expand its business outside the United
States and the amount of its revenues derived from foreign markets are subject
to the risks inherent in international operations. The Company's international
operations may be adversely affected by import duties or other legal
restrictions on imports, currency exchange control regulations, transfer
pricing regulations, the possibility of hyperinflationary conditions and
potentially adverse tax consequences, among other things. In addition, the
governments of many developing nations have exercised and continue to exercise
significant influence over many aspects of their domestic economies. Given the
balance of payment deficits and shortages in foreign exchange reserves that
many such economies, including the Mexican economy, have suffered in recent
years, there can be no assurance that the governments of nations in which the
Company operates, or intends to expand, will not take actions that materially
adversely affect the Company and its business.
As a result of recent elections, for the first time in seven decades, the
Partido Revolucionario Institucional (PRI) does not hold a majority of the
seats in the Mexican Chamber of Deputies or the office of mayor of Mexico
City. The Company cannot predict the impact these elections will have on
Mexican economic, regulatory and social policy or the consequences thereof on
the business, financial condition, results of operations and prospects of the
Company. Similarly, there can be no assurance that future economic, political
or diplomatic developments in or affecting the Company's overseas markets,
over which the Company has no control, will not impair the Company's business,
financial condition and results of operations or the ability of the Issuers or
the Guarantors to meet their respective obligations under the Notes and the
Guarantees.
The Company believes that it operates in compliance with all applicable
customs, currency exchange control and transfer pricing laws. However, there
can be no assurance that the Company will continue to be found to be operating
in compliance with such laws or that such laws will not be modified, the
result of which may be to require changes in the Company's operating
procedures. Also, the Company may experience difficulty entering new foreign
markets due to regulatory barriers, the necessity of adapting to new
regulatory systems and different cultural bases and political systems of such
markets. As the Company continues to expand its non-U.S. operations, these and
other risks associated with such operations are likely to increase.
Exchange Rates
Approximately 69% of the Company's revenues in 1997 were generated in
currencies other than the U.S. dollar. Substantially all of Jafra S.A.'s
consolidated revenues, representing approximately 43% of the Company's
revenues in 1997, are denominated in Mexican pesos. As such, the Company's
results of operations are subject to fluctuations in foreign exchange rates.
Substantially all of the Company's indebtedness (including substantially
20
<PAGE>
all the indebtedness of Jafra S.A.) is denominated in U.S. dollars. As a
result, declines relative to the U.S. dollar in the value of the currencies in
which the Company's revenues are generated (including the Mexican peso) may
materially adversely affect the Company's business, financial condition and
results of operations and the ability of the Issuers and the Note Guarantors
to meet their respective obligations under the Notes and the Guarantees.
The value of the Mexican peso in particular has been subject to significant
fluctuations with respect to the U.S. dollar in the past and may be subject to
significant fluctuations in the future. The value of the Mexican peso against
the U.S. dollar declined by 60.8% from December 31, 1993 to December 31, 1994;
by 54.8% from January 1, 1995 to December 31, 1995; by 1.8% from January 1,
1996 to December 31, 1996; by 2.4% from January 1, 1997 to December 31, 1997;
and by approximately 23.6% from January 1, 1998 to August 31, 1998. The
decline in the value of the Mexican peso in 1994 and 1995, and the associated
economic weakness, had a material adverse effect on the Company's business,
financial condition and results of operations. For example, in 1995, changes
in exchange rates (together with local liquidity issues and inflation)
resulted in a decrease of U.S.$59.0 million in sales in Mexico. Although the
Company anticipates that, as its worldwide revenues increase, Jafra S.A.'s
revenues will comprise a smaller percentage of the Company's total revenue,
there can be no assurance that this will be the case. Any future devaluation
against the U.S. dollar of the Mexican peso or any other currency in which the
Company earns revenue could materially adversely affect the ability of the
Company to service its U.S. dollar denominated liabilities, including the
Notes.
Historically, Jafra S.A. has been able to raise its prices in line with the
local inflation, thereby helping to mitigate the effect of devaluations of the
Mexican peso. For example, from 1994 to 1997, Jafra S.A. increased its prices
148%, compared to inflation of 119% and a depreciation of the Mexican peso by
150% over this period. However, there can be no assurance that Jafra S.A. will
be able to maintain this pricing policy in the future. The Company may manage
the exchange rate exposure presented by the Notes by entering into certain
hedging transactions, although there can be no assurance that the Company will
be able to do so at an acceptable cost or that future exchange rate
fluctuations will not have a material adverse effect on the ability of the
Company to pay when due the principal and interest on the Notes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
GOVERNMENT REGULATION
The Company is subject to or affected by governmental regulations
concerning, among other things, (i) product formulation, labeling and
packaging, (ii) product claims and advertising, whether made by the Company or
its sales representatives, (iii) fair trade and distributor practices and (iv)
environmental, health and safety matters. In addition, new regulations could
be adopted or any of the existing regulations could be changed at any time in
a manner that could have a material adverse effect on the Company's business
and results of operations. Present or future health and safety or food and
drug regulations could delay or prevent the introduction of new products into
a given country or marketplace or suspend or prohibit the sale of existing
products in such country or marketplace. The Company believes that it is in
compliance in all material respects with such laws and regulations now in
effect.
In particular, most countries have laws intended to prevent deceptive
schemes, often referred to as "pyramid" or "chain sales" schemes, that promise
quick rewards for little or no effort, require high entry costs, use high
pressure recruiting methods or do not involve legitimate products. The Company
believes that its method of distribution is in compliance in all material
respects with the laws and regulations relating to direct selling activities
of all of the countries in which the Company currently operates. However,
there can be no assurance that the Company will be allowed to conduct business
in new markets or continue to conduct business in each of its existing markets
on the basis of its current practices.
Jafra's sales representatives are self-employed and are not employees of the
Company. Periodically, the question of the legal status of the Company's sales
representatives has arisen, usually in regard to possible coverage under
social benefit laws that would require Jafra (and in most instances its sales
representatives) to make regular contributions to social benefit funds.
Although the Company has generally been able to address
21
<PAGE>
these questions in a satisfactory manner, the matter has not been fully
resolved in all countries. If there should be a final determination adverse to
the Company in a particular country, the cost for future, and possibly past,
contributions could be so substantial in relation to the Company's operations
in that country that the Company could be forced to discontinue operations in
that country and the business, financial condition and results of operations
of the Company could be materially adversely affected.
DEPENDENCE ON NEW MANAGEMENT
In connection with the Acquisition, several members of the Company's senior
management team have returned to Gillette and others will remain with the
Company for a transition period extending in certain cases up to December 31,
1998. See "The Transactions." Certain departing employees have been replaced
by the new management team. See "Business--Marketing--Strategy" and
"Management." The success of the Company depends in large part on the
Company's new management and, to a lesser extent, on its ability to attract
and retain other highly qualified management personnel. There can be no
assurance that the Company will be successful in hiring or retaining such
personnel or that such new management will be successful in implementing the
Company's strategy.
RISK OF INABILITY TO SUCCESSFULLY IMPLEMENT GROWTH STRATEGY
The Company's strategy is to (i) identify additional strategic hires to
round out its new management team with significant direct selling experience,
(ii) grow its sales representative base in existing markets, (iii) increase
sales representative productivity, (iv) develop new markets and (v) improve
operating efficiency. The Company's ability to implement its strategy
successfully will be dependent on business, financial and other factors that
may be beyond the Company's control, including the prevailing economic
conditions and changes in consumer preferences and in the competitive
environment. There can be no assurance that the Company will be successful in
the implementation of its strategy.
The Company's ability to anticipate changes in market and industry trends
and to successfully develop and introduce new and enhanced products on a
timely basis will be a critical factor in its ability to grow and to remain
competitive. There can be no assurance that new products and product
enhancements will be completed on a timely basis or will enjoy market
acceptance following their introduction. In addition, the anticipated
development schedules for new or improved products are inherently difficult to
predict and are subject to delay or change as a result of shifting priorities
in response to customers' requirements and competitors' new product
introductions.
YEAR 2000 ISSUE
Prior to the Acquisition, the Company established a year 2000 compliance
methodology and schedule based on the Gillette model. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000 Issue." The Company is currently in the process of repairing, upgrading
or replacing all hardware, software and equipment that has been identified as
non-compliant at a cost estimated to be $1.5 million through 1999. Part of
this process involves confirming with suppliers that their systems are or will
be year 2000 compliant. The Company has contacted but has not yet received
responses from all of its major suppliers of raw materials and finished
products with respect to their year 2000 compliance status. Based on the
replies received by the Company as of August 26, 1998, the Company does not
believe that the inability of any of the suppliers that have not yet responded
or have responded unfavorably to the Company's request for information, to
continue to supply the Company would have a material adverse effect on the
Company's business, financial condition or results of operations. The Company
intends to seek and identify alternate sources of supply for the affected raw
materials and finished products in the event it has not received assurance by
March 31, 1999 from these companies that they will be able to supply the
Company without material disruption into the year 2000. The Company currently
believes there are alternative sources for all such materials.
In the event the Company does not complete all phases of its year 2000
compliance program by December 31, 1999, it would have to consider outsourcing
its customer service and order processing functions.
22
<PAGE>
No assurance can be given that the Company will be able to outsource these
functions or that the Company will not incur significant additional expense in
doing so.
CONTROL BY CD&R FUND V
CD&R Fund V owns approximately 97.5% of the outstanding shares of Parent. As
a result of its stock ownership, CD&R Fund V has the ability to control the
Company, including the power to elect the directors of the Company, appoint
new management, and approve any action requiring approval by the stockholders
of the Company (such as adopting amendments to the organizational documents of
the Company and approving any merger or sale of all or substantially all the
assets of the Company). In addition, the employment agreements of Ronald B.
Clark, Parent's CEO, and Gonzalo R. Rubio, Parent's COO, provide that each
will be a member of the Board of Directors during the term of his employment.
The stockholders, or in some countries the directors so elected, have the
authority to effect decisions affecting the capital structure of the Company,
including the issuance of preferred stock and the declaration of dividends.
There can be no assurance that the interests of CD&R Fund V and Messrs. Clark
and Rubio will not conflict with the interests of holders of the Notes.
JUDGMENTS IN FOREIGN CURRENCIES
Under the Monetary Law of Mexico, an obligation in a currency other than
Mexican currency, which is payable in Mexico, may be satisfied in Mexican
currency at the rate of exchange in effect on the date payment occurs. Such
rate is currently determined by Banco de Mexico every business banking day in
Mexico and published the following business banking day in the Official
Gazette. Accordingly, in the event that proceedings are brought in Mexico
seeking to enforce in Mexico Jafra S.A.'s Obligations under the Notes or the
Jafra S.A. Guarantees, neither Jafra S.A. nor its subsidiaries obligated under
the Guarantees would be required to discharge such obligations in a currency
other than the Mexican peso and no separate cause of action exists in Mexico
for compensation for any shortfall. Upon the declaration of bankruptcy of
Jafra S.A. or any subsidiary thereof, Jafra S.A.'s Obligations under the Notes
or a Jafra S.A. subsidiary's obligations in respect of its Guarantee (i) would
be converted into Mexican pesos at the exchange rate prevailing at the time of
such declaration and payment would occur at the time claims of the creditors
of Jafra S.A. or such subsidiary are satisfied, (ii) would be dependent upon
the outcome of the bankruptcy proceedings and (iii) would not be adjusted to
take into account depreciation of the Mexican peso against the U.S. dollar
occurring after such declaration of bankruptcy.
FRAUDULENT TRANSFER CONSIDERATIONS
The incurrence of indebtedness by the Issuers and the Note Guarantors, such
as the Notes and the Guarantees, may be subject to review under federal, state
or foreign fraudulent transfer laws in the event either Issuer or any such
Note Guarantor is the subject of a bankruptcy filing or lawsuit commenced by
or on behalf of its unpaid creditors of such Issuer or Note Guarantor. Under
such laws, if a court in a lawsuit by a creditor or a representative of
creditors of such Issuer or Note Guarantor, such as a trustee in bankruptcy,
were to find that, at the time such Issuer or Note Guarantor incurred
indebtedness, including indebtedness under the Notes or the Guarantees, such
Issuer or Note Guarantor (i) was insolvent or rendered insolvent thereby, (ii)
was engaged in a business or transaction for which its remaining assets
constituted an unreasonably small amount of capital, (iii) intended to incur,
or believed that it would incur, debts beyond its ability to pay as they
matured, or (iv) intended to hinder, delay or defraud current or future
creditors and, in the case of clauses (i), (ii) and (iii), that such Issuer or
Note Guarantor did not receive reasonably equivalent value or fair
consideration for incurring such indebtedness, such court could avoid or
subordinate the amounts owing under the Notes or the Guarantees to presently
existing and future indebtedness of such Issuer or Note Guarantor and take
other actions detrimental to the holders of the Notes.
If a court were to find that an Issuer or Note Guarantor came within any of
clauses (i) through (iv) above, such Issuer or Note Guarantor, or its
creditors or the trustee in bankruptcy, could seek to avoid the grant of
security interests to the lenders under the Senior Credit Agreement. This
would result in an event of default with respect to indebtedness incurred
under such agreement which, under the terms of such indebtedness (subject to
applicable law), would allow the lenders to terminate their commitments
thereunder and to accelerate repayment of such indebtedness.
23
<PAGE>
The measure of insolvency for purposes of the foregoing will vary depending
upon the law of the jurisdiction which is being applied. Generally, however, a
company would be considered insolvent for purposes of the foregoing if, at the
time it incurred the indebtedness, (i) the sum of such company's debts
including contingent liabilities is greater than all such company's property
at a fair valuation, (ii) the present fair saleable value of such company's
assets is less than the amount that will be required to pay its probable
liability on its existing debts and liabilities (including contingent
liabilities) as they become absolute and matured or (iii) the company incurred
obligations beyond its ability to pay as such obligations become due. There
can be no assurance as to what standards a court would use to determine
whether an Issuer or a Note Guarantor was solvent at the relevant time, or
whether, whatever standard were to be used, the Notes or Guarantees would not
be avoided or further subordinated on grounds other than those set forth
above. In rendering their opinions in connection with the initial borrowings,
counsel for the Issuers and the Note Guarantors and counsel for the Initial
Purchasers will not express any opinion as to the applicability of federal,
state or foreign fraudulent transfer and conveyance laws. Moreover, any
solvency analysis conducted in connection with the Acquisition would not be
binding on a court and there can be no assurance that a court would not
determine that an Issuer or a Note Guarantor was insolvent at the time of or
after giving effect to the Acquisition.
The Issuers and the Note Guarantors believe that at the time the
indebtedness constituting the Notes and the Guarantees is initially incurred
by the Issuers and the Note Guarantors, the Issuers and the Note Guarantors
(i) will be (a) neither insolvent nor rendered insolvent thereby, (b) in
possession of sufficient capital to run their respective businesses
effectively and (c) incurring debts and obligations within their respective
abilities to pay as the same mature or become due and (ii) will have
sufficient assets to satisfy any probable money judgment against them in any
pending action. In reaching the foregoing conclusions, the Issuer and the Note
Guarantors have relied upon their respective analyses of internal cash flow
projections and estimated values of their respective assets and liabilities.
There can be no assurance, however, that a court passing on such questions
would reach the same conclusions.
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
To the extent that Existing Notes are tendered and accepted in the Exchange
Offer, the trading market for the remaining untendered or tendered but not
accepted Existing Notes could be adversely affected. Because the Issuers
anticipate that most holders of the Existing Notes will elect to exchange such
Existing Notes for New Notes due to the absence of restrictions on the resale
of New Notes under the Securities Act, the Issuers anticipate that the
liquidity of the market for any Existing Notes remaining after the
consummation of the Exchange Offer may be substantially limited. The New Notes
are new securities for which there presently is no established market.
Although the Initial Purchasers have informed the Issuers that they currently
intend to make a market in the New Notes, the Initial Purchasers are not
obligated to do so and any such market making may be discontinued at any time
without notice. Accordingly, there can be no assurance as to the development
or liquidity of any market for the New Notes. The Issuers do not intend to
apply for listing of the New Notes on any securities exchange or for quotation
of the New Notes through the National Association of Securities Dealers
Automated Quotation System. See "Plan of Distribution."
The liquidity of, and trading market for, the New Notes also may be
adversely affected by general declines in the market or by declines in the
market for similar securities. Such declines may adversely affect such
liquidity and trading markets independent of the financial performance of, and
prospects for, the Company.
24
<PAGE>
USE OF PROCEEDS
There will be no cash proceeds to the Company from the issuance of the New
Notes pursuant to the Exchange Offer. The proceeds of the Offering, together
with other sources of financing, were used to fund the purchase price for the
Acquisition and to pay transaction-related fees and expenses.
25
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1998. This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Conditions and Results of Operations" and
the combined financial statements of the Company and related notes thereto,
all included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1998
-------------
(IN MILLIONS)
<S> <C>
Long term debt:
Revolving Credit Facility....................................... $ 15.0
Term Loan Facility.............................................. 25.0
11 3/4% Senior Subordinated Notes Due 2008...................... 100.0
------
Total long term debt.......................................... 140.0
Total common stockholders' equity................................. 78.2(a)
------
Total capitalization.......................................... $218.2
======
</TABLE>
- --------
(a) $78.9 million of equity was contributed to Parent on or prior to the
Closing. The decrease of $0.7 million is due to the changes in
stockholders' equity attributable to operations for the two months ending
June 30, 1998. On September , 1998, an additional $ of equity was
contributed to Parent by certain members of management, certain directors
and other persons in a transaction exempt from the registration
requirements of the Securities Act. As a result, total common
stockholders' equity was $ million at September , 1998.
26
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
The following Unaudited Pro Forma Combined Statements of Operations of the
Company are based on the historical financial statements of the Company
included elsewhere in this Prospectus, adjusted to give effect to the
following: (i) the Acquisition of the worldwide Jafra Business by Parent and
its subsidiaries; (ii) the receipt of proceeds from the offering of the Notes
and the initial borrowings under the Senior Credit Agreement; and (iii) the
payment of fees and expenses related to the Acquisition and the Financings.
See "The Transactions."
The Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1997 and the Unaudited Combined Pro Forma Statement of Operations
for the six months ended June 30, 1998, give effect to the Transactions as if
the Transactions had occurred as of January 1, 1997. The pro forma adjustments
are based upon available information and certain assumptions that the Company
believes are reasonable. The Unaudited Pro Forma Statements of Operations do
not purport to represent what the Company's results of operations would
actually have been had the Transactions in fact occurred as of such dates or
to project the Company's results of operations for any future period. The
Unaudited Pro Forma Statements of Operations should be read in conjunction
with the historical combined financial statements of the Company and the notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this Prospectus.
The Acquisition was accounted for as a purchase. Under purchase accounting,
the total purchase cost and fair value of liabilities assumed will be
allocated to the assets of the Company based upon their respective fair values
as of the Closing based on valuations and other studies that have not yet been
finalized. A preliminary allocation of the purchase cost has been made to
major categories of assets and liabilities based on Company estimates. The
actual allocation of purchase cost and the resulting effect on income from
operations may differ significantly from the pro forma amounts included
herein.
Pursuant to the Acquisition Agreement, the purchase price paid by the Parent
for the Jafra Business is to be adjusted by the difference, if any, between
the adjusted net book value (as defined) of the Jafra Business as of the
closing date, and the adjusted net book value as of September 30, 1997. The
purchase price adjustment, if any, has not been resolved and accordingly no
adjustment has been made to the total purchase cost in the Unaudited Pro Forma
Combined Statement of Operations.
27
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA(A)
---------- ----------- ------------
(IN MILLIONS)
<S> <C> <C> <C>
Net sales................................. $229.5 $229.5
Cost of sales............................. 59.1 (b) 59.1
------ ------
Gross profit.............................. 170.4 170.4
Selling, general and administrative ex-
penses................................... 149.4 154.4
Depreciation and amortization........... $ 2.8 (c)
CD&R advisory fee....................... 0.5 (d)
Executive compensation restructuring.... (0.9)(e)
Insurance coverage...................... 0.3 (f)
Compensation expense.................... 2.3 (g)
------ ------ ------
Income from operations.................... 21.0 (5.0) 16.0
------ ------ ------
Interest income (expense), net............ 0.3 (17.4)(h) (17.1)
Exchange gain............................. 0.3 0.3
Other expense, net........................ (1.3) (1.3)
------ ------ ------
Income (loss) before income taxes......... 20.3 (22.4) (2.1)
Income tax expense (benefit).............. 4.8 (5.5)(i) (0.7)
------ ------ ------
Net income (loss)......................... $ 15.5 $(16.9) $ (1.4)
====== ====== ======
Other data:
EBITDA (j)................................ $ 24.3 $ (2.2) $ 22.1
====== ====== ======
Adjusted EBITDA (k)....................... $ 30.3
======
</TABLE>
28
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PRO FORMA
PREDECESSOR SUCCESSOR SIX MONTHS
FOUR MONTHS TWO MONTHS PRO ENDED
ENDED ENDED FORMA JUNE
APRIL 30, 1998 JUNE 30, 1998 ADJUSTMENTS 30, 1998(A)
-------------- ------------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Net Sales............... $ 77.3 $ 41.0 $ 118.3
Cost of Sales........... 20.3 11.8 $ (0.8)(b) 31.3
---------- --------- ---------- -------
Gross profit.......... 57.0 29.2 0.8 87.0
Selling, general and ad-
ministrative expenses.. 51.6 25.6 78.9
Depreciation and amor-
tization............. 0.9 (c)
CD&R Advisory fee..... 0.2 (d)
Executive compensation
restructuring........ (0.3)(e)
Insurance coverage.... 0.1 (f)
Compensation expense.. 0.8 (g)
---------- --------- ---------- -------
Income (loss) from oper-
ations................. 5.4 3.6 (0.9) 8.1
---------- --------- ---------- -------
Interest income (ex-
pense), net............ 0.1 (2.7) (5.7)(h) (8.3)
Exchange gain (loss).... 1.4 (1.3) 0.1
Other income (expense),
net.................... 0.1 0.2 0.3
---------- --------- ---------- -------
Income (loss) before
taxes.................. 7.0 (0.2) (6.6) 0.2
Income tax expense (ben-
efit).................. 2.9 0.4 (2.3)(i) 1.2
---------- --------- ---------- -------
Net Income (loss)....... $ 4.1 $ (0.6) $ (4.3) $ (1.0)
========== ========= ========== =======
<CAPTION>
Other data:
<S> <C> <C> <C> <C>
EBITDA(j)............... $ 8.3 $ 3.8 $ -- $ 12.1
========== ========= ========== =======
Adjusted EBITDA(k)...... $ 16.0
=======
</TABLE>
29
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(IN MILLIONS)
(a) The Acquisition was accounted for as a purchase. Under purchase accounting
the total purchase cost and fair value of liabilities assumed will be
allocated to the assets of the Company based upon their respective fair
values as of the Closing based on valuations and other studies that are not
yet available. A preliminary allocation of the purchase cost has been made
to major categories of assets and liabilities based on Company estimates.
The allocation of purchase cost and the resulting effect on income from
operations may differ significantly from the pro forma amounts included
herein.
(b) The preliminary allocation of purchase cost includes an increase in
certain finished goods inventory of approximately $2.5 million.
Substantially all of this inventory is expected to be sold within the 12
months following the Acquisition which will result in a charge to cost of
sales. This non-recurring charge has not been reflected in the Pro Forma
Combined Statements of Operations. Cost of goods sold for the two months
ended June 30, 1998 includes approximately $0.8 million attributable to the
write-up of finished goods. This non-recurring amount has been eliminated in
the Pro Forma Combined Statement of Operations for the six months ended June
30, 1998.
(c) The application of purchase accounting is expected to result in an
increase in depreciation and amortization of $2.8 annually. The adjustments
for estimated pro forma depreciation and amortization are based on their
estimated fair values. Property, plant and equipment is expected to be
depreciated over estimated useful lives ranging from 3 to 10 years for
machinery and equipment and 40 years for buildings and improvements. Other
intangible assets and goodwill are expected to be amortized over their
estimated useful lives, not to exceed 40 years. For pro forma purposes, a 40
year life has been used for other intangible assets and goodwill.
(d) CD&R will receive a fee for management consulting, monitoring and
financial advisory services provided to the Company. The fee will initially
be $0.5 per annum. CD&R manages CD&R Fund V, which is the Company's largest
stockholder. See "Certain Relationships and Related Transactions."
(e) In connection with the Acquisition, the Company terminated certain
executive compensation plans including the Gillette ESOP plan. The Company
replaced these plans with stock options that will qualify for fixed plan
accounting under APB No. 25. The net reduction in expense for such executive
compensation is estimated to be $0.9 and $0.3 for the year ended December
31, 1997 and for the six months ended June 30, 1998, respectively.
(f) The Company believes that certain efficiencies were realized in connection
with its insurance coverages as a result of operating as a subsidiary of
Gillette and estimates that its cost of insurance will be approximately $0.3
greater annually on a stand-alone basis.
(g) In connection with the Transactions, the Company is in the process of
replacing certain senior management personnel and expects to incur $2.3
annually in additional compensation expense.
(h) The pro forma adjustments to interest expense are based on the amounts
borrowed and the rates in effect as of the Closing:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------
<S> <C> <C>
Revolving Credit Facility--$15.0 at
8.5%................................ $ 1.3 $0.4
Term Loan Facility--$25.0 at 8.5%.... 2.2 0.7
Senior Subordinated Notes Offering--
$100.0 at 11.75%.................... 12.0 4.0
Estimated amortization of debt issu-
ance costs.......................... 1.6 0.5
----- ----
Pro forma interest expense........... 17.1 5.6
Elimination of historical interest 0.3 0.1
income, net ........................ ----- ----
Pro forma adjustment to interest ex- $17.4 $5.7(1)
pense, net.......................... ===== ====
</TABLE>
(1) Amount represents the adjustment to interest expense related to the
four months ended April 30, 1998 of the predecessor company. The two
months ended June 30, 1998 of the successor reflects the
capitalization resulting from the Transactions. Accordingly, interest
expense for such period has not been adjusted.
The pro forma adjustments to interest expense include the effects of
Mexican withholding tax (currently expected to be 4.9%) on Jafra
S.A.'s obligations.
Each 0.125% change in interest rates in respect of the Revolving
Credit Facility would increase or decrease pro forma interest
expense by less than $0.1 for both the year ended December 31, 1997
and the six months ended June 30, 1998.
30
<PAGE>
(i) The tax effects of the pro forma adjustments to income (loss) before
income taxes is based on the applicable statutory tax rates in the relevant
jurisdictions. The pro forma adjustments assume that no valuation reserves
would be required under SFAS 109 "Accounting for Income Taxes."
The pro forma adjustments to income tax expense includes the estimated tax
effect of inflation and exchange losses relating to Jafra S.A.'s
Obligations in Mexico.
Undistributed earnings of the Company's foreign subsidiaries are
considered to be indefinitely reinvested and, accordingly, no provision
for U.S. federal and state income taxes has been provided thereon. Upon
distribution of those earnings in the form of dividends or otherwise, the
Company would be subject to both U.S. income taxes (subject to an
adjustment for foreign tax credits) and withholding taxes payable to the
various foreign countries.
(j) EBITDA is defined as net income before net interest expense, income tax
expense, depreciation and amortization. The Company believes that EBITDA
provides useful information regarding the Company's ability to service debt
but should not be considered in isolation or as a substitute for the
combined statement of operations or cash flow data prepared in accordance
with generally accepted accounting principles and included elsewhere in this
Prospectus or as a measure of the Company's operating performance,
profitability or liquidity. While EBITDA is frequently used as a measure of
operations and the ability to meet debt service requirements, it is not
necessarily comparable to other similarly titled captions of other companies
due to differences and methods of calculation.
(k) Pro forma adjusted EBITDA reflects (i) the elimination of certain non-
recurring items that affected 1997 historical amounts and (ii) certain
changes in the cost structure of the Company that are expected to occur
following the consummation of the Transactions, as set forth below:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------
<S> <C> <C> <C> <C>
Historical EBITDA:
Predecessor........................... $24.3 $8.3
Successor............................. 3.8
Pro forma adjustments................... (2.2) --
Non-recurring items:
Reorganization expenses(1)............ 3.5 --
Gain from legal settlement(2)......... (2.3) --
Gain on sale of divested facility(3).. (0.8) --
--------
Total non-recurring items............. 0.4 --
--------- ---------
Cost savings:
Adjustment of existing employee bene-
fit plans(4)......................... 1.4 0.7
Restructuring/rationalization(5)...... 5.3 2.7
Elimination of expatriate benefits(6). 1.1 0.5
--------
Total cost savings(7)................. 7.8 3.9
--------- ---------
Pro forma adjusted EBITDA............. $ 30.3 $ 16.0
========= =========
</TABLE>
- -------
(1) In 1997, the Company incurred approximately $3.5 of cash severance
costs relating to the realignment of certain foreign operations. The
Company believes that such realignment has been completed and that such
severance costs are non-recurring.
(2) In 1997, the Company recorded a gain of approximately $2.3 relating to
a cash recovery under a legal settlement brought by the Company against
a software vendor.
(3) In 1997, the Company recorded a cash gain of approximately $0.8
relating to the sale of a facility that had been previously written-
off.
(4) The Company has adjusted certain U.S. employee benefit plans which were
provided to employees, including defined benefit pension, retirement
savings, retiree medical and health and welfare plans, at an estimated
annual savings of $1.4.
(5) The Company plans to rationalize certain distribution, manufacturing
and administrative functions which the Company believes will reduce
annual expenses by $5.3. In addition, estimated non-recurring charges
of approximately $4.0 corresponding to the
restructuring/rationalization have not been reflected in the Unaudited
Pro Forma Combined Statement of Operations.
(6) The Company plans to convert to local status or replace certain
individuals currently employed on an expatriate basis. The Company
estimates that the annual cost savings compared to the existing
expatriate policy will be approximately $1.1.
(7) The anticipated cost savings included in pro forma adjusted EBITDA are
based on estimates and assumptions made by the Company that are
inherently uncertain, although considered reasonable by the Company,
and are subject to significant business, economic and competitive
uncertainties and contingencies, all of which are difficult to predict
and many of which are beyond the control of the Company. As a result,
there can be no assurance that such savings will be achieved.
31
<PAGE>
SELECTED HISTORICAL COMBINED FINANCIAL DATA
The following table sets forth the combined financial data with respect to
the Company for the periods ended and as of the dates indicated. The historical
combined statement of operations data for the years ended December 31, 1995,
1996 and 1997 and the historical combined balance sheet data as of December 31,
1996 and 1997 are derived from the audited combined financial statements and
the historical combined statements of operations data for the six months ended
June 30, 1997, four months ended April 30, 1998 and the two months ended June
30, 1998 and the historical combined balance sheet data as of June 30, 1997,
April 30, 1998 and June 30, 1998 are derived from the unaudited combined
financial statements of the Company, both of which are included elsewhere in
this Prospectus. This information should be read in conjunction with such
combined financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The historical combined
statement of operations data for the years ended December 31, 1993 and 1994 and
the historical combined balance sheet data as of December 31, 1993, 1994 and
1995 are derived from the unaudited combined financial statements of the
Company that are not included in this Prospectus. The data presented for the
six months ended June 30, 1997, for the four months ended April 30, 1998 and
for the two months ended June 30, 1998 are derived from the unaudited combined
financial statements included elsewhere in this Prospectus and include, in the
opinion of management, all adjustments, consisting of normal recurring
adjustments necessary to present fairly the data for such periods. Prior to
1998, accounts of subsidiaries and operations outside the United States are
included in the historical combined financial data on the basis of fiscal years
generally ending November 30.
<TABLE>
<CAPTION>
PREDECESSOR
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS FOUR MONTHS TWO MONTHS
---------------------------------------- ENDED ENDED ENDED
1993 1994 1995 1996 1997 JUNE 30, 1997 APRIL 30, 1998 JUNE 30, 1998
------ ------ ------ ------ ------ ------------- -------------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales.............. $258.1 $263.9 $218.4(a) $224.5 $229.5 $110.1 $ 77.3 $ 41.0
Cost of sales.......... 55.7 59.8 54.3 58.2 59.1 28.1 20.3 11.8
------ ------ ------ ------ ------ ------ ------ ------
Gross profit........... 202.4 204.1 164.1 166.3 170.4 82.0 57.0 29.2
Selling, general and
administrative
expenses (b).......... 155.3 172.3 154.0 155.8 149.4 73.6 51.6 25.6
------ ------ ------ ------ ------ ------ ------ ------
Income from operations. 47.1 31.8 10.1 10.5 21.0 8.4 5.4 3.6
Other income (expense)
Exchange gain (loss)... (0.5) 0.1 25.5(c) -- 0.3 1.4 (1.3)
Interest income, net... 4.9 0.5 4.3 0.9 0.3 0.1 0.1 (2.7)
Other expense, net..... (1.0) (1.0) (1.0) (1.4) (1.3) 0.1 0.1 0.2
------ ------ ------ ------ ------ ------ ------ ------
Income before income
taxes and
extraordinary credit.. 50.5 31.4 38.9 10.0 20.3 8.6 7.0 (0.2)
Income taxes........... 14.4 13.4 6.1 2.6 4.8 2.1 2.9 0.4
------ ------ ------ ------ ------ ------ ------ ------
Income before
extraordinary credit.. 36.1 18.0 32.8 7.4 15.5 6.5 4.1 (0.6)
Extraordinary credit
(d)................... -- -- -- 2.6 -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Net income............. $ 36.1 $ 18.0 $ 32.8 $ 10.0 $ 15.5 $ 6.5 $ 4.1 $ (0.6)
====== ====== ====== ====== ====== ====== ====== ======
BALANCE SHEET DATA (AT
END OF PERIOD):
Cash and cash equiva-
lents................. $ 4.1 $ 6.2 $ 7.5 $ 8.7 $ 10.2 $ 11.6 $ 1.9 $ 18.4
Total working capital
(e)................... 85.4 75.1 49.4 24.4 31.1 25.6 41.0 34.3
Property, plant and
equipment, net........ 26.1 31.8 43.7 41.8 43.7 44.0 39.6 56.2
Total assets........... 203.1 217.4 203.1 164.5 175.2 179.6 141.9 277.3
Total debt............. -- -- -- -- 8.5 -- -- 140.0
Stockholders' equity... 111.7 120.8 108.7 78.6 77.3 81.0 90.1 78.2
OTHER FINANCIAL DATA:
EBITDA (f)............. $ 48.6 $ 34.1 $ 37.4 $ 15.9 $ 24.3 $ 9.9 $ 8.3 $ 3.8
Net cash provided by
(used in) operating
activities............ -- -- 27.5 5.4 26.7 5.2 (8.0) 8.2
Ratio of earnings to
fixed charges (g)..... 25.0x 9.3x 22.6x 5.8x 12.9x 18.4x 24.5x (g)
Depreciation and amor-
tization.............. 3.0 3.2 2.8 3.3 4.4 1.4 1.4 1.3
Capital expenditures... 6.1 10.7 20.3 10.3 8.9 3.7 3.2 0.5
</TABLE>
32
<PAGE>
- --------
(a) In 1995, net sales in Mexico declined $59 or 43%, primarily as a result of
the December 1994 devaluation of the Mexican peso and related economic
weakness in Mexico. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(b) Selling, general and administrative expenses include the following non-
recurring items: for 1995, net reorganization charges of $9.6; for 1996, a
$5.4 non-cash charge for the write-off of certain computer systems and
related costs, and net reorganization charges of $0.7; and for 1997, net
reorganization charges of $3.5 that were partially offset by a cash
recovery of $2.3 relating to the $5.4 charge taken in 1996, resulting from
the settlement of a legal action brought by the Company against a computer
systems contractor, and a gain of $0.8 relating to the sale of a facility
that had previously been written-off.
(c) Other income (expense), net for 1995 includes a $25.5 foreign exchange
gain in Jafra S.A. resulting from having had U.S. dollar denominated
intercompany receivables from affiliates at the time of the December 1994
peso devaluation.
(d) Extraordinary credit represents the cancellation of indebtedness (net of
income tax effect of $0.9) due to an affiliate resulting from
discontinuation of direct operations in one of Jafra's markets.
(e) Total working capital is defined as current assets less current
liabilities excluding third party short term debt with third parties.
(f) EBITDA is defined as net income before net interest expense, income tax
expense, depreciation and amortization. EBITDA for 1995 includes a $25.5
foreign exchange gain in Jafra S.A. resulting from having had U.S. dollar
denominated intercompany receivables from affiliates at the time of the
December 1994 peso devaluation, which was partially offset by $9.6 of non-
recurring charges relating to the reorganization and restructuring of
certain foreign operations. EBITDA for 1996 includes a non-recurring
charge in Jafra S.A. of $5.4 relating to the write-off of certain computer
systems and related costs, and net reorganization charges of $0.7. EBITDA
for 1997 includes $3.5 of cash severance costs relating to realignment of
certain foreign operations, which was partially offset by a cash gain of
$2.3 relating to a recovery under a legal settlement and a $0.8 cash gain
relating to the sale of a facility that was previously written-off. EBITDA
for the six months ended June 30, 1997 includes $1.2 of cash severance
costs relating to realignment of certain foreign operations, which was
more than offset by a cash gain of $2.1 relating to a recovery under a
legal settlement. The Company believes that EBITDA provides useful
information regarding the Company's ability to service debt but should not
be considered in isolation or as a substitute for the combined statement
of operations or cash flow data prepared in accordance with the generally
accepted accounting principles and included elsewhere in this Prospectus
or as a measure of the Company's operating performance, profitability or
liquidity. While EBITDA is frequently used as a measure of operations and
the ability to meet debt service requirements, it is not necessarily
comparable to other similarly titled captions of other companies due to
differences and methods of calculation.
(g) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before income taxes and extraordinary
items, plus fixed charges. Fixed charges include interest expense on all
indebtedness, amortization of deferred financing fees, and one-third of
rental expense on operating leases representing that portion of rental
expense deemed to be attributable to interest. For the two months ended
June 30, 1998, earnings before income taxes and fixed charges were
insufficient to cover fixed charges by $0.2.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion contains forward-looking statements concerning the Company's
operations, economic performance and financial condition, all of which involve
risks and uncertainties. Forward-looking statements are made based upon
management's expectations and beliefs concerning future developments and their
potential effect upon the Company. The Company's actual results may differ
significantly from management's expectations and there can be no assurance
that the effect of future developments on the Company will be those
anticipated by management. There are certain factors that might cause such a
difference. These factors include, but are not limited to, product demand and
market acceptance risks, the effect of economic conditions, the impact of
competitive products and pricing, product development, sales representative
turnover, commercialization and technological difficulties, capacity and
supply constraints or difficulties, availability of capital resources, general
business and economic conditions, the effect of the Company's accounting
policies, the impact of laws in various jurisdictions that may restrict direct
selling activities and other risks described herein. See "Risk Factors."
GENERAL
The following discussion and analysis of the results of operations,
financial condition and liquidity of the Company should be read in conjunction
with the combined financial statements of the Company and the "Unaudited Pro
Forma Combined Financial Statements" and the related notes thereto included
elsewhere in this Prospectus.
OVERVIEW
Jafra is a leading multi-level direct seller of premium skin and body care
products, color cosmetics, fragrances, nutritional supplements and other
personal care products. The Company sells its products to independent, self-
employed sales representatives. The Company has been in operation since 1956
and was purchased by Gillette in 1973. Jafra entered Latin America in 1977 and
Europe in 1978. Since 1973, the Company's sales have grown at a compound
annual growth rate of 18.5%. Parent acquired the Jafra business from Gillette
on April 30, 1998.
The Company's revenues consist of sales of products and non-resale
materials, such as product brochures and certain sales aids. Jafra's sales
representatives earn income on the difference between the wholesale prices
paid to Jafra and the retail prices charged to consumers and commissions on
sales made by other sales representatives whom they have recruited. Jafra
commissions are included in selling, general and administrative ("SG&A")
expenses.
Although Jafra currently has operations in ten countries and
distributorships in a number of other countries, most of the Company's 1997
sales were derived from the United States, Mexico and Germany. Sales in Mexico
represented 46.2% of total sales for the two and six months ended June 30,
1998 and 42.5% of total sales in 1997, an increase from 34.9% of total sales
in 1995. Sales in the United States over the same period have remained flat at
approximately 31% of total sales, and sales in Germany were 12.5% of total
sales in 1997, as compared to 17.2% in 1995.
The two key revenue drivers in the direct selling industry are the number of
sales representatives and the amount of sales, or productivity, per sales
representative. As of June 30, 1998, Jafra had 235,100 sales representatives
worldwide, an increase of 6.5% over December 31, 1997. At the end of 1997,
Jafra had 220,800 sales representatives worldwide, with average revenues per
sales representative being approximately $1,070 for all of 1997. The Company's
worldwide sales representative base increased 1.9% to 220,800 at the end of
1997 from 216,700 at the end of 1995. Sales representative productivity
increased 6.2% over this period, to $1,070 in 1997 from $1,008 in 1995.
Jafra's sales representatives have been affiliated with the Company for an
average of four years, which the Company believes is among the highest average
tenure in the direct selling industry.
34
<PAGE>
Jafra believes that the size and productivity of its sales representative
base are influenced by numerous factors, including: (i) new product
introductions and product line extensions, (ii) sales incentives such as
discounts on products, (iii) non-monetary incentives such as recognition, (iv)
product price increases, (v) leadership provided by senior management, and
(vi) the general economic condition of the countries in which it conducts
business. The Company offers lower prices on bundled products and volume
discounts, which has historically led to increased sales. New product
introductions, product line extensions and incentives such as prizes and trips
to national conventions have also served to increase productivity and sales.
The Company's results of operations are impacted by the timing of its
promotional activities. Products introduced in the prior five years accounted
for 70%, 58% and 54% of total sales for the years 1997, 1996 and 1995,
respectively. Jafra prices its products slightly below prestige level products
that are sold in department stores. Compared to its direct selling
competitors, this generally places prices on Jafra products on par with Mary
Kay product prices, but higher than Avon's prices.
Sales outside of the United States aggregated 69%, 68% and 69% of the
Company's total net sales in 1997, 1996 and 1995, respectively. Accordingly,
the Company has experienced and continues to be exposed to foreign exchange
risk. Although the Company has historically not entered into foreign currency
hedging contracts to mitigate this risk, it may do so following the
Acquisition. Foreign currency fluctuations can also impact operating results.
During 1998, the stronger U.S. dollar negatively affected revenues and
operating income. Had exchange rates remained constant for the six month 1998
and 1997 periods, revenue would have been approximately $7 million higher and
income from operations would have been approximately $1 million higher than
reported.
The Company derived approximately 46.2% of its net sales for the two and six
months ended June 30, 1998 and 42.5% for the year ended December 31, 1997 from
Mexico, substantially all of which were denominated in Mexican pesos. In 1997,
approximately 50% of the Company's total production was manufactured in
Mexico, and approximately 65% of Jafra S.A.'s total costs were denominated in
pesos, which partially mitigates Mexican peso exchange risk. The Company is
seeking other ways, including increased local sourcing of raw materials, to
reduce the dollar cost component of its products manufactured in Mexico. In
1995, the Company's sales in Mexico decreased by $59.0 million primarily as a
result of the December 1994 devaluation of the Mexican peso and the
corresponding economic weakness in Mexico. The impact of the decrease in sales
in 1995 on the results of operations was partially offset by an exchange gain
of $25.5 million in Mexico, which was primarily attributable to U.S. dollar
denominated receivable balances with affiliates. As a result of the
Transactions, Jafra S.A. has significant U.S. dollar denominated indebtedness.
There can be no assurance that future declines in the U.S. dollar-Mexican peso
exchange rate will not have a material adverse affect on the Company's results
of operations and financial condition.
SG&A expenses make up the largest portion of Jafra's costs. SG&A costs
consist primarily of overhead expenses related to administration,
manufacturing, distribution and marketing. The Company believes that a
substantial portion of SG&A costs are fixed. The largest component of variable
costs consist of sales commissions (paid to sales representative managers on
the wholesale value of their sales and the sales made by their recruits) which
were $35.4 million, or 15.4% of sales in 1997.
RECENT DEVELOPMENTS
Pursuant to the Acquisition Agreement, the purchase price paid by Parent for
the Jafra Business is to be adjusted by the difference, if any, between the
audited adjusted net book value of the Jafra Business as of April 30, 1998 and
the adjusted net book value of the Jafra Business as of September 30, 1997. On
June 22, 1998, Gillette sent to Parent an audited balance sheet of the Company
as of April 30, 1998 and a notice indicating that the adjusted net book value
of the Jafra Business as of April 30, 1998 exceeded the adjusted net book
value of the Jafra Business as of September 30, 1997 by approximately $11.9
million and requesting a purchase price adjustment payable by Parent in such
amount. However, Gillette indicated that approximately $5 million of
intercompany accounts payable by Gillette or its subsidiaries to the Company
remained due and payable. Accordingly, net of such accounts payable,
approximately $6.9 million would be due to Gillette under Gillette's proposed
purchase price adjustment. On July 10, 1998, Parent delivered a notice
disputing certain items in the
35
<PAGE>
April 30, 1998 balance sheet delivered by Gillette, contending that the
adjusted net book value of the Jafra Business as of September 30, 1997
exceeded the adjusted net book value of the Jafra Business as of April 30,
1998 by approximately $5 million and requesting a purchase price adjustment
payable by Gillette in such amount. Under the Acquisition Agreement, the
parties are required to submit their dispute over the purchase price
adjustment to a neutral accountant if the dispute has not been resolved by
July 30, 1998, which date has been extended to , 1998 as Parent and
Gillette attempt to resolve the purchase price dispute by mutual agreement.
Although management cannot predict the outcome of the purchase price
adjustment dispute at this time, management does not believe that the
resolution of such dispute will have a material adverse effect on the
Company's business, financial condition or results of operations.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------- ------------------------------
1995 1996 1997 1997 1998
------------- ------------- ------------- ------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.................................. $218.4 100.0% $224.5 100.0% $229.5 100.0% $110.1 100.0% $ 118.3 100.0%
Cost of sales.............................. 54.3 24.9 58.2 25.9 59.1 25.8 28.1 25.5 32.1 27.1
------ ----- ------ ----- ------ ----- ------ ----- -------- -----
Gross profit............................... 164.1 75.1 166.3 74.1 170.4 74.2 82.0 74.5 86.2 72.9
Selling, general & administrative expenses. 154.0 70.5 155.8 69.4 149.4 65.1 73.6 66.8 77.2 65.3
------ ----- ------ ----- ------ ----- ------ ----- -------- -----
Income from operations..................... 10.1 4.6 10.5 4.7 21.0 9.1 8.4 7.6 9.0 7.6
Exchange gain (loss)....................... 25.5 11.7 -- -- 0.3 0.1 0.1 -- .1 --
Interest income, net....................... 4.3 2.0 0.9 0.4 0.3 0.1 0.1 0.1 (2.6) (2.2)
Other income (expense), net................ (1.0) (0.5) (1.4) (0.6) (1.3) (0.5) -- 0.1 0.3 0.3
------ ----- ------ ----- ------ ----- ------ ----- -------- -----
Income before income taxes and
extraordinary item........................ 38.9 17.8 10.0 4.5 20.3 8.8 8.6 7.8 6.8 5.7
Income taxes............................... 6.1 2.8 2.6 1.2 4.8 2.1 2.1 1.9 3.3 2.8
------ ----- ------ ----- ------ ----- ------ ----- -------- -----
Income before extraordinary credit......... 32.8 15.0 7.4 3.3 15.5 6.7 6.5 5.9 3.5 3.0
Extraordinary credit....................... -- -- 2.6 1.2 -- -- -- -- -- --
------ ----- ------ ----- ------ ----- ------ ----- -------- -----
Net income................................. $ 32.8 15.0% $ 10.0 4.5% $ 15.5 6.7% $ 6.5 5.9% $ 3.5 3.0%
====== ===== ====== ===== ====== ===== ====== ===== ======== =====
STATEMENT OF CASH FLOWS DATA:
Net cash (used in) provided by Operating
Activities................................ $ 27.5 $ 5.4 $ 26.7 $ 5.2 $ 0.2
Net cash (used in) provided by Investing
Activities................................ (13.9) (4.5) (5.8) (3.4) (195.5)
Net cash (used in) provided by Financing
Activities................................ (13.4) 2.4 (19.0) 2.5 199.4
Effect of Exchange Rate Changes on Cash.... 0.9 (2.2) (0.3) (1.4) (0.5)
Effect of Accounting Calendar Change -- -- -- -- 6.3
on Cash................................... ------ ------ ------ ------ --------
Net Increase (Decrease) in Cash............ $ 1.1 $ 1.1 $ 1.6 $ 2.9 $ 9.9
====== ====== ====== ====== ========
</TABLE>
- --------
(1) Pursuant to the terms of the Acquisition Agreement (See "The
Transactions"), the Company was acquired by Parent on April 30, 1998.
Accordingly, for purposes of Management's Discussion and Analysis of
Financial Condition and Results of Operations, and Discussion of
Business, the results of operations and cash flows for the six months
ended June 30, 1998 are a combination of the historic results of the
Predecessor for the four months ended April 30, 1998 and the Company's
results of operations for the two months ended June 30, 1998.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net Sales
Net sales in 1998 increased to $118.3 million from $110.1 million in 1997,
an increase of $8.2 million, or 7.4%. The total number of sales
representatives increased by approximately 14,300 in 1998, or 6.5%. Net sales
in Latin America rose 16.6% to $59.6 million in 1998 from $51.1 million in
1997 due to a larger sales representative base, product price increases, the
Company's successful annual convention and introduction of new products.
Increased sales in Latin America were partially offset by decreased sales in
Western Europe, which declined 7.5% to $22.1 million in 1998 from $23.9
million in 1997. The reduction in sales in Western Europe was due principally
to a decrease of 9.6% and 11.6% in the sales representative base and sales
representative productivity in Germany, respectively. Additionally, changes in
exchange rates in Germany during this period resulted in losses of $1.2
million in sales and a decrease of $0.3 million in profits from operations.
36
<PAGE>
Gross Profit
Gross profit in 1998 increased to $86.2 million from $82.0 million in 1997,
an increase of $4.2 million or 5.1% as a result of the increase in sales.
Gross margin decreased to 72.9% from 74.5%. The decrease in gross margin was
due principally to the effects of accounting for the Acquisition, $0.8 million
was included in cost of sales for the two months ended June 30, 1998 relating
to the write-up of certain inventories as a result of accounting for the
Acquisition.
Selling, general and administrative expenses
SG&A expenses in 1998 increased to $77.2 million from $73.6 million in 1997,
an increase of $3.6 million or 4.9%. SG&A as a percentage of net sales
decreased in 1998 to 65.3% from 66.9% for 1997, a decline of 1.6% of net
sales. The decrease was due principally to a net decrease of $0.8 million of
non-recurring charges from 1997 to 1998. These non-recurring charges in 1997
were mainly related to reorganization costs and the closing of Jafra's
operations in two markets (Hungary and Canada.) SG&A expenses were also lower
due to a decrease of $0.5 million in market research expenses and
infrastructure improvements that provided for increased economies of scale.
Other expense (income)
Net other expense (income) increased to $2.2 million in 1998 from $(0.2)
million in 1997, a gain of $2.4 million. Other expense (income) generally
includes foreign exchange gains and losses, interest income and expenses and
other miscellaneous items. In 1998, other expense (income) increased as a
result of interest expense of $2.7 million, and to a lesser extent from
increased expenses in miscellaneous items, including credit card fees and
amortization of goodwill.
Income before income taxes
Income before income taxes decreased $1.8 million, or 20.9% to $6.8 million
in 1998 from $8.6 million in 1997. This decrease was due principally to $2.7
million of interest expense in 1998 resulting from the new debt structure
which was partially offset by a reduction in non-recurring charges of $0.8
million and improvement in profit from operations of $0.6 million.
Net income
Income taxes as a percentage of pretax income increased to 48.5% in 1998
from 24.4% in 1997. The increased tax rate resulted principally from valuation
allowances provided against net operating losses in the U.S. and Europe. The
decrease in net income of $3.0 million was attributable to an increase in
income taxes of $1.2 million and a decrease in income before taxes of $1.8
million.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996
Net sales
Net sales for 1997 increased to $229.5 million from $224.5 million in 1996,
an increase of $5.0 million, or 2.2%. The Company's year end number of total
sales representatives increased by approximately 12,300, or nearly 6%, in
1997, primarily in Latin America. Productivity increased slightly to $1,070
per sales representative. Net sales in Latin America rose 23.4% to $111.8
million in 1997 from $90.6 million in 1996 due to a larger sales
representative base, product price increases, the Company's successful
Christmas promotion and introduction of new products. Increased sales in Latin
America were partially offset by decreased sales in Western Europe, which
declined 22.3% to $46.8 million in 1997 from $60.2 million in 1996. The
reduction in sales in Western Europe was due principally to losses resulting
from currency depreciations and a significant reduction in sales
representative productivity mainly due to weak economic conditions.
Gross profit
Gross profit for 1997 increased to $170.4 million from $166.3 million in
1996, an increase of $4.1 million or 2.5%. Gross margin increased to 74.2%
from 74.1%. The increase in gross profit was due principally to product price
increases as well as improvements in production processes, particularly in
Mexico. These increases were partially offset by higher manufacturing overhead
costs. Gross profit was also negatively impacted by increased freight costs
resulting from a higher than normal use of air freight to Europe and increased
shipping costs in the United States.
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Selling, general & administrative expenses
SG&A expenses for 1997 decreased to $149.4 million from $155.8 million for
1996, a decline of $6.4 million or 4.1%. SG&A as a percentage of net sales for
1997 decreased to 65.1% from 69.4% for 1996, a decline of 4.3% of net sales.
The decrease was due principally to a net decrease of $4.9 million of non-
recurring charges from 1996 to 1997. These non-recurring charges in 1996 were
mainly related to the write-off of software under development, reorganization
costs and the closing of Jafra's operations in two markets. SG&A expenses were
also lower due to a decrease of $2.2 million in sales promotional expenses and
infrastructure improvements that provided for increased economies of scale.
Other expense (income)
Net other expense for 1997 increased $0.2 million to $0.7 million from $0.5
million in 1996. Other items generally include foreign exchange gains and
losses, interest income and expense and other miscellaneous items. In 1997,
the Company benefited from foreign exchange gains of $0.3 million. This
benefit was offset by a net reduction in interest income of $0.6 million, and
to a lesser extent from decreases in miscellaneous items, including credit
card fees and amortization of goodwill.
Income before income taxes and extraordinary credit
Income before income taxes and extraordinary credit for 1997 increased $10.3
million, or 102.4%, to $20.3 million from $10.0 million in 1996. This increase
was due principally to the net non-recurring charges recorded in 1996 and
increased gross profit. During 1996, the Company recorded an extraordinary
credit of $2.6 million, recorded net of its tax effect of $0.9 million,
related to the cancellation of indebtedness due to an affiliate resulting from
the discontinuation of the Company's operations in a foreign market.
Net income
The effective tax rate for 1997 decreased 2.3% to 23.6% from 26.0% in 1996.
Net income for the year ended December 31, 1997 was $15.5 million as compared
to $10.0 million in 1996, an increase of $5.5 million or 55.0%. Exclusive of
the impact of the extraordinary credit, the increase in net income in 1997 was
$8.1 million.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995
Net sales
Net sales for 1996 increased $6.1 million, or 2.8%, to $224.5 million from
$218.4 million for 1995. Sales in all regions increased in 1996 due to price
increases and economic recovery in many parts of Latin America, increased
sales representative productivity due to successful promotional activity in
the U.S. and a small increase in the sales representative base in the U.S. and
Western Europe. This increase was partially offset by a decrease in year-end
total sales representatives by approximately 8,000 persons in Mexico and
Venezuela. The effect of this decline in the number of sales representatives
was offset by an increase in sales representative productivity.
Gross profit
Gross profit for 1996 increased $2.2 million, or 1.3%, to $166.3 million
from $164.1 million in 1995. However, gross margin for the year ended December
31, 1996 decreased 1.0% to 74.1% from 75.1% for 1995. The increase in gross
profit was due principally to higher overall product sales prices worldwide
offset by increased labor and materials costs associated with new products.
Product price increases did not fully recoup increased product costs,
resulting in a decline in gross margins. However, lower freight costs in 1996
to Europe positively impacted gross profit in 1996.
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Selling, general & administrative expenses
SG&A expenses for 1996 increased $1.8 million, or 1.2%, to $155.8 million
from $154.0 million for 1995. SG&A as a percentage of net sales for 1996
decreased 1.1% to 69.4% from 70.5% for 1995. This decrease was due to a
reduction in net non-recurring charges of $3.5 million, related to the
realignment and restructuring of global operations. Net of these non-recurring
charges, SG&A expenses increased $5.3 million. This increase in SG&A was due
principally to increased marketing costs to support new product launches, as
well as special events held in Mexico to recruit and motivate sales
representatives. Other SG&A increases included higher sales promotional
expenses of approximately $1.5 million and increased costs related to the
enhancement of the commercial software developed in Mexico for use in Germany.
Other expense (income)
Net other expense (income) increased $29.3 million to a net expense of $0.5
million in 1996 compared to a net income of ($28.8) million in 1995. This
increase in net expenses was primarily due to a foreign currency exchange gain
of $25.5 million in 1995, resulting from U.S. dollar denominated intercompany
receivables from affiliates at the time of the December 1994 peso devaluation,
and a $3.4 million net decrease in interest income in 1996.
Income before income taxes and extraordinary credit
Income before income taxes and extraordinary credit for 1996 decreased $28.9
million to $10.0 million from $38.9 million in 1995. During 1996, the Company
recorded an extraordinary credit of $2.6 million, related to closure of the
Company's Brazilian operations. The Company also recorded net one-time
expenses of $6.1 million related primarily to the write-off of certain
computer software. Excluding non-recurring charges and income, income before
income taxes and extraordinary credit would have been $16.1 million. The
decrease in income before income taxes and extraordinary credit was due
principally to the foreign exchange gain recorded in 1995 of $25.5 million,
reduced interest income of $3.4 million and increased marketing costs in
support of new product launches.
Net income
The effective tax rate for 1996 increased 10.2% to 26.0% from 15.7% in 1995.
The effective income tax rate in 1995 was due to the positive impacts of
inflation effects recognized for tax purposes in Mexico. Net income for 1996
decreased $22.8 million to $10.0 million from $32.8 million in 1995. Exclusive
of the impact of the extraordinary credit of $2.6 million, the decrease in net
income in 1996 was $25.4 million.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations decreased to $0.2 million for the six-month
period ended June 30, 1998 from $5.2 million for the comparable period in
1997. The decrease in cash flow from operations is attributable to a $2.5
million decrease in net income adjusted for depreciation and amortization and
other non-cash items included in net income and a $2.5 million decrease in the
change in working capital over 1997. Operating activities provided net cash
flow of $26.7 million, $5.4 million and $27.5 million in 1997, 1996 and 1995,
respectively. Cash flow from operating activities increased $21.3 million in
1997 compared to 1996 primarily due to a $15.5 million decrease in inventories
following the success of the Company's 1997 Christmas promotion. The increase
in net income of $5.4 million and a decrease of $4.2 million related to taxes
also served to increase the Company's cash position in 1997. These gains were
partially offset by a net $2.5 million decrease in accounts payable. Cash flow
from operating activities decreased $22.1 million to $5.4 million in 1996 from
$27.5 million in 1995. This decrease was primarily due to a $22.8 million
reduction in net income which was due to foreign exchange gains in 1995 that
resulted from U.S. dollars denominated intercompany receivables from
affiliates at the time of the December 1994 peso devaluation.
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Cash flows from investing activities decreased to a net use of cash of
$195.5 million in 1998 from a net use of cash of $3.4 million in 1997. The
decrease in cash flows from investing activities is attributable to the cash
requirements of the Acquisition of $197.6 million which was partially offset
by proceeds from the sale of certain property and equipment of $5.9 million
during the four month period ended April 30, 1998 in anticipation of the
Acquisition. Investing activities required net cash of $5.8 million, $4.5
million, $13.9 million in 1997, 1996 and 1995, respectively. The substantial
part of the Company's historical capital expenditures in the last three years
has resulted from investments in equipment and facilities to augment the
Company's manufacturing capabilities as well as from data processing
requirements. In 1995, the Company opened a new customer service and office
facility in Mexico City at a cost of approximately $13.3 million. In addition,
the Company moved to a state-of-the-art manufacturing facility in Naucalpan,
Mexico in 1997. Capital expenditures in 1998 are expected to be $12.1 million,
comprised of $7.0 million for maintenance, $2.0 million for information
technology and $3.1 million for expenditures related to opening of new
markets. The Company expects that capital expenditures will remain relatively
flat for the next several years.
Cash flows from financing activities increased to $199.5 million in 1998
from $2.5 million of cash provided by financing activities in 1997. Cash flows
from financing activities prior to the Acquisition represent the intercompany
transactions between the Company and Gillette. Cash flows from financing
activities subsequent to the Acquisition reflect proceeds from the financing
of the Transactions, including; $100.0 million from the issuance of 11 3/4%
Senior Subordinated Notes, $25.0 million from borrowing under the Term Loan
Facility, $15.0 million from borrowing under the Revolving Credit Facility,
and $78.9 million contributed by CD&R and other investors. The Senior
Subordinated Notes represent the several obligation of JCI and Jafra S.A. in
the amount of $60 million and $40 million, respectively, with each
participating on a pro rata basis upon redemption. The Notes mature in the
year 2008 and bear a fixed interest rate of 11.75% payable semi-annually.
Loans under the Term Loan Facility are payable in quarterly installments of
principal and interest over 6 years. The loans under the Revolving Credit
Facility mature on April 30, 2004. Borrowings under the Senior Credit
Agreement bear interest at an annual rate of LIBOR plus a margin not to exceed
2.625% or an alternate base rate (the higher of the prime rate or federal
funds rate plus 1%, plus an applicable margin not to exceed 1.625%).
The Senior Credit Agreement and the Indenture contain certain covenants
which limit the Company's ability to incur indebtedness, pay cash dividends
and make certain other payments. These debt agreements also require the
Company to maintain certain financial ratios including a minimum EBITDA to
cash interest expense coverage ratio and a maximum debt to EBITDA ratio.
Financing activities consist principally of transactions with affiliates.
Transactions with affiliates resulted in net cash payments of $27.5 million in
1997, net cash receipts of $2.4 million in 1996 and net cash payments of $13.4
million in 1995. Cash flows from financing activities included $8.5 million of
proceeds from the issuance of bank debt in 1997.
Use of cash in 1998 decreased to $0.5 million from $1.4 million in 1997 due
to the effect of changes in exchange rates.
EFFECTS OF INFLATION
Mexico has experienced from time to time in the past, including during most
of the 1980s and during 1995 through 1997, periods of high inflation. For
example, during the period 1995 through 1997, Mexican inflation ranged between
35.1% and 21.0%. In 1997, Mexico was classified as a hyperinflationary economy
for financial reporting purposes, and accordingly, the functional currency of
Jafra S.A. was designated as the U.S. dollar. The Company has generally been
able to offset the effects of inflation in Mexico by increasing its product
prices by at least the level of inflation, although there can be no assurance
that the Company will be able to maintain its pricing policy in the future. In
addition, the effects of Mexican inflation have been partially offset in the
Company's U.S. dollar denominated combined financial statements by the effects
of depreciation in the U.S. dollar-Mexican peso exchange rate of 2.4%, 1.8%
and 54.8% in 1997, 1996 and 1995, respectively.
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YEAR 2000 ISSUE
Prior to the Acquisition, the Company established a year 2000 compliance
methodology and schedule based on the Gillette model. This methodology
encompassed six phases, namely discovery, planning, resolution, testing,
implementation and certification. The scope of the Company's compliance
program includes information technology (computer systems, hardware and
operating systems), facilities (phone systems, plant machinery, elevators and
security systems), embedded software in production equipment and major
suppliers of raw materials and finished goods. The Company has completed the
discovery and planning phases and is currently in the resolution phase in
which all affected hardware, software, equipment etc. is being repaired,
upgraded or replaced.
The Company expects to complete the resolution phase for all systems
(information technology and non-information technology) by the end of the
first quarter of 1999. The Company expects to have completed the testing phase
by the end of the second quarter of 1999 and the implementation and
certification phases by the end of the third quarter of 1999 and has budgeted
$1.5 million through 1999 to complete the program. As of the date hereof, the
Company estimates that the program is 40% complete and that it has spent
approximately $600,000 to date. This figure includes approximately $300,000
for software upgrades, approximately $1 million for outside consultants and
approximately $200,000 for replacing systems. The allocation of amounts may
change from time to time.
As part of its investigation conducted in the discovery phase, the Company
prepared a questionnaire that it distributed to approximately 106 of its major
suppliers, which supply 75% of the raw materials and finished goods purchased
by the Company from third party suppliers. As of August 26, 1998 the Company
has received written responses from 54 of these suppliers. Of these, 51 have
informed the Company that they do not expect that the dating problems
associated with the year 2000 will have a material adverse effect on their
ability to continue to supply the Company in accordance with past practice.
Based on these replies, the Company does not believe that the inability of any
of the suppliers that have not yet responded or have responded unfavorably to
the Company's request for information, to continue to supply the Company would
have in a material adverse effect on the Company's business, financial
condition or results of operations. The Company intends to seek and identify
alternate sources of supply for the affected raw materials and finished
products in the event it has not received assurance by March 31, 1999 from the
remaining companies that they will be able to supply the Company without
material disruption into the year 2000. The Company currently believes there
are alternative sources for all such materials.
In the event the Company does not complete all phases of its year 2000
compliance program by December 31, 1999, it would have to consider outsourcing
its customer service and order processing functions. No assurance can be given
that the Company will be able to outsource these functions or that the Company
will not incur significant additional expense in doing so.
In August 1998 the Company's Chief Information Officer left to return to
Gillette. The Company had previously appointed a project manager whose duties
include oversight of the Company's year 2000 compliance program in all of the
Company's markets. The Company does not believe that the departure of the
Chief Information Officer will have a material adverse effect on the Company's
ability timely to achieve year 2000 compliance.
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BUSINESS
GENERAL
Jafra is a leading direct seller of premium skin and body care products,
color cosmetics, fragrances, nutritional supplements and other personal care
products. Jafra currently operates in ten countries directly and in a number
of additional countries through distributors, although approximately 86% of
the Company's sales in 1997 were in the United States, Mexico and Germany.
Jafra markets its products through a direct selling, multilevel distribution
system comprised of approximately 235,100 self-employed salespersons (known as
"sales representatives"). The Company seeks to provide its sales
representatives attractive and flexible career opportunities selling quality
products at affordable prices. Jafra's sales representatives have the
opportunity to earn significant income and to receive non-financial awards
designed to motivate and recognize individual achievement.
The Company believes that it enjoys high brand recognition and product
acceptance in the markets where its products are sold. For example, in 1996,
Jafra was identified by respondents to an A.C. Nielsen survey of Mexican
consumers as the most recognized cosmetics brand in Mexico. The Company
believes that it has the potential to realize significant growth by increasing
the number of its sales representatives and improving sales representative
productivity. In 1997, the Company's worldwide sales representative base grew
5.9%, to approximately 220,800 at year end, with average sales per sales
representative during such year totaling $1,070. As of June 30, 1998, the
Company's worldwide sales representative base had increased to 235,100, an
increase of 6.5% over December 31, 1997. The Company generated $229.5 million
in revenues in 1997 and $118.3 million in the first six months of 1998, with
pro forma adjusted EBITDA of $30.3 million in 1997 and $16.0 in the first six
months of 1998 and generated cash flow from operations of $26.7 million in
1997 and $0.2 million in the first six months of 1998. Pro forma adjusted
EBITDA reflects (i) the elimination of certain non-recurring items that
affected 1997 historical amounts and (ii) certain changes in the cost
structure of the Company that are expected to occur following the consummation
of the Transactions. See "Summary Historical and Pro Forma Combined Financial
and Operating Data" and "Unaudited Pro Forma Combined Financial Statements."
According to the WFDSA, the global direct selling industry generated sales
of $79 billion worldwide in 1996 and has grown at a compound annual rate of
10% since 1991. In 1996, total direct sales in the United States were $21
billion and total sales of skin care products, cosmetics and similar items
totaled approximately $9 billion. The growth of direct sales has outpaced
overall retail growth in the United States in eight of the past ten years. In
1996, for example, direct sales grew at 16% in the United States, as compared
to a 5% growth for retail sales generally in the same year.
Jafra believes that as a result of the strong infrastructure created to
date, it is well positioned to increase sales and profitability under the
Company's new, focused ownership and management. As more fully set forth
below, this existing infrastructure consists of four primary elements: first,
Jafra's motivated, well-trained and loyal base of sales representatives
through whom the Company reaches its customers; second, the Company's diverse
and high quality product line and its ability to satisfy changing demand
through its "fast follower" product development strategy; third, the Company's
operating infrastructure, including state-of-the-art manufacturing and
distribution facilities; and finally, the geographic diversity of the
Company's sales and operations, which the Company believes will help produce
consistent cash flow and help insulate the Company's financial performance
against changes in individual markets.
OPERATING STRENGTHS
Motivated and Loyal Sales Representative Base. Jafra has built a motivated,
well-trained and loyal direct sales force of approximately 235,100 self-
employed independent sales representatives. The average Jafra sales
representative has been affiliated with the Company for approximately four
years, which the Company believes is among the highest average tenure in the
direct selling industry. The Company offers its sales representatives
attractive opportunities for career development and significant potential for
financial rewards. Jafra sales representatives earn income on their own sales
and can also earn commissions on sales made by the sales representatives they
recruit. In 1997, Jafra sales representatives earned aggregate direct sale
income of over $190 million and total commissions of more than $35 million,
with the highest paid Jafra sales representative earning total compensation of
over $250,000. In addition to such financial benefits, the Company also offers
non-financial rewards, such as international travel, regional and national
conventions and incentive awards, all designed to
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motivate and recognize individual achievement. Unlike many of its competitors,
the Company requires little or no start-up costs from new sales
representatives, imposes no inventory maintenance requirements, has low
minimum order sizes and provides retail discounts on all orders. The Company's
worldwide sales representative base grew 5.9% to approximately 220,800 at the
end of 1997 from approximately 208,500 at the end of 1996. As of June 30,
1998, the Company's worldwide sales representative base was 235,100, an
increase of 6.5% over December 31, 1997.
Prestige Quality Product Offerings. The Company offers diverse, prestige
quality product lines that it believes appeal to a wide customer base, build
brand equity and product loyalty, and lead to repeat purchases. The Company
positions its products to appeal to middle income, value oriented consumers,
generally pricing below the prestige level. The Company tries to develop
integrated products and actively promotes products that bridge between
categories, thus encouraging multi-product sales and repeat purchases. In
order to meet changing consumer demand, the Company employs a "fast follower"
product development strategy that minimizes research costs and focuses
development efforts on products that have proven successful in the
marketplace. In 1997, approximately 70% of sales resulted from products
introduced in the last five years. The Company estimates that this percentage
will remain the same in 1998.
Significant Investment in Operating Infrastructure. Over the last three
years, Jafra has invested approximately $30 million in new infrastructure,
including a customer service and office facility in Mexico, new machinery and
equipment, and upgraded data processing capabilities. The Company's
manufacturing facilities in Westlake Village, California, which produces skin
care products, and in Naucalpan, Mexico, which produces color cosmetics, are
equipped with some of the latest manufacturing technologies. Jafra also has
ten major distribution facilities worldwide and is generally able to fill
orders within four days from the time of receipt with 98% accuracy, a rate
which the Company believes is among the highest in the industry. In addition,
the Company has made significant improvements in sourcing raw materials
locally since 1995, and has recently implemented several programs to
standardize product packaging, including in-house bottle decorating. As a
result of these recent investments and the current strength of the Company's
infrastructure, Jafra expects that it will have relatively low maintenance
capital requirements over the next several years.
Geographic Diversification. The Company currently operates in ten countries
directly and through distributors in a number of additional countries, and
expects to expand its operations to include approximately four additional
countries (primarily in Latin America and Europe) over the next several years.
The Company's most important markets to date have been the United States,
Mexico and Germany, which represented approximately 31%, 43% and 13%,
respectively, of total 1997 sales and 31%, 46% and 10%, respectively, of 1998
sales as of June 30, 1998. See footnote 10 to the combined financial
statements of the Company included elsewhere in this Prospectus. With
significant revenue coming from each of the United States, Latin America and
Europe, the Company believes that it is less vulnerable to adverse economic
developments in any particular market. The Company expects that future growth
in the United States and in new markets will lead to greater diversification
of the sources of revenue.
STRATEGY
The Company's new owners and management intend to build on Jafra's strong
existing infrastructure and to increase the Company's sales and profitability
by refocusing the Company on growing its sales representative base and
productivity in new and existing markets and by leveraging the Company's
comparative strengths. To this end, the Company intends to pursue the
following strategy:
Deploy New Senior Management Team with Significant Direct Selling
Experience. In connection with the Acquisition, Ronald B. Clark joined the
Company as its Chairman and Chief Executive Officer, Gonzalo R. Rubio joined
as its President and Chief Operating Officer, Michael DiGregorio joined as its
President of United States Operations, Eugenio Lopez Barrios joined as its
President of Mexican Operations, Jose Luis Peco joined as its President of
European Operations, Jaime Lopez Guirao joined as its President of Global
Operations and Alan Fearnley joined as its Senior Vice President of Global
Marketing. Messrs. Clark and Rubio have both purchased equity, and it is
expected that other members of senior management will purchase equity, in
Parent. See "Management." Messrs. Clark, Rubio, DiGregorio, Barrios, Peco,
Guirao and Fearnley have an average of
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over 20 years of direct selling industry experience, including various senior
management positions with Jafra competitors Avon and Mary Kay. Jafra's new
Chief Executive Officer also served as the President of Jafra's United States
operations from 1985 to 1988, and Jafra's new Senior Vice President of Global
Marketing served in the same position at Jafra from 1987 to 1995. Jafra
believes that this new team will provide the dynamic leadership required to
attract new sales representatives and management talent, inspire new and
existing sales representatives to greater productivity and execute the
Company's new market development strategy.
Grow Sales Representative Base in Existing Markets. Jafra plans to expand
its sales representative base in existing markets by (i) targeting U.S.
expansion into new geographic areas and demographic groups, (ii) streamlining
the commission structure to provide more rewards to those sales
representatives who actively recruit other sales representatives, (iii)
providing more training in business skills and recruiting techniques to sales
representative managers, and (iv) initiating programs to reactivate former or
inactive sales representatives. Although Jafra operates in all fifty states,
approximately 55% of its 1997 U.S. sales were concentrated in four states and
Puerto Rico. The Company believes that it has a significant opportunity to
expand its distribution reach to include new geographic areas, particularly in
the United States, and demographic segments such as baby boomers and minority
groups.
Increase Sales Representative Productivity. The Company plans to focus on
increasing the productivity, as measured by sales per sales representative, of
its existing sales representatives by (i) expanding the Company's product
lines, (ii) initiating better-targeted marketing activities and (iii)
decreasing lead time on new product introductions. Over the next two years,
the Company plans to expand product offerings to include other complementary
merchandise that would be introduced into specific regions after test
marketing to establish the presence of sufficient demand. The Company believes
that sales representative productivity can also be increased through targeted
marketing efforts to increase brand and product awareness of existing product
lines. The Company intends to provide its sales representatives with increased
product knowledge and financial incentives to sell more products through
greater training, internal "advertising" and promotion. Finally, the Company
intends to adopt a shorter lead time on product development to get new
products to its sales representative base more quickly, decreasing the
Company's current time to market by up to one-third.
Develop New Markets. The Company believes that its existing distribution and
manufacturing capabilities provide a strong platform for Jafra to expand into
new markets. The Company expects that it will be able to implement its new
market development strategy with limited additional capital expenditures and
without diverting focus from the Company's core markets. The Company's new
senior management team has extensive experience and a proven track record in
developing new markets in Latin America and Central and Eastern Europe. The
Company intends to focus its expansion efforts on markets that the Company
believes (i) do not require high start-up costs, such as markets contiguous to
the Company's existing markets, (ii) have proven receptive to direct selling
techniques, (iii) demonstrate promising economic demographics, including
population size, growth of gross domestic product and an expanding middle
class, and (iv) evidence demand for quality cosmetic products.
Once a new target market has been identified, the Company will recruit local
management with demonstrated knowledge of the local market. Operations will
typically begin in one of the larger cities within the target market. The
Company plans to hold seminars conducted by successful sales representatives
and senior managers from existing markets to recruit and train local sales
representatives and to identify potential leaders. In addition, the Company
will use distribution capabilities from appropriate existing operations until
the market is able to support its own distribution capabilities.
The Company currently intends to re-enter Brazil and to start new operations
in Poland in 1998. According to the WFDSA, in 1996 Brazil was the fourth
largest direct selling country in the world, with $3.5 billion in sales and
nearly 900,000 salespeople. There are currently approximately 4,000 direct
sellers in Brazil selling Jafra products; however, they currently operate
through a local distributor and the Company intends to establish a direct
relationship with these direct sellers. The Company believes that Poland is
the largest potential market in Central Europe. The Company expects to enter
Poland by leveraging off of its established operations in Western Europe,
consistent with the Company's strategy for entering new markets with a minimum
of start-up costs.
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Improve Operating Efficiency. The Company's new management team believes
that opportunities exist to improve operating efficiency through cost-cutting,
better inventory management, and streamlining of marketing efforts and product
lines. The Company expects these measures, when fully implemented, to result
in net annual savings of at least $6.2 million. Over the past several years,
the Company has turned its inventory approximately 1.6 times per year. By the
end of 2000, the Company expects to increase inventory turns to approximately
three times per year, consistent with industry norms, which the Company
expects will reduce significantly its future working capital requirements.
HISTORY
Jafra was founded in 1956, as a California corporation, by Jan and Frank Day
and acquired by Gillette in 1973. The Company expanded into Latin America in
1977 and into Europe in 1978. During the 24 years that Jafra was owned by
Gillette, its revenues grew at a compound annual rate of 18.5%. Parent
acquired the Jafra Business from Gillette on April 30, 1998.
[INSERT PLOT POINTS]
INDUSTRY OVERVIEW
The Direct Selling Industry
The Company operates in the direct selling industry, which involves the
marketing and sale of products to end consumers through an independent,
commission-based sales force. Direct selling does not rely on direct mail,
product advertising or physical retail store locations. Instead, salespersons
demonstrate and sell products to consumers, typically at home or work.
According to the WFDSA, in 1996 worldwide direct sales totaled approximately
$79.3 billion and the worldwide direct sales force numbered approximately 25
million persons. The WFDSA also estimates that the United States represents
the second largest direct selling market, with total 1996 sales of $20.8
billion.
1996 Worldwide Sales by Region
Japan 38%
U.S. 26%
Other 4%
Europe 15%
Latin America 8%
Other Asia 9%
1996 Worldwide Representative Count by Region
Other Asia 30%
Japan 10%
U.S. 34%
Other 4%
Europe 10%
Latin America 12%
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The WFDSA estimates that, globally, revenues from direct sales and the
number of salespersons grew from 1992 to 1996 at compound annual rates of 6%
and 18%, respectively, and that over the same period revenues from direct
sales in the United States grew at a compound annual rate of more than 10% and
Latin America at compound annual rates of 36%, respectively.
The Direct Selling Association (the "DSA") estimates that personal care and
wellness items constituted in the aggregate approximately 42.3% of total U.S.
direct sales in 1996. The growth of direct sales has outpaced overall retail
growth in the United States in eight of the past ten years. In 1996, for
example, direct sales grew at 16% in the United States, as compared to a 5%
growth for retail sales generally in the same year.
Estimated 1996 U.S. Direct Sales by Product Type
Home/Family Care 33.6%
Personal Care 29.2%
Services & Other 18.3%
Wellness 13.1%
Leisure/Educational 5.8%
There are two main types of direct selling companies: single-level and
multi-level. Jafra is a multi-level direct selling company. In single-level
companies, independent salespersons purchase products directly from direct
selling companies and earn revenues solely from the resale of such products at
a profit to end users. In multi-level companies, independent salespersons not
only make direct sales to consumers but also recruit other salespersons and
earn commissions based on sales by such recruits and by salespersons recruited
by such original recruits.
Direct selling companies typically utilize one or both of two main direct
selling techniques, person-to-person and party plan. Jafra's sales
representatives use both techniques. Person-to-person sales consist of a
salesperson demonstrating the products on an individual basis and taking
immediate orders. If a customer is not ready to place an order, the
salesperson generally leaves a catalog and follows up with a telephone call or
personal visit. In party plan direct selling, an independent salesperson
demonstrates products to a group of potential customers, one of whom acts as
hostess for the function, generally by allowing the event to take place in her
residence. Again, if a customer is not prepared to place an order, the
salesperson provides a catalog and contacts such customer at a later date.
According to the DSA, person-to-person direct selling accounted for
approximately 78% of U.S. direct sales in 1996. Based on information supplied
by its sales representatives, the Company estimates that approximately 70% of
the Company's 1997 U.S. revenues resulted from person-to-person sales.
The Cosmetics Industry
The cosmetics and toiletries industry is highly competitive and fragmented.
The Company believes that worldwide over 1,000 companies market over 20,000
brands in a number of major product categories. Brand recognition, product
quality, performance, price, and marketing efforts have substantial influence
on consumers' choices among competing products and brands. Products are
distributed through three primary channels: (i) prestige distribution, mainly
department stores and specialty stores, (ii) mass distribution, including drug
stores, food stores and warehouse clubs, and (iii) alternative distribution,
such as direct selling, mail order, salons, direct
46
<PAGE>
response television and health stores. The Company believes that approximately
70% of products reach consumers through mass distribution channels, while
prestige distribution accounts for approximately 22% and alternative
distribution methods for approximately 8%. Sales within the prestige
distribution channel and certain outlets of the alternative distribution
channel are considered demonstrator-assisted and command a price premium,
whereas other sales are considered self-selected. Generally, advertising,
promotion, recommendations from other consumers, reputation, merchandising and
packaging, and the timing and frequency of new product introduction and line
extensions have a significant impact on cosmetic product buying decisions.
INDEPENDENT SALES FORCE
Jafra's self-employed sales force comprises approximately 235,000 motivated,
independent sales representatives. More seasoned senior sales representatives,
who have experience managing their own sales representative networks, recruit
and train the Company's field level organization. Jafra sells substantially
all of its products directly to its sales representatives. Each sales
representative conducts her Jafra sales operations as a stand-alone business,
purchasing Jafra goods and reselling them to customers, as well as offering
free personal care consultations. The Company's independent sales force
constitutes its primary marketing contact with the general public. Pride of
proprietorship and the drive to earn income create strong incentives for sales
representatives to satisfy customers, increase personal sales and recruit
others to sell Jafra products.
Selling
The primary role of a Jafra sales representative is to sell Jafra products.
Although the majority of the Company's sales occur as a result of person-to-
person sales, the Company also encourages its sales representatives to arrange
sales parties at customers' homes. Sales parties permit a more efficient use
of a sales representative's time, allowing the sales representative to offer
products and cosmetic advice to multiple potential customers at the same time,
and provide a comfortable selling environment in which clients can learn about
skin care and sample the Jafra product line. Such parties also provide an
introduction to potential recruits and the opportunity for referrals to other
potential clients, party hostesses and recruits.
Jafra does not require sales representatives to maintain any inventory. The
Company believes that the inventory requirements of other leading direct
sellers are often onerous to sales representatives. Instead, Jafra sales
representatives can wait to purchase products from the Company until they have
a firm client order to fill. Sales representatives generally personally
deliver orders to their clients within one week of placement of an order. By
delivering products directly to the customer, the Jafra sales representative
creates an additional sales opportunity.
Recruiting
The Company believes that it enjoys a competitive advantage in recruiting
sales representatives due to its lower start-up costs and its policy of
providing retail discounts even on small orders. In addition, the Company does
not burden its sales representatives with inventory maintenance requirements,
a common practice in the direct selling industry. Other major attractions to
prospective recruits include flexible hours, increased disposable income, an
attractive incentive program (including international travel, national and
regional meetings, awards and free products), personal and professional
recognition, social interaction, product discounts and career development
opportunities. The Company also emphasizes its commitment to sales
representatives' personal and professional training, thereby building sales
representatives' management and entrepreneurial skills.
Existing sales representatives recruit new sales representatives. Such
recruitment often occurs at party plan events. To join the Jafra sales force,
a new recruit signs an independent sales representative agreement and
purchases an inexpensive sales representative kit for approximately thirty
dollars. Worldwide, Jafra's sales representative base grew 6% from 1996 to
1997, to a level of 220,810 as of December 31, 1997. As of June 30, 1998, the
number of the Company's sales representatives had increased to 235,100, an
increase of 6.5% from December 31, 1997. In Mexico, the sales representative
base, which had declined from a peak of 132,542 in 1994, rose 8% from 1996 to
1997, and was 129,062 as of December 31, 1997. The U.S. and German sales
representative bases have been relatively stable since 1994, totaling 53,138
and 13,350, respectively, as of the end of 1997.
47
<PAGE>
Sales Representative Management and Training
To become a manager, a sales representative must sponsor a specified number
of recruits and meet certain minimum sales levels. A manager continues to gain
seniority in the Jafra sales force by meeting the prescribed recruitment and
sales requirements at each level of management. At more senior levels,
managers may have several junior managers who in turn sponsor and manage other
managers and sales representatives. The most successful managers have many
such downline managers and sales representatives. The following chart
illustrates the various levels of sales representative management in the
United States, Mexico and Germany:
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE NUMBER OF
TITLE* DESCRIPTION TOTAL SALES FORCE YEARS WITH JAFRA
------ ----------- ----------------- -----------------
<C> <S> <C> <C>
Sales represen- An independent salesperson who has 94.0% 4.0
tative purchased a sales case and earns a
percentage on every product sale.
Manager A sales representative who has recruited a 3.7 7.4
specified number of new sales
representatives and sold required minimum
dollar amounts, and has signed a manager's
contract. She earns a percentage on her
personal sales plus commissions on the
sales of her downline sales
representatives.
District Manager A manager who has promoted between 1 and 3 1.9 10.1
(Levels I-III) sales representatives to manager from her
downline group. She earns a percentage on
her personal sales plus commissions on her
downline group's sales.
District Direc- A district manager who has promoted at 0.4 14.3
tor least 5 sales representatives to manager
(Levels I-V) from her downline group. She earns a
percentage on her personal sales plus
commissions on her downline group's sales.
</TABLE>
- --------
* The titles of sales representative managers vary by country.
Managers progress to higher levels of management by growing their downline
sales representative networks. At the same time, managers' earnings increase,
as they become entitled to commissions on sales by an increasing number of
downline sales representatives. This is a powerful incentive for managers to
maintain a well-trained and enthusiastic base of downline sales
representatives.
Training for new sales representatives focuses first on the personalized
selling of the Jafra product line, beginning with skin care and the
administration of a Jafra business. Training is conducted primarily by the
Company's sales representative managers. Managers train their downline sales
representatives at monthly meetings using materials prepared by the Company.
In training managers, the Company seeks to improve leadership and management
skills, while teaching managers to motivate downline sales representatives to
higher sales levels. The Company also teaches its managers and more
experienced sales representatives techniques for recruiting their own downline
sales representative bases. A large part of sales representative and manager
training occurs at the Company's semi-annual national conventions.
Income Opportunities and Recognition
Sales representatives earn income by purchasing products from Jafra at
retail discounts and selling to consumers at suggested retail prices. Once a
sales representative becomes a manager, her compensation also includes
commissions on the wholesale value of paid sales made by herself and her
recruits. Commissions vary among markets. Jafra pays commissions directly to
managers on receipt of payment for the underlying product sale. While this
commission-based incentive system diminishes the Company's profit margin on
individual product sales, it results in increased numbers of sales
representatives selling Jafra products, which ultimately earns greater profits
for the Company.
48
<PAGE>
The Company believes that public recognition of sales accomplishments serves
the dual purpose of identifying successful role models and boosting sales
representative morale. Each year Jafra sponsors major events in each of its
national markets to recognize and reward sales and recruiting achievements and
strengthen the bond between the independent sales force and the Company. Sales
representatives and managers must meet certain minimum levels of sales and new
sales representative sponsorship in order to receive invitations to attend
these events.
PRODUCTS
Jafra continuously introduces new products based on changes in consumer
demand and technological advances in order to enhance the quality, image and
price positioning of its products. Research and development activities occur
at the Jafra Skin, Body and Color Laboratory, located in the Westlake Village
facility. Twenty employees in the Research and Development Department
formulate products and analyze them for chemical purity and microbial
integrity. A separate pilot plant allows testing via small batch production
prior to full scale manufacture. Since 1993, Jafra has invested in the
globalization and upgrading of its product lines. Packaging and formulations
have been updated to build better brand awareness and a fresh image, and
contemporary fragrances have been added to the product line. Through
globalized product development, manufacturing and packaging, Jafra believes
that it has enhanced the consistency and quality of its products in all
geographic regions and across all product lines. Seventy percent of 1997
revenues derived from products introduced over the last five years, and the
Company expects this number to remain the same in 1998.
Certain of Jafra's products are based on formulas or include ingredients or
components that have been developed by Gillette. In addition, certain of
Jafra's products are manufactured at facilities owned by Gillette. The
Transition Services Agreement allows Jafra to continue using proprietary
Gillette formulas and materials in its products and provides that Gillette
will continue to provide manufacturing services until December 31, 1998.
The following table sets forth the sales of the Company's principal product
lines for fiscal 1997:
<TABLE>
<CAPTION>
SALES BY
PRODUCT LINE PERCENTAGE OF
$ (IN MILLIONS) TOTAL SALES
--------------- -------------
<S> <C> <C>
Color Cosmetics................................... $ 66.9 29.1%
Skin Care......................................... 57.8 25.2
Body Care & Daily Use............................. 43.4 18.9
Fragrances........................................ 37.3 16.3
Other(1).......................................... 24.1 10.5
------ -----
Total........................................... $229.5 100.0%
====== =====
</TABLE>
- --------
(1) Includes sales aids (party hostess gifts, demonstration products, etc.)
and promotional materials.
Color
Jafra's range of color cosmetics for the face, eyes, lips, cheeks and nails
contribute significantly to Company results. The Company develops internally
its lipstick formulas, foundations and mascaras. During 1996, Jafra introduced
an enhanced "global palette" of colors. This replacement product line features
an expanded palette of colors, improved quality and upgraded packaging. In
1997, Jafra launched its Always Color lipstick line, which competes with
products featuring the latest technology in long-wearing, transfer-resistant
formulas and has helped to revitalize the color line. Time Protector
lipsticks, launching in early 1998, feature contemporary colors with skin care
benefits, including sunscreen and antioxidants, as well as moisturizers and
conditioners.
Skin Care
Jafra sells skin care regimens tailored to five specific skin types. Each
regimen includes cleanser, mask, skin freshener and moisturizers for day and
night. In addition to basic skin care products, Jafra offers a range of
49
<PAGE>
special care products for special needs, including its premier product, Royal
Jelly Milk Balm Moisture Lotion, an Alpha Hydroxy complex (Rediscover) and
products for maturing skin (Advanced Time Protector and Time Corrector), eye
care (Optimeyes) and extra firming (Skin Firming Complex).
Body Care and Daily Use
Jafra markets a broad selection of body, bath, sun and personal care
products. Jafra's premier body care product, Royal Jelly Body Complex,
contains "royal jelly" (a substance produced by queen bees) in an oil-free
deep moisturizing formula with natural botanical extracts and vitamins. Other
offerings in the body care line include sunscreens, hand care lotions,
contouring creams, revitalizing sprays, bath products, as well as an aroma
therapy brand, Aromascape. A children's product line featuring animal
characters was launched in 1997 and two sunless tanning lotions were launched
in early 1998.
Jafra's daily use products include deodorant, shampoo and nutritional
supplements. Jafra strengthened this category in 1997 with the launch of the
Daily Essentials line, which includes a conditioning body wash, a conditioning
body lotion with Alpha Hydroxy action, a body lotion for sensitive skin, a
multi-vitamin and a ginseng complex. Consumers use these products in regular
cycles, allowing more frequent contact with sales representatives and their
catalogs of Jafra products.
Fragrance
Direct selling is a significant distribution channel for fragrances, and
Jafra's new scents have enabled the Company to participate on a larger scale,
as evidenced by the double-digit growth in sales over the last two years. In
1996, Jafra introduced Adorisse, a contemporary women's fragrance, and Fm
Force Magnetique, a prestige men's fragrance. Jafra further extended its
fragrance line in 1997 with Le Moire for women and Legend for Men. The
fragrance category includes line extensions such as body lotions, shower gels,
deodorants, after-shave lotions and shave creams for some of the most popular
fragrances.
MARKETING
Strategy
The Company's marketing vision is to provide glamour, excitement and variety
through prestige quality products at affordable prices. The Company's product
strategy and marketing and sales efforts reinforce this vision with its sales
representatives and their customers. The Company believes that this approach
builds brand equity that leads to product loyalty.
Jafra positions its products to appeal to a relatively wide range of market
categories, demographic groups and lifestyles. Jafra products generally price
at the higher end of the mass market category but slightly below prestige
brands such as Clinique. As compared to its direct selling competitors, Jafra
prices in line with Mary Kay, but higher than Avon, which targets the lower to
middle mass market.
Jafra targets middle income, value-oriented consumers who seek a fresh,
diverse and quality product line. The Jafra consumer enjoys the personal
attention of prestige product cosmetic counters in department stores but is
not inclined to pay their premium prices. The Jafra consumer also likes the
convenience, flexibility and low-key atmosphere of shopping at home, the
personalized recommendations of her sales representative and the try-before-
you-buy sales policy of the Company. The Company believes that consumers are
very loyal to the Jafra brand.
Product Strategy
Jafra's product strategy is to provide customers with exciting and prestige
quality product lines that fit into Jafra's value-added demonstration sales
techniques and promote the sale of multiple products per home visit. To that
end, Jafra develops integrated products and actively promotes cross-selling
among categories.
50
<PAGE>
Product variety and modernization are keys to the Company's success. Seventy
percent of 1997 revenues derived from products introduced over the last five
years, and the Company expects this number to rise to 80% in 1998. To seize
upon new product trends, the Company employs a "fast follower" product
strategy which focuses the Company's development efforts on products that have
proven successful in the marketplace. For example, Color Stay Lipstick, a
transfer-resistant lipstick introduced by Revlon, has galvanized entire
product lines using the popular long-wearing "volatile" technology. Other
companies, including Jafra, quickly introduced their own successful "volatile"
lipsticks and color products. Jafra's version, Always Color, generated $5.2
million in sales in the first year of introduction. Jafra currently has
approximately 20 products in development and has launched or expects to launch
32 products in 1998. Over the past several years, the Company has turned its
inventory approximately 1.6 times per year. By the end of 2000, the Company
expects to increase inventory turns to approximately three times per year,
consistent with industry norms, which the Company expects will reduce
significantly its future working capital requirements.
Jafra has also recently expanded its offerings of nutritional supplements
and body washes, which are used in regular cycles and present sales
representatives with opportunities for more frequent contact with customers,
thereby increasing opportunities to market other Jafra products. In addition,
Jafra has introduced products to expand into other profitable categories,
targeting the mature market, upper income consumers and children. Sales of
these products have been successful, with Time Corrector and Advanced Time
Protector alone generating $3.5 million in sales in the first four months of
launch.
Marketing Material & Support
The Company generally does not advertise, relying instead on its energetic
network of sales representatives and favorable word-of-mouth that the Company
believes its products generate. The Company's marketing expenses are far below
those of its retail competitors. In 1997, Jafra's marketing expenses were $25
million, or 10.8% of net sales (excluding commissions paid to sales
representatives).
Sales representative kits, filled with products and colorful promotional
materials, play a crucial role in sales support. In their own homes, Jafra
consumers try Jafra products from these kits and get immediate feedback from
their personal sales representatives and friends before deciding whether to
commit to a purchase. This combination of sampling and positive reinforcement
is what the Company believes provides the stimulus for most of its sales
representatives' sales. Sales representatives and managers also purchase from
the Company various printed, video and audio materials for distribution to
customers and for use by managers with their sales representative networks.
Customer materials announce special promotions and sales, introduce new
products and generally keep customers informed of exciting product
developments. Finally, managers and sales representatives receive from the
Company fliers and newsletters intended to generate excitement, recognize top
sellers and reinforce a sense of belonging to the Jafra "family."
MANUFACTURING
Over the last three years, Jafra has invested approximately $30 million in
new infrastructure, including a customer service center and office facility in
Mexico, new machinery and equipment and upgraded data processing capabilities.
Consistent with Jafra's globalization strategy, the Company recently
consolidated its manufacturing operations, instituting a new planning and
procurement strategy and unifying the sourcing of products on a worldwide
basis. In addition, the Company has instituted uniform worldwide packaging on
most of its product lines.
The Company has also revamped its approach to product development,
accelerating its new product development cycle and forging additional research
and development alliances with third-party manufacturers and vendors of raw
materials. In the near term, Jafra will continue to outsource pressed powder
godets, liner pencils, liquid eyeliners and nail lacquers. New products may
increasingly be manufactured by third parties or be licensed formulations.
51
<PAGE>
Jafra's manufacturing facilities are located in Westlake Village, California
and Naucalpan, Mexico, which is near Mexico City. Skin care products are
produced at the Westlake Village facility and color cosmetics and most
fragrances are produced at the Mexico facility. The manufacturing process at
the Westlake Village facility involves mixing, filling and in-house decoration
processes using product ingredients, plastic bottles, glass bottles, tubes and
caps. Jafra implemented a move to in-house color manufacturing beginning in
1993, and currently produces the majority of its color cosmetics in the Mexico
facility. During 1995, Jafra transitioned from a manual lipstick production
process to highly sophisticated automation in support of the global palette
launch. In Mexico, pursuant to the Transition Services Agreement, a Gillette
affiliate will continue to be responsible for Jafra's manufacturing processes
until December 31, 1998. Thereafter, the Company will hire the Gillette
employees involved in the manufacture of Jafra's products and assume
responsibility for the manufacture of products at its Mexico facility. See
"The Transactions--Transition Services Agreement."
The Company purchases from third party suppliers certain finished goods and
raw materials for use in its manufacturing operations. In general, the Company
does not have written contracts with suppliers. Finished goods and raw
materials used in the Company's products generally are available stock items
or can be obtained to Company specifications from more than one potential
supplier. At the Closing, the Company entered into an agreement with Gillette
relating to the continued use by the Company of certain proprietary Gillette
formulas and materials.
DISTRIBUTION
The Company has ten principal distribution centers around the world. The
U.S. warehouses in Bridgeport, New Jersey and Westlake Village, California,
currently stock the entire Jafra product line. Management believes that these
facilities are adequate to meet domestic demand for the foreseeable future. In
Europe, the Company is in the process of pursuing alternatives to in-house
distribution facilities in Switzerland and Italy and may eventually combine
certain distribution operations into a central warehouse in Germany or enter
into agreements with third parties for these services. In Mexico, the Company
has outsourced some of its distribution needs to third parties, which has
enabled the Company to reduce inventories.
Typically, owned or leased distribution centers are located in an area that
allows for direct delivery to sales representatives by either post or carrier.
Maintaining a short delivery cycle in direct selling is an important
competitive advantage. The Company delivers 98% of its products within four
days of placement of an order at a packing accuracy rate of approximately 98%.
COMPETITION
Jafra sells all of its products in highly competitive markets. The principal
bases of competition in the cosmetics direct selling industry are price,
quality and range of product offerings. On the basis of information available
to it from industry sources, management believes that there are several
thousand companies (including both direct sales and cosmetic manufacturing
companies) that sell products that compete with Jafra's products. Several
direct sales companies compete with Jafra in sales of cosmetic products, and
at least two such competitors, Mary Kay Corporation and Avon Products, Inc.,
are substantially larger than Jafra in terms of total independent
salespersons, sales volume and resources. In addition, Jafra's products
compete with cosmetics and toiletry items manufactured by cosmetic companies
that sell their products in retail or department stores. Several of such
competitors are substantially larger than Jafra in terms of sales and have
substantially more resources. Jafra also faces competition in recruiting
independent salespersons from other direct selling organizations whose product
lines may or may not compete with Jafra's products.
PATENTS AND TRADEMARKS
Jafra's operations do not depend to any significant extent upon any single
trademark other than the Jafra trademark. Some of the trademarks used by
Jafra, however, are identified with and important to the sale of Jafra's
products. Jafra's most important trademarks are: Adorisse (a contemporary
woman's fragrance), Eau D'Aromes
52
<PAGE>
(revitalizing fragrance spray), Fm Force Magnetique (a men's prestige
fragrance), Legend for Men (a men's premium fragrance), Le Moire (a
contemporary woman's fragrance), Optimascara (mascara), Optimeyes (eye
treatment lotion), Rediscover (skin cream with Alpha Hydroxy), Royal Jelly
Body Complex (body lotion), Royal Jelly Milk Balm Moisture Lotion
(moisturizing lotion), Time Corrector (skin cream) and Time Protector (skin
cream). Jafra's operations do not depend to any significant extent on any
single or related group of patents, although the Company has applied for or
received patent protection in its major markets for certain dispensers and
product containers, nor do they rely upon any single or related group of
licenses, franchises or concessions. Jafra has in the past licensed know-how
from Gillette relating to the design, development and manufacture of its
products. Jafra can continue to use such know-how in connection with its
products, although management expects to replace Gillette as a provider of
certain standard-setting and testing services.
A former employee of Gillette has applied to register, and in certain
jurisdictions in which the Company does not currently operate has received
registrations for, the Jafra trademark. Gillette has obtained a court order
prohibiting this employee from transferring or licensing such trademark
applications and registrations and requiring that the trademark applications
and registrations be assigned to Gillette. If Gillette is not successful in
obtaining such assignments or does not transfer these applications and
registrations to Jafra, Jafra may be prohibited from distributing its products
in such jurisdictions, or may face significant costs in establishing its right
to do so.
PROPERTIES
The Company is headquartered in Westlake Village, California, 40 miles north
of Los Angeles. Manufacturing is done on a global basis and by product line in
two key locations, Westlake Village and Naucalpan, Mexico. The Company
maintains 10 major distribution facilities and 15 sales offices and service
centers. The following table sets forth the Company's principal properties by
location, type of facility, square footage and ownership interest:
<TABLE>
<CAPTION>
SQUARE
COUNTRY CITY FUNCTION FOOTAGE TITLE
- ------- ---- -------- ------- -----
<S> <C> <C> <C> <C>
U.S.............. Westlake Village Office/Manufacturing 148,500(1) Owned
Bridgeport Warehouse 25,100 Leased
Mexico........... Mexico City Office 80,000 Owned
Naucalpan Manufacturing 99,000 Owned/Leased
Germany.......... Munich Office 19,500 Leased
Kaufbeuren Office/Warehouse 32,100 Leased
Italy............ Milan Office 7,100 Leased
Rovellasca Warehouse 18,200 Leased
Switzerland...... Cham Office/Warehouse 6,400 Leased(2)
Venezuela........ Caracas Office/Warehouse 37,700 Leased
Colombia......... Bogota Office/Warehouse 13,700 Leased
</TABLE>
- --------
(1) Two buildings.
(2) Operation to be merged into German facility.
Until December 31, 1998, a Gillette affiliate will provide manufacturing
services to Jafra at Jafra's Mexico manufacturing plant, using the
manufacturing equipment owned by Jafra. See "The Transactions--Transition
Services Agreement."
MANAGEMENT INFORMATION SYSTEMS
Historically, each marketing region within Jafra handled its own computing
systems, staffing and development, leading to the development of disparate
functionality and standards. In early 1995, management formulated and began to
implement a plan to replace the commercial systems that handle order entry,
53
<PAGE>
commissions and accounts receivable, among other functions, at all existing
Jafra companies, other than in the United States, with the commercial system
developed in Mexico. The Company expects to complete this project and have a
year 2000 compliant version of the Mexican commercial system installed at all
Jafra companies, other than in the United States, in early 1999. The Westlake
Village facility will continue to use an older commercial system that is not
currently year 2000 compliant but which will be modified to be year 2000
compliant over the next 12 months. The Company has budgeted $1.5 million
through 1999 to modify or replace its business critical information systems so
as to be year 2000 compliant prior to December 31, 1999. See "Risk Factors--
Year 2000 Issue."
Jafra currently uses software licensed through Gillette enterprise-wide
software licenses that provide certain price advantages to Gillette
subsidiaries. Jafra and Gillette have negotiated Jafra's continued ability to
use this software after the Closing and the additional costs relating to
continued use of this software are not material to the Company's financial
position or results of operations. Gillette will allow Jafra to continue using
certain internally developed Gillette software and has obtained the right for
Jafra to continue using certain other licensed software for varying periods
(which in most cases can be renewed at the option of Jafra) in return for the
payment of monthly fees. On or before termination of the Transition Services
Agreement, Jafra will also have to replace certain Gillette software and
obtain licenses to the additional licensed software. See "The Transactions --
Transition Services Agreement."
EMPLOYEES
As of December 31, 1997, the Company had 851 full-time employees, of which
250 were in manufacturing, warehousing, distribution and technical operations,
408 were in sales and marketing, 148 were in administration and 45 were part
of the corporate staff. The Company also had 40 outside contract employees.
ENVIRONMENT
The Company is subject to various federal, state, local and foreign laws or
regulations governing environmental, health and safety matters. The Company
believes that it is in material compliance with all such laws and regulations
and under present conditions the Company does not foresee that such laws and
regulations will have a material adverse effect on capital expenditures,
earnings or the competitive position of the Company.
LEGAL PROCEEDINGS
The Company is involved from time to time in routine legal matters
incidental to its business. The Company believes that the resolution of such
matters will not have a material adverse effect on the Company's business,
financial condition or results of operation.
54
<PAGE>
MANAGEMENT
The executive officers and directors of the Company are listed below. The
business address for each executive officer is as follows: Jafra Cosmetics
International, Inc., 2451 Townsgate Road, Westlake Village, California 91361.
<TABLE>
<CAPTION>
NAME AGE
---- ---
<S> <C> <C>
Ronald B. Clark......... 62 Chairman and Chief Executive Officer; Director
Gonzalo R. Rubio........ 54 President and Chief Operating Officer; Director
Ralph S. Mason, III..... 46 Vice Chairman, Executive Vice President and General Counsel
James Brill............. 47 Chief Financial Officer
Michael DiGregorio...... 43 President of United States Operations
Eugenio Lopez Barrios... 54 President of Mexican Operations
Jose Luis Peco.......... 53 President of European Operations
Jaime Lopez Guirao...... 50 President of Global Operations
Alan Fearnley........... 48 Senior Vice President of Global Marketing
Carlos Matos............ 39 Vice President of Finance
Donald J. Gogel......... 49 Director
Steven D. Goldstein..... 46 Director
Thomas E. Ireland....... 48 Director
David A. Novak.......... 29 Director
Paul Orfalea............ 50 Director
Ann Reese............... 45 Director
Edward H. Rensi......... 54 Director
Christopher Sinclair.... 48 Director
Kenneth D. Taylor....... 64 Director
</TABLE>
Ronald B. Clark currently serves as a director and the Chairman and Chief
Executive Officer of the Company. Mr. Clark served from 1996 to 1997 as
President, Richmont Europe (Mary Kay Holding Company). From 1992 to 1995, he
was President of Mary Kay Europe. Prior to that, he served as Executive Vice
President of Primerica Corp., President of Jafra Cosmetics International,
Inc., and Vice President of Avon Products, Inc.
Gonzalo R. Rubio currently serves as a director and the President and Chief
Operating Officer of the Company. Mr. Rubio served from 1992 to 1997 as Area
Vice President and later President of the European operations of Mary Kay Inc.
and was employed by Avon Products Inc. from 1970 to 1992, serving alternately
as Area Director for Europe, International Operations Director and Area
Director for Latin America.
Ralph S. Mason, III serves as the Vice Chairman, Executive Vice President
and General Counsel of the Company. For more than the prior five years, Mr.
Mason was the senior and founding partner at Mason, Taylor & Colicchio, a law
firm in Princeton, New Jersey.
James Brill serves as Chief Financial Officer of the Company. From 1996 to
1998, Mr. Brill served as Vice President, Finance and Administration and Chief
Financial Officer of Vertel Corporation. From 1988 to 1996, Mr. Brill was
employed by Merisel, Inc., serving as Senior Vice President, Finance, Chief
Financial Officer, and a Director.
Michael DiGregorio currently serves as President of United States Operations
of the Company. From 1993 to 1998, Mr. DiGregorio served as Vice President,
Treasurer and Chief Financial Officer of Atlantis Plastics, Inc. From 1989 to
1993, Mr. DiGregorio was employed by The Wackenhut Corporation, serving most
recently as Senior Vice President, Finance and Chief Financial Officer.
Eugenio Lopez Barrios currently serves as President of Mexican Operations of
the Company. From 1993 to 1998, Mr. Barrios was President of Mary Kay Mexico.
Prior to that, Mr. Barrios was employed by Avon Products, Inc. for over 30
years, where he oversaw Operations in Mexico, South America and Central
America.
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Jose Luis Peco currently serves as President of European Operations of the
Company. From 1994 to 1998, Mr. Peco served as Vice President of Europe
Operations for Mary Kay Cosmetics and President of Mary Kay Cosmetics--Iberia.
Prior to that, Mr. Peco served as Controller and Financial Director for
various European Operations for Avon Products, Inc. for over 20 years.
Jaime Lopez Guirao serves as President, Global Operations. For more than the
prior five years, Mr. Guirao was employed by Avon Products, Inc., holding
several operational, management and Country President positions in Europe and
the Americas.
Alan Fearnley currently serves as Senior Vice President of Global Marketing
of the Company. For the past year, Mr. Fearnley served as Vice President of
Marketing for Dermatologica. Prior to that, Mr. Fearnley took a year's
sabbatical to attend the Sloan Fellowship Masters Program at the London
Business School. During this sabbatical, Mr. Fearnley also served as
consultant to various companies. From 1987 to 1995, Mr. Fearnley served as
Senior Vice President of Global Marketing of Jafra.
Carlos Matos has served as JCI's Vice President of Finance since early 1997.
Previously, Mr. Matos worked for 12 years in a series of Gillette financial
management positions in the U.K., Spain and the U.S. Prior to joining
Gillette, Mr. Matos worked as an accountant for Arthur Andersen for five
years. Mr. Matos has been seconded to the Company pursuant to the Transition
Services Agreement until , 1998. See "The Transactions--Transition Services
Agreement."
Donald J. Gogel has been a director of the Company since January 1998. Mr.
Gogel has served as President and a director of CD&R since 1995 and, since
1989, has been a principal of CD&R. Mr. Gogel is also a limited partner of
CD&R Associates V Limited Partnership ("Associates V"), the general partner of
CD&R Fund V, and President and a director of CD&R Investment Associates II,
Inc. ("Investment Associates II"), a Cayman Islands exempted company that is
the managing general partner of Associates V. Mr. Gogel is a director of
Kinko's, Inc., a corporation in which Fund V has an investment, APS Holding
Corporation, a corporation in which an investment fund managed by CD&R has an
investment, and Turbochef, Inc. Mr. Gogel's business address is 375 Park
Avenue, New York, New York 10152.
Steven D. Goldstein has been a director of the Company since July 1998 and
is the Chairman and Chief Executive Officer of Invenet, LLC. Prior to joining
Invenet, LLC, Mr. Goldstein was employed as President, Credit of Sears,
Roebuck & Co. From 1982 to 1996, Mr. Goldstein was employed by American
Express Co., serving as the Chairman and Chief Executive Officer of American
Express Bank.
Thomas E. Ireland has been a director of the Company since March 1998 and is
a principal of CD&R, a limited partner of Associates V and a shareholder of
Investment Associates II. Prior to joining CD&R in 1997, Mr. Ireland served as
a senior managing director of Alvarez & Marsal, Inc. Prior to joining Alvarez
& Marsal in 1988, Mr. Ireland served as a managing director of Magten Asset
Management, a registered investment advisor, and was a vice president of
Citibank, N.A. Mr. Ireland also serves on the board of directors of the Maine
Coast Heritage Trust. Mr. Ireland's business address is 375 Park Avenue, New
York, New York 10152.
David A. Novak has been a director of the Company since January 1998, and is
a professional employee of CD&R and a limited partner of Associates V. Prior
to joining CD&R in 1997, Mr. Novak worked in the Merchant Banking and
Investment Banking Divisions of Morgan Stanley & Co. Incorporated and for the
Central European Development Corporation. Mr. Novak's business address is 375
Park Avenue, New York, New York 10152.
Paul Orfalea has been a director of the Company since July 1998 and is the
founder of the Kinko's chain. For more than the prior five years, Mr. Orfalea
has been employed by Kinko's, Inc., serving as its Chairperson. Mr. Orfalea is
also a director of DataProse, Inc., Espresso Caffe Corp., Glendale Federal
Bank and Kinko's, Inc.
Ann Reese has been a director of the Company since July 1998. From 1992
until March 1998, Ms. Reese was employed by ITT Corporation, serving most
recently as Chief Financial Officer.
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Edward H. Rensi has been a director of the Company since July 1998. For more
than the prior five years, Mr. Rensi has been employed by McDonalds USA,
serving most recently as President and Chief Executive Officer. Mr. Rensi also
serves as a director of Snap-On Inc. and I.S.C. Corporation, and serves as a
member of the compensation committee of the board of directors of Snap-On Inc.
Christopher A. Sinclair has been a director of the Company since July 1998
and is the President and Chief Executive Officer of Cutter Capital LLC. Prior
to that, Mr. Sinclair served from 1996 to 1998 as the President and Chief
Executive Officer of Quality Food Inc. From 1984 to 1996, Mr. Sinclair was
employed by Pepsico, Inc., serving most recently as the Chairman and Chief
Executive Officer of Pepsi-Cola Company. Mr. Sinclair also serves as a
director of Mattel, Inc., Perdue Farms, Inc. Venator Group (Woolworth) and
Grupo Azucarero de Mexico S.A. de C.V.
Kenneth D. Taylor has been a director of the Company since July 1998 and has
been the Chairman of Global Public Affairs, Inc. since October 1994. From 1991
to 1994, Mr. Taylor served as the Chairman of Taylor & Ryan, Inc.
EMPLOYMENT AGREEMENTS
Effective as of the Closing, the Company entered into employment agreements
with Messrs. Clark, Rubio and Mason and the Company has since entered into
employment agreements with each of Messrs. Guirao and Barrios (together with
Messrs. Clark, Rubio and Mason, the "Senior Executive Officers"). The
employment agreements of Messrs. Clark, Rubio and Mason have an initial term
of three years that becomes a continuous "rolling" two year term as of the
first anniversary of the Closing. The employment agreements of Messrs. Guirao
and Barrios have a continuous "rolling" term of two years, commencing as of
the Closing. Pursuant to their respective agreements, Messrs. Clark, Rubio,
Mason, Guirao and Barrios receive annual base salaries of $600,000, $500,000,
$450,000, $450,000 and $400,000, respectively. In addition, each of Messrs.
Clark, Rubio, Mason, Guirao and Barrios is eligible for a target annual bonus
equal to 60% of such Senior Executive Officer's annual base salary if the
Company achieves the performance goals established under its annual incentive
plan for executives and may receive a larger bonus if such goals are exceeded.
The employment agreements further provide that, in the event of a termination
of any such Senior Executive Officer's employment by the Company without
"cause" or by such executive for "good reason" (as such terms are defined in
the employment agreements), such Senior Executive Officer will be entitled to
continued payments of his base salary for the remaining term of his employment
agreement and for payment of a pro rata annual bonus for the year of
termination provided that the Company achieves the performance objectives
applicable for such year. Each of the employment agreements also contains
covenants regarding nondisclosure of confidential information, noncompetition
and nonsolicitation.
CERTAIN INCENTIVE ARRANGEMENTS
The Company has adopted a stock incentive plan (the "Stock Incentive Plan")
providing for the sale to members of senior management (including each Senior
Executive Officer) of up to 52,734 shares of Common Stock of Parent
(representing approximately 6.2% of the Common Stock outstanding at the close
of the September 1998 offering of shares of Common Stock to certain members of
management (assuming all shares are purchased)) and the issuance of options to
purchase up to 105,468 additional shares of Common Stock (which in total
represents 16.5% of the fully diluted Common Stock of Parent outstanding at
the close of such offering (assuming all shares are purchased)) under such
plan. At the Closing of the Transactions, Messrs. Clarke, Rubio and Mason
purchased 7,733, 6,800 and 5,370 shares of Common Stock of Parent,
respectively, pursuant to the Stock Incentive Plan and, on September , 1998,
Messrs. Clark, Rubio, Mason, Guirao and, Barrios purchased , , ,
and shares of Common Stock of Parent, respectively, pursuant to the Stock
Incentive Plan. The purchase price paid by the Senior Executive Officers is
$100 per share. A portion of the cash purchase price paid by each such Senior
Executive Officer for such shares of Common
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Stock was financed by loans from Chase Manhattan Bank on market terms. To help
such executives obtain such terms for such financing, the Company guaranteed
(or expects to guarantee) up to 75% of the purchase price for the shares of
Parent Common Stock purchased by each such Senior Executive Officer.
In connection with his purchase of shares of Common Stock of Parent, at the
September closing of such purchases, each Senior Executive Officer is expected
to be granted options to purchase two additional shares of Parent Common Stock
for each share purchased by such Senior Executive Officer. The exercise price
for all of shares covered by such options is expected to be $100 per share.
Options covering one-half of the shares of Parent Common Stock are expected to
become vested in three equal annual installments on the first three
anniversaries of the date of grant, subject to the Senior Executive Officer's
continued employment. The remaining options covering 50% of the shares are
expected to become vested if, and to the extent, the Company achieves certain
annual and/or cumulative EBITDA targets specified in the agreements pursuant
to which such options are expected to be granted or, regardless of whether
such targets are achieved, on the ninth year anniversary of such Senior
Executive Officer's employment if such Senior Executive Officer is employed by
the Company on such date.
In addition, certain directors and other persons are expected to purchase up
to an aggregate of 31,000 shares of Common Stock, representing approximately
3.68% of the Common Stock of Parent outstanding as of the September closing
of such purchases (assuming all shares are purchased).
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OWNERSHIP OF CAPITAL STOCK
Parent owns, indirectly, all of the outstanding capital stock of the U.S.
Issuer and Jafra S.A. The table below sets forth the owners of 5% or more of
the Parent Common Stock and the ownership of Parent Common Stock by the
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME SHARES OF CLASS
- ---- --------- --------
<S> <C> <C>
Clayton, Dubilier & Rice Fund V Limited Partnership (1)..... 769,600 97.5
Ronald B. Clark............................................. 7,733 *
Gonzalo R. Rubio............................................ 6,800 *
Ralph S. Mason, III......................................... 5,370 *
All directors and executive officers as a group (3 persons)
(2)........................................................ 19,903 2.5
</TABLE>
- --------
(1) Associates V is the general partner of CD&R Fund V, and has the power to
direct CD&R Fund V as to the voting and disposition of shares held by CD&R
Fund V. Investment Associates II is the managing general partner of
Associates V and has the power to direct Associates V as to its direction
of CD&R Fund V's voting and disposition of the shares held by CD&R Fund V.
No person controls the voting and dispositive power of Investment
Associates II with respect to the shares owned by CD&R Fund V. Each of
Associates V and Investment Associates II expressly disclaims beneficial
ownership of the shares owned by CD&R Fund V. The business address for
each of CD&R Fund V, Associates V and Investment Associates II is c/o
Investment Associates II, 1403 Foulk Road, Suite 106, Wilmington, Delaware
19803.
(2) Messrs. Clark, Rubio and Mason purchased shares of Parent Common Stock at
the Closing. On September , 1998, certain members of management, certain
directors and other persons are expected to purchase up to an aggregate of
52,900 shares of Parent Common Stock in a transaction exempt from the
registration requirements of the Securities Act. Shares owned by CD&R Fund
V are not included herein. Mr. Gogel is an officer, director and
shareholder of Investment Associates II and Mr. Ireland is a director of
Investment Associates II.
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THE TRANSACTIONS
The following is a summary of the structure of the Acquisition and certain
provisions of the Acquisition Agreement and the Transition Services Agreement.
THE ACQUISITION
On April 30, 1998, Parent completed the Acquisition of the Jafra Business
pursuant to the Acquisition Agreement. Parent, the U.S. Issuer, Jafra S.A. and
certain subsidiaries of Parent were organized to effect the Acquisition.
The Acquisition was accomplished as follows: (i) Jafra Cosmetics
International Inc., a California Corporation merged with the U.S. Issuer with
the U.S. Issuer surviving; (ii) Jafra S.A. acquired all the outstanding
capital stock of Grupo Jafra, which then merged with and into Jafra S.A., with
Jafra S.A. as the surviving entity; (iii) indirect subsidiaries of Parent
purchased the stock of Gillette subsidiaries conducting the Jafra Business in
Germany, Italy, the Netherlands and Switzerland; and (iv) indirect
subsidiaries of Parent acquired from various Gillette subsidiaries certain
assets used in the Jafra Business in Austria, Argentina, Colombia and
Venezuela.
THE ACQUISITION AGREEMENT
The purchase price for the Acquisition was approximately $200 million in
cash, subject to post-closing adjustment for changes in net worth of the Jafra
Business as of the closing as compared to net worth of the Jafra Business as
of September 30, 1997. See "Management's Discussion and Analysis of Financial
Conditions and Results of Operations--Recent Developments." Pursuant to the
Acquisition Agreement, Gillette has agreed, subject to certain limitations, to
retain or indemnify the Company for certain liabilities and obligations
relating to the Jafra Business prior to the Closing, including liabilities and
obligations relating to pre-Closing taxes, employee compensation and other
benefits and discontinued operations.
TRANSITION SERVICES AGREEMENT
At the Closing, Parent and Gillette entered into a Transition Services
Agreement (the "Transition Services Agreement") pursuant to which Gillette or
its affiliates agreed to provide certain administrative support services to
the Company for three months and with respect to certain personnel up to six
months. Pursuant to such agreement, the Company has exercised its right to
extend certain services for an additional three month period and has the right
to further extend such services through December 31, 1998. In addition, an
affiliate of Gillette will provide manufacturing services relating to the
products produced at the Company's manufacturing facility in Mexico until
December 31, 1998. After the transition period for manufacturing services at
the Mexico facility, all Gillette employees at such facility will be
transferred to the Company. Other than certain injection molding services that
the Company may continue to purchase from a Gillette affiliate, thereafter the
Company will be responsible for the manufacture of products at its Mexico
facility. The Company believes that the amounts to be paid for such services
generally reflect the historical allocated cost to the Company of such
services and that the Company will be able to perform such functions for
itself or purchase such services from third parties at amounts comparable to
or less than historical costs.
The Transition Services Agreement also includes a license to certain
Gillette formulas, ingredients and components currently used in Jafra products
and provides for Gillette to continue to manufacture certain Jafra products
until December 31, 1998.
THE FINANCINGS
In addition to the issuance of the Existing Notes, concurrently with and as
part of the financing for the Acquisition, Parent, the U.S. Issuer and Jafra
S.A. entered into the Senior Credit Agreement with certain lenders providing
for new senior secured credit facilities, including a $25 million Term Loan
Facility (all of which was drawn at the Closing) and a $65 million
multicurrency Revolving Credit Facility (approximately $15 million of which
has been drawn in connection with the Transactions). See "Description of the
Senior Credit Agreement."
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CD&R Fund V, which is Parent's largest stockholder, is a private investment
fund managed by CD&R. Amounts contributed to CD&R Fund V by its limited
partners are invested at the discretion of the general partner in equity or
equity-related securities of entities formed to effect leveraged buy-out
transactions and in the equity of corporations where the infusion of capital,
coupled with the provision of managerial assistance by CD&R, can be expected
to generate returns on investments comparable to returns historically achieved
in leveraged buyout transactions. The general partner of CD&R Fund V is
Associates V, and the general partners of Associates V are Investment
Associates II, CD&R Investment Associates, Inc. and CD&R Cayman Investment
Associates, Inc., a Cayman Islands exempted company. Each of Mr. Gogel, who is
President and a director of CD&R, President and a director of Investment
Associates II and a limited partner of Associates V, Mr. Ireland, who is a
principal of CD&R, a limited partner of Associates V and a shareholder of
Investment Associates II, and Mr. Novak, who is a professional employee of
CD&R and a limited partner of Associates V, are directors of Parent. See
"Management."
CD&R is a private investment firm which is organized as a Delaware
corporation. CD&R is the manager of a series of investment funds, including
CD&R Fund V. CD&R generally assists in structuring, arranging financing for
and negotiating the transactions in which the funds it manages invest. After
the consummation of such transactions, CD&R generally provides advisory,
management consulting and monitoring services to the companies in which its
investment funds have invested during the period of such fund's investment.
Such services include helping the company to establish effective banking,
legal and other business relationships and assisting management in developing
and implementing strategies for improving the operational, marketing and
financial performance of the Company.
CD&R received at Closing an initial transaction fee of $2.7 million for
providing services related to the structuring, implementation and consummation
of the Acquisition, in addition to the reimbursement of out-of-pocket
expenses. Pursuant to a consulting agreement entered into at the Closing,
until the tenth anniversary of the Acquisition or the date on which CD&R Fund
V no longer has an investment in the Company, CD&R will receive an annual fee
of $500,000 (and reimbursement of out-of-pocket expenses) for providing
advisory, management consulting and monitoring services to the Company. Under
the terms of the Company's lending arrangements, such fees must be determined
by arm's-length negotiation and must be reasonable.
CD&R, CD&R Fund V and Parent entered into an indemnification agreement,
pursuant to which Parent has agreed to indemnify the members of its board of
directors, as well as CD&R, CD&R Fund V, Associates V, Investment Associates
II and certain of their members, partners, associates and affiliates (the
"Indemnitees") to the fullest extent allowable under applicable law and to
indemnify the Indemnitees against any suits, claims, damages or expenses which
may be made against or incurred by them under applicable securities laws in
connection with offerings of securities of the Company, including the
Offering, liabilities to third parties arising out of any action or failure to
act by the Company, and, except in cases of gross negligence or intentional
misconduct, the provision by CD&R of advisory, management consulting and
monitoring services.
Ralph S. Mason, III, who became Vice Chairman, Executive Vice President and
General Counsel of Parent as of the Closing, was a partner in the law firm of
Mason, Taylor & Colicchio. Prior to Closing, Mr. Mason and the law firm of
Mason, Taylor & Colicchio acted as legal counsel for the new management team,
including Messrs. Clark, Rubio and Mason, in connection with the Transactions.
The Company has entered into or expects to enter into employment agreements
with 11 members of management, including Messrs. Clark, Rubio and Mason. The
employment agreements of Messrs. Clark and Rubio provide that each will be a
director of Parent during the term of his employment. See "Management--
Employment Agreements."
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DESCRIPTION OF THE SENIOR CREDIT AGREEMENT
General. In connection with the Transactions, the U.S. Issuer and Jafra S.A.
(the "Borrowers") and Parent entered into the Senior Credit Agreement with a
syndicate of financial institutions and Credit Suisse First Boston, as
Administrative Agent (the "Agent"). Chase Securities Inc. acts as syndication
agent in connection with the facilities. The following is a summary
description of the principal terms of the Senior Credit Agreement and the
related loan documents (the "Credit Documentation") and is subject to and
qualified in its entirety by reference to the Credit Documentation, which has
been filed as Exhibits to the Registration Statement of which this Prospectus
is a part.
The Senior Credit Agreement provides for senior secured credit facilities in
an aggregate principal amount of up to $90.0 million, consisting of (i) a
multicurrency revolving credit facility in an aggregate principal amount of up
to $65.0 million (the "Revolving Credit Facility") and (ii) a term loan
facility in an aggregate principal amount of $25.0 million (the "Term Loan
Facility", and together with the Revolving Credit Facility, the "Credit
Facilities"). The U.S. Issuer borrowed $15.0 million under the Term Loan
Facility and will be entitled to borrow up to 100% of the Revolving Credit
Facility available to it from time to time; Jafra S.A. borrowed $10.0 million
under the Term Loan Facility and is entitled to borrow up to 50% of the
Revolving Credit Facility available to it from time to time.
Use of Facility. In connection with the Transactions, the Borrowers borrowed
the entire amount available under the Term Loan Facility and approximately
$15.0 million under the Revolving Credit Facility, as part of the financing
for the Acquisition. See "The Transactions." The remaining unused commitment
under the Revolving Credit Facility as of June 30, 1998 was $50 million. The
remaining unused commitment will be available to the Borrowers from time to
time for general corporate purposes.
Guarantee. The obligations of each Borrower under the Senior Credit
Agreement and the other Credit Documentation is unconditionally guaranteed by
Parent. Each Borrower's obligations is also guaranteed by the other Borrower
on a senior basis, including a 30-day standstill period prior to enforcement
of each such guarantee. The U.S. Issuer's obligations under the Senior Credit
Agreement will also be guaranteed by each subsequently acquired or organized
U.S. subsidiary of the U.S. Issuer, subject to certain exceptions. Jafra
S.A.'s obligations under the Senior Credit Agreement are also guaranteed by
each existing and subsequently acquired or organized subsidiary of Jafra S.A.
Subsequently organized U.S. subsidiaries of Parent (other than those specified
above) will guarantee the obligations of the Borrowers under the Senior Credit
Agreement and other Credit Documentation.
Security. Each Borrower's obligations under the Senior Credit Agreement and
each guarantor's obligations under the related guarantees are secured as fully
as is permitted by applicable law by substantially all of the assets of
Parent, the U.S. Issuer, Jafra S.A., each existing and subsequently acquired
or organized subsidiary of each of Jafra S.A., and each subsequently acquired
or organized U.S. subsidiary of the U.S. Issuer, including, but not limited
to, (a) a pledge of all the capital stock of the Borrowers, certain
intermediate holding companies and each existing and each subsequently
acquired or organized direct subsidiary of each of the Borrowers (which
pledge, in the case of any foreign subsidiary of the U.S. Issuer, shall be
limited to 65% of the capital stock of such foreign subsidiary) and (b)
security interests in, and mortgages on, substantially all tangible and
intangible assets of the Borrowers and each existing and each subsequently
acquired or organized subsidiary of Jafra S.A. and each existing and each
subsequently acquired or organized U.S. subsidiary of the U.S. Issuer.
Amortization; Interest; Fees; Maturity. Loans under the Term Loan Facility
are repayable in quarterly principal payments over six years. Loans under the
Revolving Credit Facility mature on the sixth anniversary of the Closing date.
Loans under the Term Loan Facility and the Revolving Credit Facility will bear
interest at a rate per annum equal, at the applicable Borrower's option, to
(a) an adjusted London inter-bank offered rate ("Adjusted LIBOR") plus the
applicable margin (the "Adjusted LIBOR Margin") or (b) an Alternate Base Rate
(equal to the higher of the Agent's prime rate and the Federal Funds Effective
Rate plus 1/2 of 1% plus the applicable margin (the "Applicable ABR Margin"
and, together with the Applicable LIBOR Margin, the
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<PAGE>
"Applicable Margins") where the Applicable Margins are determined by reference
to the levels specified for the Company's ratio of (i) Total Debt (as defined
in the Senior Credit Agreement) outstanding as of the date of determination to
(ii) Consolidated EBITDA (as defined in the Senior Credit Agreement) for the
period of four consecutive fiscal quarters most recently ended as of such date
of determination. Notwithstanding the foregoing, the Applicable LIBOR Margin
and the Applicable ABR Margin for loans under the Credit Facilities will not
exceed 2.625% and 1.625%, respectively. Overdue amounts under the Senior
Credit Agreement not paid when due shall bear interest at a default rate equal
to 2.00% per annum above the otherwise applicable rate. The Borrowers may
enter into certain interest rate protection arrangements following the Closing
with respect to a portion of their indebtedness under the Senior Credit
Agreement that will be designed to place a cap on the interest rates payable
thereon.
The transaction fees and expenses set forth in the sources and uses of funds
for the Acquisition (see "The Transactions") include transaction fees payable
in connection with the commitments under the Senior Credit Agreement. In
addition, a commitment fee is payable quarterly on the daily average undrawn
portion of the Revolving Credit Facility, in the amount of 0.50% per annum or
less (depending on the ratio described in the preceding paragraph).
Prepayments. The Senior Credit Agreement permits voluntary prepayment of
loans thereunder without premium or penalty. Subject to certain exceptions,
mandatory prepayments are required to be made from (a) 100% of net cash
proceeds of all non-ordinary asset sales or other dispositions of property
(including insurance and condemnation proceeds); (b) 100% of the net cash
proceeds of issuances of indebtedness by the Company, other than as permitted
by the Senior Credit Agreement; and (c) 50% of excess cash flow for each
fiscal year in which the Company's Total Debt on the last day of such fiscal
year to its Consolidated EBITDA for the four fiscal quarters then ended is
greater than or equal to 3.75:1.00. Such mandatory prepayments will be applied
to loans outstanding under the Term Loan Facility until the loans thereunder
have been paid in full.
Covenants and Events of Default. The Senior Credit Agreement contains
covenants that, among other things, restrict the ability of the Company and
its subsidiaries to dispose of assets, incur additional debt, guarantee
obligations or contingent liabilities, repay the Notes, pay dividends, prepay
other indebtedness (including a specific restriction on prepayment of the
Notes), create liens on assets, make investments, loans or advances, engage in
mergers or consolidations, make capital expenditures or engage in certain
transactions with affiliates, and will otherwise restrict corporate
activities. The Senior Credit Agreement also contains certain financial ratios
and tests, including a maximum consolidated leverage ratio and a minimum
consolidated interest coverage ratio.
The Senior Credit Agreement also contains provisions that prohibit any
modification of the Indenture in any manner that adversely affects the
interests of the Lenders.
The Senior Credit Agreement contains customary events of default, including,
among others, non-payment of principal or interest, bankruptcy, breach of
covenants and change of control. If for any reason either Borrower is unable
to comply with the terms of the Senior Credit Agreement, including the
covenants included therein, such noncompliance could result in an event of
default under the Senior Credit Agreement and could result in an acceleration
of the payment of the indebtedness outstanding under the Senior Credit
Agreement.
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THE EXCHANGE OFFER
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and reference is made to the
provisions of the Registration Rights Agreement, which has been filed as an
exhibit to the Registration Statement and a copy of which is available as set
forth under the heading "Available Information."
TERMS OF THE EXCHANGE OFFER
General
In connection with the issuance of the Existing Notes pursuant to a Purchase
Agreement, dated as of April 28, 1998, between the Issuers and the Initial
Purchasers, the Initial Purchasers and their respective assignees became
entitled to the benefits of the Registration Rights Agreement.
Under the Registration Rights Agreement, the Issuers have agreed to use
their reasonable best efforts to (i) file with the Commission within 180 days
after April 30, 1998, the date the Existing Notes were issued (the "Issue
Date"), the Registration Statement of which this Prospectus is a part with
respect to a registered offer to exchange the Existing Notes for the New Notes
and (ii) cause the Registration Statement to be declared effective under the
Securities Act within 210 days after the Issue Date. The Company will keep the
Exchange Offer open for not less than days after the date notice of the
Exchange Offer is mailed to holders of the Existing Notes. The Exchange Offer
being made hereby, if commenced and consummated within the time periods
described in this paragraph, will satisfy those requirements under the
Registration Rights Agreement.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, all Existing Notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date will
be accepted for exchange. New Notes will be issued in exchange for an equal
principal amount of outstanding Existing Notes accepted in the Exchange Offer.
Existing Notes may be tendered only in integral multiples of $1,000. This
Prospectus, together with the Letter of Transmittal, is being sent to all
registered holders as of , 1998. The Exchange Offer is not conditioned upon
any minimum principal amount of Existing Notes being tendered for exchange.
However, the obligation to accept Existing Notes for exchange pursuant to the
Exchange Offer is subject to certain conditions as set forth herein under "--
Conditions."
Existing Notes shall be deemed to have been accepted as validly tendered
when, as and if the Issuers have given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Existing Notes for the purposes of receiving the New Notes and delivering
New Notes to such holders.
Based on interpretations by the Staff of the Commission as set forth in no-
action letters issued to third parties (including Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated
(available June 5, 1991), K-III Communications Corporation (available May 14,
1993) and Shearman & Sterling (available July 2, 1993)), the Issuers believe
that the New Notes issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder that is a broker-dealer or an "affiliate" of the Issuers within
the meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that (i) such New Notes are acquired in the ordinary course of
business, (ii) at the time of the commencement of the Exchange Offer such
holder has no arrangement or understanding with any person to participate in a
distribution of such New Notes and (iii) such holder is not engaged in, and
does not intend to engage in, a distribution of such New Notes. The Issuers
have not sought, and do not intend to seek, a no-action letter from the
Commission with respect to the effects of the Exchange Offer, and there can be
no assurance that the staff would make a similar determination with respect to
the New Notes as it has in such no-action letters.
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By tendering Existing Notes in exchange for New Notes and executing the
Letter of Transmittal, each holder will represent to the Issuers that: (i) any
New Notes received by such holder will be acquired in the ordinary course of
business, (ii) such holder will have no arrangements or understanding with any
person to participate in a distribution of the Existing Notes or the New Notes
within the meaning of the Securities Act, (iii) such holder is not an
"affiliate," as defined in Rule 405 of the Securities Act, of the Issuers or
if it is an affiliate, such holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent
applicable, (iv) if such holder is not a broker-dealer, that it is not engaged
in, and does not intend to engage in, the distribution of the New Notes, (v)
if such holder is a broker-dealer, that it will receive New Notes for its own
account in exchange for Existing Notes that were acquired as a result of
market-making activities and that it will deliver a prospectus in connection
with any resale of such New Notes, and (vi) that it is not acting on behalf of
any person who could not truthfully make the foregoing representations.
Each broker-dealer that receives New Notes for its own account in exchange
for Existing Notes where such Existing Notes were acquired by such broker-
dealer as a result of market-making or other trading activities, must
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act and that it has not entered into any arrangement or
understanding with the Issuers or an affiliate of the Issuers to distribute
the New Notes in connection with any resale of such New Notes. See "Plan of
Distribution."
Upon consummation of the Exchange Offer, subject to certain limited
exceptions, holders of Existing Notes who do not exchange their Existing Notes
for New Notes in the Exchange Offer will no longer be entitled to registration
rights and will not be able to offer or sell their Existing Notes, unless such
Existing Notes are subsequently registered under the Securities Act (which,
subject to certain limited exceptions, the Issuers and Note Guarantors will
have no obligation to do), except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws.
The Issuers and, by acquiring the Notes, the holders of Notes agree to treat
$400 of each $1,000 principal amount of the Notes as indebtedness of Jafra
S.A. and $600 of each $1,000 principal amount of the Notes as indebtedness of
the U.S. Issuer for all U.S. federal, state and local and non-U.S. tax
purposes.
Expiration Date; Extensions; Amendments; Termination
The term "Expiration Date" shall mean , 1998 ( business days
following the commencement of the Exchange Offer), unless the Issuers, in
their sole discretion, extend the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended. Notwithstanding any extension of the Exchange Offer, if the Exchange
Offer is not consummated by December 28, 1998, additional interest will accrue
on the Existing Notes at the rate of (a) prior to March 29, 1999, (until the
Exchange Offer is consummated), 0.25% per annum and (b) thereafter (until the
Exchange Offer is consummated), 0.50% per annum. See "Registration Rights."
To extend the Expiration Date, the Company will notify the Exchange Agent of
any extension by oral or written notice and will notify the holders of the
Existing Notes by means of a press release or other public announcement prior
to 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date. Such announcement may state that the
Issuers are extending the Exchange Offer for a specified period of time.
The Issuers reserve the right (i) to delay acceptance of any Existing Notes,
to extend the Exchange Offer or to terminate the Exchange Offer and not permit
acceptance of Existing Notes not previously accepted if any of the conditions
set forth herein under "--Conditions" shall have occurred and shall not have
been waived by the Issuers prior to the Expiration Date, by giving oral or
written notice of such delay, extension or termination to the Exchange Agent,
or (ii) to amend the terms of the Exchange Offer in any manner deemed by it to
be advantageous to the holders of the Existing Notes. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly
as practicable by oral or written notice thereof to the Exchange Agent. If the
Exchange Offer is amended in a manner determined by the Issuers to constitute
a material change, the Issuers will promptly disclose such amendment in a
manner reasonably calculated to inform the holders of the Existing Notes of
such amendment.
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Without limiting the manner in which the Issuers may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Issuers shall have no obligations to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
INTEREST ON THE NEW NOTES
The New Notes will accrue interest at the rate of 11 3/4% per annum from the
Issue Date of the Existing Notes. Interest on the New Notes is payable on May
1 and November 1 of each year, commencing November 1, 1998.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) a timely confirmation of
a book-entry transfer (a "Book-Entry Confirmation") of such Existing Notes
into the Exchange Agent's account at The Depository Trust Company (the "Book-
Entry Transfer Facility") pursuant to the procedure for book-entry transfer
described below, must be received by the Exchange Agent prior to the
Expiration Date or (ii) the holder must comply with the guaranteed delivery
procedures described below. THE METHOD OF DELIVERY OF LETTERS OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS.
IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR
OTHER REQUIRED DOCUMENTS SHOULD BE SENT TO THE COMPANY. Delivery of all
documents must be made to the Exchange Agent at its address set forth below.
Holders may also request their respective brokers, dealers, commercial banks,
trust companies or nominees to effect such tender for such holders.
The tender by a holder of Existing Notes will constitute an agreement
between such holder and the Issuer in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal. Any
beneficial owner whose Existing Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or an "eligible guarantor" institution within the meaning of
Rule 17Ad-15 under the Exchange Act (each an "Eligible Institution") unless
the Existing Notes tendered pursuant thereto is tendered for the account of an
Eligible Institution.
If the Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such person should so
indicate when signing, and unless waived by the Issuers, evidence satisfactory
to the Issuers of their authority to so act must be submitted with the Letter
of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Existing Notes will be determined by
the Issuers in their sole discretion, which determination will be final and
binding. The Issuers reserve the absolute right to reject any and all Existing
Notes not properly tendered or any Existing Notes which, if accepted, would,
in the opinion of counsel for the Issuers, be unlawful. The Issuers also
reserve the absolute right to waive any irregularities or conditions of tender
as to particular Existing Notes. The
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Issuers' interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Existing Notes must be cured within such time as
the Issuers shall determine. Neither the Issuers, the Exchange Agent nor any
other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Existing Notes, nor shall any of
them incur any liability for failure to give such notification. Tenders of
Existing Notes will not be deemed to have been made until such irregularities
have been cured or waived. Any Existing Notes received by the Exchange Agent
that are not properly tendered and as to which the defects or irregularities
have not been cured or waived will be returned without cost to such holder by
the Exchange Agent, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
In addition, the Issuers reserve the right in their sole discretion, subject
to the provisions of the Indenture, (i) to purchase or make offers for any
Existing Notes that remains outstanding subsequent to the Expiration Date or,
as set forth under "--Conditions", (ii) to terminate the Exchange Offer in
accordance with the terms of the Registration Rights Agreement, (iii) to
redeem Existing Notes as a whole or in part at any time and from time to time,
as set forth under "Description of Notes--Optional Redemption" and (iv) to the
extent permitted by applicable law, to purchase Existing Notes in the open
market, in privately negotiated transactions or otherwise. The terms of any
such purchases or offers could differ from the terms of the Exchange Offer.
ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
all Existing Notes properly tendered will be accepted promptly after the
Expiration Date, and the New Notes will be issued promptly after acceptance of
the Existing Notes. See "--Conditions." For purposes of the Exchange Offer,
Existing Notes shall be deemed to have been accepted as validly tendered for
exchange when, as and if the Issuers have given oral or written notice thereof
to the Exchange Agent.
In all cases, issuance of New Notes for Existing Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of a Book-Entry Confirmation of such Existing Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility, a properly
completed and duly executed Letter of Transmittal and all other required
documents. If any tendered Existing Notes are not accepted for any reason set
forth in the terms and conditions of the Exchange Offer, such unaccepted or
such nonexchanged Existing Notes will be credited to an account maintained
with such Book- Entry Transfer Facility as promptly as practicable after the
expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Existing Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Existing Notes by causing
the Book-Entry Transfer Facility to transfer such Existing Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance
with such Book-Entry Transfer Facility's procedures for transfer. However, the
Letter of Transmittal or facsimile thereof with any required signature
guarantees and any other required documents must, in any case, be transmitted
to and received by the Exchange Agent at one of the addresses set forth below
under "--Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
EXCHANGING BOOK-ENTRY NOTES
The Exchange Agent and the Book Entry Transfer Facility have confirmed that
any financial institution that is a participant in the Book Entry Transfer
Facility may utilize the Book-Entry Transfer Facility Automated Tender Offer
Program ("ATOP") procedures to tender Existing Notes.
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Any participant in the Book Entry Transfer Facility may make book-entry
delivery of Existing Notes by causing the Book Entry Transfer Facility to
transfer such Existing Notes into the Exchange Agent's account in accordance
with the Book Entry Transfer Facility's ATOP procedures for transfer. However,
the exchange for the Existing Notes so tendered will only be made after a
Book-Entry Confirmation of such book-entry transfer of Existing Notes into the
Exchange Agent's account, and timely receipt by the Exchange Agent of an
Agent's Message (as such term is defined in the next sentence) and any other
documents required by the Letter of Transmittal. The term "Agent's Message"
means a message, transmitted by the Book Entry Transfer Facility and received
by the Exchange Agent and forming part of a Book-Entry Confirmation, which
states that the Book Entry Transfer Facility has received an express
acknowledgment from a participant tendering Existing Notes that are the
subject of such Book-Entry Confirmation that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal, and that the
Issuers may enforce such agreement against such participant.
GUARANTEED DELIVERY PROCEDURES
If the procedures for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) prior to the Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed Letter
of Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Issuers (by facsimile transmission,
mail or hand delivery), setting forth the name and address of the holder of
Existing Notes and the amount of Existing Notes tendered, stating that the
tender is being made thereby and guaranteeing that within three New York Stock
Exchange ("NYSE") trading days after the date of execution of the Notice of
Guaranteed Delivery, a Book-Entry Confirmation and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent and (iii) a Book-Entry Confirmation and
all other documents required by the Letter of Transmittal are received by the
Exchange Agent within three NYSE trading days after the date of execution of
the Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Tenders of Existing Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to 5:00 p.m., New York City time on the
Expiration Date at one of the addresses set forth below under "--Exchange
Agent." Any such notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility from which the Existing Notes was
tendered, identify the principal amount of the Existing Notes to be withdrawn,
and specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Existing Notes and otherwise comply
with the procedures of such facility. All questions as to the validity, form
and eligibility (including time of receipt) of such notice will be determined
by the Issuers, whose determination shall be final and binding on all parties.
Any Existing Notes so withdrawn will be deemed not be have been validly
tendered for exchange for purposes of the Exchange Offer. Any Existing Notes
which have been tendered for exchange but which are not exchanged for any
reason will be credited to an account maintained with such Book-Entry Transfer
Facility for the Existing Notes as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Existing Notes may be retendered by following one of the procedures described
under "--Procedures for Tendering" and "--Book-Entry Transfer" above at any
time on or prior to the Expiration Date.
CONDITIONS
The Company has no obligation to consummate the Exchange Offer if the New
Notes to be received by such holder or holders of Existing Notes in the
Exchange Offer, upon receipt, will not be tradable by such holder without
restriction under the Securities Act and the Exchange Act and without material
restrictions under the "blue sky" or securities laws of the several states of
the United States. All conditions to the Exchange Offer (with the exception of
certain necessary governmental approvals) must be satisfied or waived prior to
the Expiration Date.
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EXCHANGE AGENT
The State Street Bank and Trust Company has been appointed as Exchange Agent
for the Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
By Mail: By Overnight Carrier
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two International Place
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Corporate Trust Department Attention: Corporate Trust Department
Kellie Mullen Kellie Mullen
By Hand: in New York (as Drop Agent) By Hand: in Boston
State Street Bank and Trust Company, State Street Bank and Trust Company
N.A. Two International Place
61 Broadway, 15th Floor Fourth Floor, Corporate Trust
Corporate Trust Window Boston, Massachusetts 02110
New York, New York 10006
For Information Call:
(617) 664-5587
By Facsimile Transmission
(for Eligible Institutions only):
(617) 664-5314
Attention: Corporate Trust Department
Confirm by Telephone:
(617) 664-5314
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Issuers. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitations may be
made by telegraph, telephone, telecopy or in person by officers and regular
employees of the Issuers.
The Issuers will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The Issuers may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of the Prospectus and related documents
to the beneficial owners of the Existing Notes, and in handling or forwarding
tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Issuers, including fees and expenses of the Exchange Agent and
Trustee and accounting, legal, printing and related fees and expenses.
The Issuers will pay all transfer taxes, if any, applicable to the exchange
of Existing Notes pursuant to the Exchange Offer. If, however, New Notes or
Existing Notes for principal amounts not tendered or accepted for exchange are
to be registered or issued in the name of any person other than the registered
holder of the Existing Notes tendered, or if tendered Existing Notes are
registered in the name of any person other than the person signing the Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Existing Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
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CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Existing Notes who do not exchange their Existing Notes for New
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Existing Notes as set forth in the legend
thereon as a consequence of the issuance of the Existing Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Existing Notes may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. The Issuers do not currently anticipate that they will register the
Existing Notes under the Securities Act. To the extent that Existing Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Existing Notes could be adversely affected.
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REGISTRATION RIGHTS
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, which has been filed as an Exhibit to the Registration Statement of
which this Prospectus is a part.
Pursuant to the Registration Rights Agreement, the Issuers and the Note
Guarantors will file a shelf registration statement covering resales of
Existing Notes or New Notes, as the case may be (a "Shelf Registration
Statement"), if (i) any changes in the applicable interpretations of the staff
of the SEC do not permit the Issuers to effect such an Exchange Offer, (ii)
the Exchange Offer is not consummated within 240 days of the Issue Date, (iii)
under certain circumstances, the Initial Purchasers so request with respect to
Existing Notes not eligible to be exchanged for New Notes in the Exchange
Offer, or (iv) if any holder of Existing Notes (other than an Initial
Purchaser) is not permitted by applicable law to participate in the Exchange
Offer or does not receive freely tradeable New Notes in the Exchange Offer
(other than, in either case, due solely to the status of such holder as an
affiliate of either of the Issuers or due to such holder's inability to make
the representations referred to above). If any of these events occur, the
Issuers and the Note Guarantors will, at their own expense, use their
reasonable best efforts (a) as promptly as reasonably practicable, to file a
Shelf Registration Statement covering resales of Existing Notes or New Notes,
as the case may be, and (b) to cause the Shelf Registration Statement to be
declared effective under the Securities Act within 270 days after the Issue
Date. After such Shelf Registration Statement is declared effective, the
Issuers will use their reasonable best efforts to keep the Shelf Registration
Statement in effect until the earlier of two years from the Issue Date (or one
year in the case of a shelf registration effected at the request of the
Initial Purchasers) or such shorter period that will terminate when all the
Existing Notes or New Notes covered by the Shelf Registration Statement (i)
have been sold pursuant thereto or (ii) are distributed to the public pursuant
to Rule 144 or become eligible for resale pursuant to Rule 144 without volume
restriction, if any. Under certain circumstances, the Issuers may suspend the
availability of the Shelf Registration Statement for certain periods of time.
The Issuers will, in the event a Shelf Registration Statement is filed,
among other things, provide to each holder for whom such Shelf Registration
Statement was filed, copies of the prospectus that is a part of the Shelf
Registration Statement, notify each such holder when the Shelf Registration
Statement has become effective and take certain other actions as are required
to permit unrestricted resales of the Existing Notes or the New Notes, as the
case may be. A holder of Existing Notes selling such Existing Notes pursuant
to the Shelf Registration Statement generally would be required to be named as
a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by certain provisions of the Registration Rights Agreement (including
certain indemnification obligations). In addition, each such holder of
Existing Notes will be required, among other things, to deliver information to
be used in connection with the Shelf Registration Statement within the time
periods set forth in the Registration Rights Agreement in order to benefit
from the provisions regarding additional interest set forth in the following
paragraph.
Additional Interest. Although the Issuers intend to file one or more
registration statements described above, as required, there can be no
assurance that any such registration statement (other than the one of which
this Prospectus is a part) will be filed, or if filed, that any thereof will
become effective. From the date of a Registration Default (as defined below)
to the date on which such Registration Default has been cured, additional
interest will accrue on the Transfer Restricted Notes (as defined below) at
the rate of (a) prior to the 91st day of such period (for so long as such
period is continuing), 0.25% per annum and (b) thereafter (so long as such
period is continuing), 0.50% per annum. Any such additional interest shall not
exceed such respective rates for such respective periods, and shall not in any
event exceed 0.50% per annum in the aggregate, regardless of the number of
Registration Defaults that shall have occurred and be continuing. Any such
additional interest shall be paid in the same manner and on the same dates as
interest payments in respect of Transfer Restricted Notes. Following the cure
of all Registration Defaults, the accrual of such additional interest will
cease. All Registration Defaults shall be deemed cured upon consummation of
the Exchange Offer.
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For purposes of the foregoing, each of the following events is a
"Registration Default": (i) neither the Exchange Offer Registration Statement
nor a Shelf Registration Statement has been filed with the SEC on or before
the 180th day after the Issue Date; (ii) the Exchange Offer is not consummated
on or before the 240th day after the Issue Date; (iii) if a Shelf Registration
Statement is required to be filed under the Registration Rights Agreement, (A)
the Shelf Registration Statement is not declared effective by the SEC on or
before the 270th day after the Issue Date (or, in the case of a Shelf
Registration Statement required to be filed in response to any change in
applicable interpretations of the staff of the SEC, if later, on or before the
90th day after publication of such change) or (B) during the time the Issuers
are required to use their reasonable best efforts to keep the Shelf
Registration in effect, the Issuers shall have suspended and be continuing to
suspend the availability of the Shelf Registration Statement for more than 30
days in the aggregate in any consecutive twelve-month period.
For purposes of the foregoing, "Transfer Restricted Notes" means each
Existing Note until (i) the date on which such Note has been exchanged for a
freely transferable Exchange Note in the Exchange Offer, (ii) the date on
which such Note has been effectively registered under the Securities Act and
disposed of in accordance with a Shelf Registration Statement, or (iii) the
date on which such Note is distributed to the public pursuant to Rule 144 of
the Securities Act or is eligible for resale pursuant to Rule 144 without
volume restriction, if any.
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DESCRIPTION OF NOTES
GENERAL
The Existing Notes were issued, and the New Notes offered hereby will be
issued, under an Indenture, dated as of April 30, 1998 (the "Indenture"),
among Acquisition Co., Jafra S.A., the initial Note Guarantors (as hereafter
defined) and State Street Bank and Trust Company, as Trustee (the "Trustee").
Immediately after the issuance of the Existing Notes, (i) the U.S. Issuer
merged with Jafra Cosmetics International, Inc., a California corporation,
with the U.S. Issuer as the surviving entity and (ii) Jafra S.A. acquired the
stock of Grupo Jafra, which then merged into Jafra S.A., with Jafra S.A.
surviving as a wholly owned subsidiary of Parent. Following such mergers, the
U.S. Issuer and Jafra S.A. became the primary obligors on the Notes. Copies of
the form of the Indenture is available upon request to the Company.
The following is a summary of certain provisions of the Indenture and the
Notes after giving effect to the Acquisition and related transactions,
including such mergers. It does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all the provisions of the
Indenture, including the definitions of certain terms therein and those terms
to be made a part thereof by the Trust Indenture Act of 1939, as amended
("TIA"). The capitalized terms defined in "--Certain Definitions" below are
used in this "Description of Notes" as so defined. As used herein, the term
"Company" refers to Parent, the term "JCI" refers to the U.S. Issuer and the
term "Issuers" refers to the U.S. Issuer and Jafra S.A.
Principal of, and premium, if any, and interest on, the Notes will be
payable, and the Notes may be exchanged or transferred, at the office or
agency of the Issuers in the Borough of Manhattan, The City of New York (which
initially shall be the corporate trust office of the Trustee, at 61 Broadway,
15th Floor, New York, New York 10006), except that, at the option of the
Issuers, payment of interest may be made by check mailed to the address of the
registered holders of the Notes as such address appears in the Note Register.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Issuers may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
The Notes have been designated for trading in the PORTAL market.
TERMS OF THE NOTES
The Notes will be issued initially in an aggregate principal amount of
$100.0 million. Additional securities may be issued under the Indenture in one
or more series from time to time ("Additional Notes"), subject to the
limitations set forth under "--Certain Covenants--Limitation on Indebtedness,"
which may vote as a class with the Notes and otherwise be treated as Notes for
purposes of the Indenture.
The Notes are the several obligations of the Issuers. Of the aggregate
principal amount of Notes of $100.0 million, JCI will be severally liable with
respect to the payment of $60.0 million of principal, together with interest
thereon (the "JCI Portion"), and Jafra S.A. will be severally liable with
respect to the payment of $40.0 million of principal, together with interest
thereon (the "Jafra S.A. Portion"). Except as otherwise described herein, JCI
and Jafra S.A. will be severally liable in respect of each outstanding Note in
the relative proportions of the JCI Portion and the Jafra S.A. Portion,
respectively (each such portion, a "Portion").
The Notes will mature on May 1, 2008. Each Note will bear interest at a rate
per annum shown on the front cover of this Offering Circular from the date of
issuance, or from the most recent date to which interest has been paid or
provided for, payable semiannually in cash to Holders of record at the close
of business on the April 15 or October 15 immediately preceding the interest
payment date on May 1 and November 1 of each year, commencing November 1,
1998.
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OPTIONAL REDEMPTION
Except as set forth in the following paragraph or under "--Redemption for
Changes in Withholding Taxes," the Notes will not be redeemable at the option
of the Issuers prior to May 1, 2003. Thereafter, the Notes will be redeemable,
at the Issuers' option, in whole or in part, and from time to time on and
after May 1, 2003 and prior to maturity; provided, however, that any such
optional redemption may only be effected concurrently by both of the Issuers
on a pro rata basis as between their respective Portions, based on the
relative proportions of the JCI Portion and the Jafra S.A. Portion. Such
redemption may be made upon notice mailed by first-class mail to each Holder's
registered address, not less than 30 nor more than 60 days prior to the
redemption date. Any such redemption and notice may, in the Issuers'
discretion, be subject to the satisfaction of one or more conditions
precedent. The Notes will be so redeemable at the following redemption prices
(expressed as a percentage of principal amount), plus accrued interest, if
any, to the relevant redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on
May 1 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
------ ----------
<S> <C>
2003........................................ 105.875%
2004........................................ 103.917
2005........................................ 101.958
2006 and thereafter......................... 100.000
</TABLE>
In addition, at any time and from time to time prior to May 1, 2001, the
Issuers at their option may concurrently redeem the Notes on a pro rata basis
as between their respective Portions (based on the relative proportions of the
JCI Portion and the Jafra S.A. Portion), in an aggregate principal amount
equal to up to 35% of the original aggregate principal amount of the Notes
(including the principal amount of any Additional Notes), with funds in an
aggregate amount (the "Redemption Amount") not exceeding the aggregate cash
proceeds of one or more Equity Offerings (as defined below), at a redemption
price (expressed as a percentage of principal amount thereof) of 111.75% plus
accrued interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that an aggregate
principal amount of the Notes equal to at least 65% of the original aggregate
principal amount of the Notes (including the principal amount of any
Additional Notes) must remain outstanding after each such redemption. "Equity
Offering" means a sale of Capital Stock (other than Disqualified Stock) (x)
that is a sale of Capital Stock of the Company, or (y) proceeds of which in an
amount equal to or exceeding the Redemption Amount are contributed to the
Company or any of its Restricted Subsidiaries. The Issuers may make such
redemption upon notice mailed by first-class mail to each Holder's registered
address, not less than 30 nor more than 60 days prior to the redemption date
(but in no event more than 180 days after the completion of the related Equity
Offering). Any such notice may be given prior to the completion of the related
Equity Offering, and any such redemption or notice may, at the Issuers'
discretion, be subject to the satisfaction of one or more conditions
precedent, including but not limited to the completion of the related Equity
Offering.
SELECTION
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other
method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
will be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal
to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. In the event of any partial
redemption (other than a redemption described under "--Redemption for Changes
in Withholding Taxes"), the several obligation of each Issuer for each Note
that remains outstanding shall continue in the same proportion as the relative
proportions of the JCI Portion and the Jafra S.A. Portion, respectively.
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ADDITIONAL AMOUNTS
All payments made on behalf of Jafra S.A. under or with respect to the Notes
or on behalf of any Note Guarantor (other than JCI) under or with respect to
any Note Guarantee (in any case a Person making such payment, a "Payor") shall
be made free and clear of and without withholding or deduction for or on
account of any present or future tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and other liabilities
related thereto) imposed or levied by or on behalf of the Governments of
Mexico, Luxembourg or the jurisdiction of incorporation, seat of management or
residence for income tax purposes of any future Jafra S.A. Subsidiary
Guarantor or any successors to the Company, Jafra S.A. or any Jafra S.A.
Subsidiary Guarantor (each a "Successor Jurisdiction"), as the case may be, or
of any territory thereof or by any authority or agency therein or thereof
having power to tax (hereinafter "Taxes"), unless the Payor is required to
withhold or deduct Taxes by law or by the interpretation or administration
thereof by the relevant government authority or agency. If a Payor is so
required to withhold or deduct any amount for or on account of Taxes from any
payment made under or with respect to the Notes or a Note Guarantee, such
Payor will be required to pay such additional amounts ("Additional Amounts")
as may be necessary so that the net amount received by each Holder (including
Additional Amounts) after such withholding or deduction will not be less than
the amount the Holder would have received if such Taxes had not been withheld
or deducted; provided, however, that no Additional Amounts will be payable
with respect to:
(i) any payment to a Holder which is subject to such Taxes by reason of
its (or the beneficial owner of the Notes) being connected with Mexico,
Luxembourg or any Successor Jurisdiction or any territory thereof other
than a connection arising from the mere holding of Notes or the receipt of
payments in respect of the Notes or the Note Guarantees;
(ii) any Taxes with respect to a Note presented for payment more than 30
days after the date on which such payment became due and payable or the
date on which payment thereof is duly provided for and notice thereof given
to the Holders, whichever occurs later, except to the extent that the
Holder of such Note would have been entitled to such Additional Amounts on
presenting such Note for payment on any date during such 30-day period;
(iii) Taxes that would not have been imposed but for the failure of the
Holder or beneficial owner of a Note to comply with any certification,
identification, information, or other documentation requirement under law,
regulation, administrative practice or an applicable treaty that is a
precondition to exemption from, or reduction in the rate of, the
imposition, deduction or withholding of Taxes, provided that at least 60
days prior to (a) the first payment date with respect to which this clause
(iii) shall be applied and (b) in the event of a change in such
certification, identification, information or other documentation
requirement, the first payment date subsequent to such change, the Payor
shall have notified the Trustee, in writing, that the Holders or beneficial
owners of the Notes will be required to provide such information or
documentation;
(iv) estate, inheritance, gift, sales, transfer, personal property or
other similar taxes imposed with respect to such Notes;
(v) any Tax which is only payable otherwise than by withholding or
deduction from payments in respect of the Notes or the Note Guarantees; and
(vi) any combination of items (i), (ii), (iii), (iv) and (v) above.
Each Payor will also make such withholding or deduction and remit the full
amount deducted or withheld to the relevant authority as and when required in
accordance with applicable law. Each Payor will furnish to the Trustee of the
Notes, within 30 days after the date the payment of any Taxes is due pursuant
to applicable law, certified copies of tax receipts evidencing such payment by
such Payor; provided, however, that if the relevant Payor is unable to obtain
such receipt within 30 days, notwithstanding such Payor's best efforts to
obtain such receipts, the Payor will furnish such receipts to the Trustee as
soon as receipts can be obtained.
Whenever in the Indenture there is mentioned, in any context, (a) the
payment of principal, (b) purchase prices in connection with a purchase of
Notes, (c) interest or (d) any other amount payable on or with respect to
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any of the Notes or a Note Guarantee, such reference shall be deemed to
include payment of Additional Amounts provided for in this section to the
extent that, in such context, Additional Amounts are, were or would be payable
in respect thereof.
Each Payor will pay any present or future stamp, court or documentary taxes
or any other similar taxes, charges or levies that arise in Mexico, Luxembourg
or any Successor Jurisdiction from the execution, delivery, registration of,
or enforcement of rights under, the Notes, the Indenture or any other document
or instrument in relation thereof.
The obligations of each Payor described under this heading shall survive any
termination, defeasance or discharge of the Indenture.
For a discussion of the reduction in Mexican withholding taxes applicable to
payments under or with respect to the Notes and the Note Guarantees, see
"Certain Income Tax Considerations."
REDEMPTION FOR CHANGES IN WITHHOLDING TAXES
The Jafra S.A. Portion of the Notes may be redeemed, at the option of Jafra
S.A., at any time as a whole but not in part, on not less than 30 nor more
than 60 days' notice, at a redemption price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest (if any) to the date of
redemption (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant interest payment date), in the
event Jafra S.A., any successor to Jafra S.A. or any current or future Note
Guarantor of such Jafra S.A. Portion has become or would become obligated to
pay, on the next date on which any amount would be payable with respect to the
Notes, and such obligation cannot be avoided by such person's taking
reasonable measures available to it, any Additional Amounts in excess of
Additional Amounts that Jafra S.A., such successor or such Note Guarantor
would be required to pay if payments by Jafra S.A., such successor or such
Note Guarantor were subject to a 15% Mexican withholding tax as a result of a
change in or an amendment to applicable treaties or laws (including any
regulations promulgated thereunder) of Mexico (or any political subdivision or
taxing authority thereof or therein), or any change in or amendment to any
official position regarding the application or interpretation of such
treaties, laws or regulations, which change or amendment is announced or
becomes effective on or after the Issue Date ("Excessive Additional Amounts");
provided, however, that no such notice of redemption may be given earlier than
60 days prior to the earliest date on which Jafra S.A., such successor or such
Note Guarantor would, but for such redemption, be obligated to pay such
Excessive Additional Amounts. Prior to the publication of any notice of
redemption pursuant to this provision, Jafra S.A., any successor to Jafra S.A.
or any Note Guarantor will deliver to the Trustee (a) a certificate duly
signed by an officer of Jafra S.A., such successor or such Note Guarantor
stating that Jafra S.A., such successor or such Note Guarantor is entitled to
effect such redemption and setting forth a statement of facts showing that the
conditions precedent to the right of Jafra S.A., such successor or such Note
Guarantor so to redeem have occurred and (b) a written opinion of Mexican
legal counsel reasonably acceptable to the Trustee to the effect that Jafra
S.A., such successor or such Note Guarantor has or will become obligated to
pay such Excessive Additional Amounts as a result of an amendment or change
referred to in this provision.
NOTE GUARANTEES
The monetary obligations of the Issuers pursuant to the Notes, including any
repurchase obligation resulting from a Change of Control Triggering Event,
will be guaranteed on a senior subordinated basis by the Company. The
obligation of JCI with respect to the JCI Portion will also be guaranteed on a
senior subordinated basis by Jafra S.A. (subject to a 30-day standstill
period), and with certain exceptions, by each subsequently acquired or
organized U.S. Subsidiary of JCI. The obligation of Jafra S.A. with respect to
the Jafra S.A. Portion will also be guaranteed on a senior subordinated basis
by JCI (subject to a 30-day standstill period), and by each presently existing
or subsequently acquired or organized Restricted Subsidiary of Jafra S.A. The
terms and conditions of these Note Guarantees are further described below.
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The Company, as primary obligor and not merely as surety, will irrevocably
and fully and unconditionally Guarantee, on a senior subordinated basis, the
punctual payment when due, whether at Stated Maturity, by acceleration or
otherwise, of all monetary obligations of each Issuer under the Indenture and
the Notes, whether for principal of or interest on the Notes, expenses,
indemnification or otherwise (all such obligations of each Issuer being herein
called the "Guaranteed Note Obligations").
Each Issuer, as primary obligor and not merely as surety, will Guarantee, on
a senior subordinated basis, the punctual payment when due, whether at Stated
Maturity, by acceleration or otherwise, of all Guaranteed Note Obligations of
the other Issuer under the Indenture and the Notes with respect to the JCI
Portion (in the case of such Guarantee by Jafra S.A.) or the Jafra S.A.
Portion (in the case of such Guarantee by JCI). Proceedings or other actions
to enforce either such Note Guarantee of either Issuer may not be initiated or
taken until the earlier of (i) 30 days after written demand for payment has
been made thereunder by the Trustee or the Holders in accordance with the
terms of the Indenture and (ii) the occurrence of certain events of bankruptcy
of such Issuer.
Each U.S. Subsidiary Guarantor, as primary obligor and not merely as surety,
will jointly and severally, irrevocably and fully and unconditionally
Guarantee, on a senior subordinated basis, the punctual payment when due,
whether at Stated Maturity, by acceleration or otherwise, of all Guaranteed
Note Obligations of JCI under the Indenture and the Notes (all such Guaranteed
Note Obligations being herein called the "Guaranteed JCI Obligations"). At the
time of the Acquisition, JCI will not have any U.S. Subsidiaries. Each Jafra
S.A. Subsidiary Guarantor, as primary obligor and not merely as surety, will
jointly and severally, irrevocably and fully and unconditionally Guarantee, on
a senior subordinated basis, the punctual payment when due, whether at Stated
Maturity, by acceleration or otherwise, of all Guaranteed Note Obligations of
Jafra S.A. under the Indenture and the Notes (all such Guaranteed Note
Obligations being herein called the "Guaranteed Jafra S.A. Obligations"). Each
Subsidiary Guarantee will be limited in amount to an amount not to exceed the
maximum amount that can be guaranteed by the applicable Subsidiary Guarantor
without rendering the Subsidiary Guarantee, as it relates to such Subsidiary
Guarantor, voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors
generally. If a Subsidiary Guarantee were to be rendered voidable, it could be
subordinated by a court to all other indebtedness (including guarantees and
other contingent liabilities) of the applicable Subsidiary Guarantor, and,
depending on the amount of such indebtedness, a Subsidiary Guarantor's
liability on its Subsidiary Guarantee could be reduced to zero. See "Risk
Factors--Fraudulent Transfer Considerations."
Each Note Guarantor will also agree to pay any and all reasonable out-of-
pocket expenses (including reasonable counsel fees and expenses) incurred by
the Trustee or the Holders in enforcing any rights under its Note Guarantee.
Each Note Guarantee shall be a continuing Guarantee and shall (i) remain in
full force and effect until payment in full of the principal amount of all
outstanding Notes (whether by payment at maturity, purchase, redemption,
defeasance, retirement or other acquisition) and all other relevant Guaranteed
Note Obligations then due and owing, unless earlier terminated as described
below, (ii) be binding upon such Note Guarantor and (iii) inure to the benefit
of and be enforceable by the Trustee, the Holders and their permitted
successors, transferees and assigns.
Notwithstanding the preceding paragraph, Note Guarantees will be subject to
termination and discharge under the circumstances described in this paragraph:
(1) Any Subsidiary Guarantor will automatically and unconditionally be
released from all obligations under its Subsidiary Guarantee, and such
Subsidiary Guarantee shall thereupon terminate and be discharged and of no
further force or effect, (i) concurrently with any sale or disposition (by
merger or otherwise) of any Subsidiary Guarantor or any interest therein in
accordance with the terms of the Indenture (including the covenant
described under "--Limitation on Sales of Assets and Subsidiary Stock") by
the Company or a Restricted Subsidiary, following which such Subsidiary
Guarantor is no longer a Restricted Subsidiary of the Company, (ii)
pursuant to the terms of its Subsidiary Guarantee, (iii) at any time that
such Subsidiary
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Guarantor is released from all its obligations under all its Guarantees of
payment by the relevant Issuer of Indebtedness (other than Bank
Indebtedness) of such Issuer, (iv) upon the merger or consolidation of such
Subsidiary Guarantor with and into the Company, an Issuer or another
Subsidiary Guarantor that is the surviving Person in such merger or
consolidation, (v) upon legal or covenant defeasance of the relevant
Issuer's obligations, or satisfaction and discharge of the Indenture, and
(vi) subject to customary contingent reinstatement provisions, upon payment
in full of the aggregate principal amount of all Notes then outstanding for
which the relevant Issuer is liable and all other Guaranteed Note
Obligations of such Issuer then due and owing.
(2) The Company will automatically and unconditionally be released from
all obligations under its Note Guarantee, and such Note Guarantee shall
thereupon terminate and be discharged and of no further force or effect,
(i) with respect to the predecessor Company, as and when provided under the
provisions described in the second paragraph under "--Merger and
Consolidation," (ii) pursuant to the terms of its Note Guarantee, (iii)
upon legal or covenant defeasance of the relevant Issuer's obligations, or
satisfaction and discharge of the Indenture, and (iv) subject to customary
contingent reinstatement provisions, upon payment in full of the aggregate
principal amount of all Notes then outstanding for which the relevant
Issuer is liable and all other Guaranteed Note Obligations of such Issuer
then due and owing.
(3) An Issuer will automatically and unconditionally be released from all
obligations under its Note Guarantee, and such Note Guarantee shall
thereupon terminate and be discharged and of no further force or effect,
(i) with respect to the relevant predecessor Issuer, as and when provided
under the provisions described in the second paragraph under "--Merger and
Consolidation," (ii) pursuant to the terms of its Note Guarantee, (iii)
upon legal or covenant defeasance of the other Issuer's obligations, or
satisfaction and discharge of the Indenture, and (iv) subject to customary
contingent reinstatement provisions, upon payment in full of the aggregate
principal amount of all Notes then outstanding for which the other Issuer
is liable and all other Guaranteed Note Obligations of the other Issuer
then due and owing.
Upon any such occurrence specified in this paragraph, the Trustee shall
execute any documents reasonably required in order to evidence such release,
discharge and termination in respect of such Note Guarantee.
Neither the Issuers nor any Note Guarantor shall be required to make a
notation on the Notes to reflect any such Note Guarantee or any such release,
termination or discharge.
RANKING
The indebtedness evidenced by the Notes and each Note Guarantee will be
unsecured Senior Subordinated Indebtedness of the Issuers or the relevant Note
Guarantor, as the case may be, will be subordinated in right of payment, as
set forth in the Indenture, to the payment when due of all existing and future
Senior Indebtedness of the Issuers or such Note Guarantor, including such
Person's obligations under the Senior Credit Facility, will rank pari passu in
right of payment with all existing and future Senior Subordinated Indebtedness
of such Person and will be senior in right of payment to all existing and
future Subordinated Obligations of such Person. The Notes and each Note
Guarantee will also be effectively subordinated to any Secured Indebtedness of
the Issuers or the relevant Note Guarantor, as the case may be, to the extent
of the value of the assets securing such Indebtedness. However, payment from
the money or the proceeds of U.S. Government Obligations held in any
defeasance trust described under "--Defeasance" below is not subordinated to
any Senior Indebtedness or subject to the restrictions described herein.
As of June 30, 1998, the outstanding Senior Indebtedness of the Issuers was
approximately $40 million, all of which was guaranteed by, and constituted
Senior Indebtedness of, the Note Guarantors (other than the Issuers). In
addition, the Issuers had additional availability of $50 million for
borrowings under the Senior Credit Facility, all of which would have been
Secured Indebtedness, and no Senior Subordinated Indebtedness (other than the
indebtedness represented by the Notes). Although the Indenture contains
limitations on the amount of additional
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Indebtedness that the Issuers and the Note Guarantors may Incur, under certain
circumstances the amount of such Indebtedness could be substantial and, in any
case, such Indebtedness may be Senior Indebtedness or Secured Indebtedness.
See "--Certain Covenants--Limitation on Indebtedness" below.
The terms on which each Note Guarantee will be subordinated to the prior
payment in full of Senior Indebtedness of the relevant Note Guarantor will be
substantially identical to those described below governing the subordination
of the Notes to the prior payment in full of Senior Indebtedness of the
Issuers.
All the operations of the Company, and a substantial portion of the
operations of JCI, are conducted through their respective Subsidiaries. Claims
of creditors of such Subsidiaries, including trade creditors, and claims of
preferred shareholders (if any) of such Subsidiaries will have priority with
respect to the assets and earnings of
such Subsidiaries over the claims of creditors of the Company or JCI,
including holders of the Notes. Therefore, Company's Note Guarantee will be
effectively subordinated to creditors (including trade creditors) and
preferred shareholders (if any) of Subsidiaries of the Company that are not
Issuers or (to the extent of their Note Guarantees) Subsidiary Guarantors, and
JCI's obligations with respect to the JCI Portion of the Notes will be
effectively subordinated to creditors (including trade creditors) and
preferred shareholders (if any) of Subsidiaries of JCI that are not U.S.
Subsidiary Guarantors. Although the Indenture limits the incurrence of
Indebtedness (including preferred stock) by certain of the Company's
Subsidiaries, such limitation is subject to a number of significant
qualifications. At June 30, 1998, the outstanding Indebtedness and trade
payables of the Company's Subsidiaries (other than the Issuers and the
Subsidiary Guarantors) totaled approximately $8.0 million. No preferred stock
of such Subsidiaries was outstanding at such date. See "--Certain Covenants--
Limitation on Indebtedness" below.
"Senior Indebtedness" means, with respect to either Issuer or any Note
Guarantor, the following obligations, whether outstanding on the date of the
Indenture or thereafter issued, without duplication: (i) all Bank
Indebtedness, (ii) all obligations of such Person in respect of any
Receivables Financing, and (iii) all obligations of such Person consisting of
the principal of and premium, if any, and accrued and unpaid interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to such Person regardless of whether
post-filing interest is allowed in such proceeding) on, and fees and other
amounts owing in respect of, all other Indebtedness of such Person, unless, in
the instrument creating or evidencing the same or pursuant to which the same
is outstanding, it is expressly provided that the obligations in respect of
such Indebtedness are not senior in right of payment to the Notes or the Note
Guarantee of such Person; provided, however, that Senior Indebtedness shall
not include (1) any obligation of such Person to any Subsidiary of such
Person, (2) any liability for Federal, state, foreign, local or other taxes
owed or owing by such Person, (3) any accounts payable or other liability to
trade creditors arising in the ordinary course of business (including
Guarantees thereof or instruments evidencing such liabilities), (4) any
Indebtedness of such Person that is expressly subordinated in right of payment
to any other Indebtedness of such Person, (5) any Capital Stock of such Person
or (6) that portion of any Indebtedness of such Person that is Incurred by
such Person in violation of the covenant described under "--Certain
Covenants--Limitation on Indebtedness" (but no such violation shall be deemed
to exist for purposes of this clause (6) if any holder of such Indebtedness or
such holder's representative shall have received an Officer's Certificate of
the Company to the effect that such Incurrence of such Indebtedness does not
(or that the Incurrence of the entire committed amount thereof at the date on
which the initial borrowing thereunder is made would not) violate such
covenant). If any Senior Indebtedness is disallowed, avoided or subordinated
pursuant to the provisions of Section 548 of Title 11 of the United States
Code or any applicable state fraudulent conveyance law, such Senior
Indebtedness nevertheless will constitute Senior Indebtedness.
Only Indebtedness of an Issuer or a Note Guarantor that is Senior
Indebtedness will rank senior to such Person's obligations with respect to the
Notes or such Person's Note Guarantee, as the case may be, in accordance with
the provisions of the Indenture. Each Issuer's or Note Guarantor's obligations
with respect to the Notes and the relevant Note Guarantee, as the case may be,
will in all respects rank pari passu with all other Senior Subordinated
Indebtedness of such Person. The Company has agreed in the Indenture that it
will not Incur, and will not permit either Issuer or any Note Guarantor to
Incur, directly or indirectly, any Indebtedness that is
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expressly subordinated in right of payment to Senior Indebtedness of the
Company, such Issuer or such Note Guarantor, as the case may be, unless such
Indebtedness is pari passu with, or subordinated in right of payment to, the
Notes or the relevant Note Guarantee, as the case may be. Unsecured
Indebtedness is not deemed to be subordinate or junior to Secured Indebtedness
merely because it is unsecured, and Indebtedness that is not guaranteed by a
particular Person is not deemed to be subordinate or junior to Indebtedness
that is so guaranteed merely because it is not so guaranteed.
Neither Issuer may pay principal of, or premium (if any) or interest on, the
Notes or make any deposit pursuant to the provisions described under "--
Defeasance" below and may not otherwise purchase, redeem or otherwise retire
any Notes (collectively, "pay the Notes") if (i) any Senior Indebtedness of
such Issuer is not paid in full when due or (ii) any other default on Senior
Indebtedness of such Issuer occurs and the maturity of such Senior
Indebtedness is accelerated in accordance with its terms (either such event, a
"Payment Default") unless, in either case, (x) the Payment Default has been
cured or waived and any such acceleration has been rescinded in writing or (y)
such Senior Indebtedness has been paid in full. However, an Issuer may pay the
Notes without regard to the foregoing if such Issuer and the Trustee receive
written notice approving such payment from the Representative for the
Designated Senior Indebtedness with respect to which the Payment Default has
occurred and is continuing.
In addition, during the continuance of any default (other than a Payment
Default) with respect to any Designated Senior Indebtedness of an Issuer
pursuant to which the maturity thereof may be accelerated immediately without
further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace period (a "Non-payment
Default"), such Issuer may not pay the Notes for the period specified as
follows (a "Payment Blockage Period"). The Payment Blockage Period shall
commence upon the receipt by the Trustee (with a copy to such Issuer) of
written notice (a "Blockage Notice") of such Non-payment Default from the
Representative for such Designated Senior Indebtedness specifying an election
to effect a Payment Blockage Period and shall end on the earliest to occur of
the following events: (i) 179 days shall have elapsed since such receipt of
such Blockage Notice, (ii) the Non-payment Default giving rise to such
Blockage Notice is no longer continuing (and no other Payment Default or Non-
payment Default is then continuing), (iii) such Designated Senior Indebtedness
shall have been discharged or repaid in full or (iv) such Payment Blockage
Period shall have been terminated by written notice to the Trustee and such
Issuer from the Person or Persons who gave such Blockage Notice. An Issuer
shall promptly resume payments on the Notes, including any missed payments,
after such Payment Blockage Period ends, unless the holders of such Designated
Senior Indebtedness or the Representative of such holders have accelerated the
maturity of such Designated Senior Indebtedness, or any Payment Default
otherwise exists. Not more than one Blockage Notice to the Issuers in the
aggregate may be given in any 360 consecutive day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness during such
period, except that if any Blockage Notice within such 360-day period is given
by or on behalf of any holders of Designated Senior Indebtedness other than
Bank Indebtedness, a Representative of holders of Bank Indebtedness may give
another Blockage Notice within such period. In no event may the total number
of days during which any Payment Blockage Period is in effect extend beyond
179 days from the date of receipt by the Trustee of the relevant Blockage
Notice, and there must be a 181 consecutive day period during any 360
consecutive day period during which no Payment Blockage Period is in effect.
Upon any payment or distribution of the assets of an Issuer upon a total or
partial liquidation or dissolution or reorganization of or similar proceeding
relating to such Issuer or its property, or in a bankruptcy, insolvency,
receivership or similar proceeding relating to such Issuer or its property,
the holders of Senior Indebtedness of such Issuer will be entitled to receive
payment in full of such Senior Indebtedness before the Noteholders are
entitled to receive any payment from such Issuer and until the Senior
Indebtedness of such Issuer is paid in full, any payment or distribution from
such Issuer to which Noteholders would be entitled but for the subordination
provisions of the Indenture will be made to holders of such Senior
Indebtedness as their interests may appear. If a distribution from an Issuer
is made to Noteholders that due to the subordination provisions should not
have been made to them, such Noteholders are required to hold it in trust for
the holders of Senior Indebtedness of such Issuer and pay it over to them as
their interests may appear.
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If an Issuer fails to make any payment on the Notes when due or within any
applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the holders of the Notes to
accelerate the maturity thereof. See "--Defaults." If payment of the Notes is
accelerated because of an Event of Default, the Issuers or the Trustee shall
promptly notify the holders of the Designated Senior Indebtedness of the
Issuers or the Representative of such holders of the acceleration. Such
acceleration will not be effective with respect to an Issuer, and such Issuer
may not pay the Notes, until five Business Days after such holders or the
Representative of each Designated Senior Indebtedness of such Issuer receive
notice of such acceleration and, thereafter, such Issuer may pay the Notes
only if the subordination provisions of the Indenture otherwise permit payment
at that time.
By reason of such subordination provisions contained in the Indenture, in
the event of liquidation, receivership, reorganization or insolvency, (i)
creditors of an Issuer who are holders of Senior Indebtedness of such Issuer
may recover more, ratably, from such Issuer than the Noteholders, (ii) trade
creditors of an Issuer who are not holders of Senior Indebtedness of such
Issuer or of Senior Subordinated Indebtedness of such Issuer (including the
Notes) may recover less, ratably, than holders of Senior Indebtedness of such
Issuer and may recover more, ratably, than the holders of Senior Subordinated
Indebtedness of such Issuer, and (iii) an Issuer may be unable to meet its
obligations on the Notes. In addition, as described above, the Notes will be
effectively subordinated, with respect to an Issuer's Subsidiaries that are
not Subsidiary Guarantors, to the claims of creditors of those Subsidiaries.
CHANGE OF CONTROL
Upon the occurrence after the Issue Date of a Change of Control (as defined
below) and the failure of the Notes to have, on the 30th day after such Change
of Control, a rating of at least BBB- (or equivalent successor rating) by S&P
and a rating of at least Baa3 (or equivalent successor rating) by Moody's (a
"Change of Control Triggering Event"), each Holder will have the right to
require the Issuers to repurchase, on a several basis in proportion to each
Issuer's several obligations in respect of the Notes, all or any part of such
Holder's Notes at a purchase price in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
repurchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the relevant interest payment date); provided,
however, that, the Issuers shall not be obligated to repurchase Notes pursuant
to this covenant in the event that they have exercised their right to redeem
all the Notes as described under "--Optional Redemption."
The term "Change of Control" means:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of a percentage of the total voting power of
the Voting Stock of the Company that is (x) greater than the percentage
thereof that is then held in the aggregate by Permitted Holders and (y)
greater than 35% of the total voting power of the Voting Stock of the
Company (for the purposes of this clause (i), such other person shall be
deemed to beneficially own any Voting Stock of the Company held by a parent
corporation, if the Company is a Subsidiary of such parent corporation and
such other person is the beneficial owner (as defined in this clause (i)),
directly or indirectly, of a percentage of the total voting power of the
Voting Stock of the parent corporation that is (x) greater than the
percentage thereof that is then held in the aggregate by Permitted Holders
and (y) greater than 35% of the total voting power of the Voting Stock of
such parent corporation);
(ii) the Company ceases to beneficially own, directly or indirectly, 100%
of the aggregate voting power of the Voting Stock of either Issuer
(excluding beneficial ownership of any other Person attributable to
Designated Equity Interests), other than in a transaction by the Company in
compliance with the provisions described under "--Merger and Consolidation"
in which the Company's Successor succeeds to such beneficial ownership of
the Company;
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(iii) during any period of two consecutive years (during which period the
Company has been a party to the Indenture), individuals who at the
beginning of such period were members of the board of directors of the
Company (together with any new members thereof whose election by such board
of directors or whose nomination for election by holders of Capital Stock
of the Company was approved by one or more Permitted Holders or by a vote
of a majority of the members of such board of directors then still in
office
who were either members thereof at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of such board of directors then in
office; or
(iv) the Company merges or consolidates with or into, or sells or
transfers (in one or a series of related transactions) all or substantially
all of the assets of the Company and its Restricted Subsidiaries to,
another Person (other than one or more Permitted Holders) and any "person"
(as defined in clause (i) above), other than one or more Permitted Holders,
is or becomes the "beneficial owner" (as so defined), directly or
indirectly, of a percentage of the total voting power of the Voting Stock
of the surviving Person in such merger or consolidation, or the transferee
Person in such sale or transfer of assets, as the case may be, that is (x)
greater than the percentage thereof that is then held in the aggregate by
Permitted Holders and (y) greater than 35% of the total voting power of
such Voting Stock (for purposes of this clause (iv), such other person
shall be deemed to beneficially own any Voting Stock of such surviving or
transferee Person held by a parent corporation, if such surviving or
transferee Person is a Subsidiary of such parent corporation and such other
person is the beneficial owner (as so defined), directly or indirectly, of
a percentage of the total voting power of the Voting Stock of such parent
corporation that is (x) greater than the percentage thereof that is then
held in the aggregate by Permitted Holders and (y) greater than 35% of the
total voting power of such Voting Stock).
In the event that, at the time of such Change of Control Triggering Event,
the terms of the Bank Indebtedness restrict or prohibit the repurchase of
Notes pursuant to this covenant, then prior to the mailing of the notice to
Holders provided for in the immediately following paragraph but in any event
not later than 30 days following the date the Company obtains actual knowledge
of any Change of Control Triggering Event (unless the Issuers have exercised
their right to redeem all the Notes as described under "--Optional
Redemption"), the Issuers shall (i) repay in full all Bank Indebtedness or
offer to repay in full all Bank Indebtedness and repay the Bank Indebtedness
of each lender who has accepted such offer or (ii) obtain the requisite
consent under the agreements governing the Bank Indebtedness to permit the
repurchase of the Notes as provided for in the immediately following
paragraph. The Issuers shall first comply with the provisions of the
immediately preceding sentence before they shall be required to repurchase
Notes pursuant to the provisions described below. The Issuers' failure to
comply with such provisions or the provisions of the immediately following
paragraph shall constitute an Event of Default described in clause (iv) and
not in clause (ii) under "--Defaults" below.
Unless the Issuers have exercised their right to redeem all the Notes as
described under "--Optional Redemption," the Issuers shall, not later than 30
days following the date the Company obtains actual knowledge of any Change of
Control Triggering Event having occurred, mail a notice to each Holder with a
copy to the Trustee stating: (1) that a Change of Control Triggering Event has
occurred or may occur and that such Holder has, or upon such occurrence will
have, the right to require the Issuers, severally in proportion to their
respective obligations in respect of the Notes, to purchase such Holder's
Notes at a purchase price in cash equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on a record date to receive
interest on the relevant interest payment date); (2) the circumstances and
relevant facts and financial information regarding such Change of Control; (3)
the repurchase date (which shall be no earlier than 30 days nor later than 60
days from the date such notice is mailed); (4) the instructions determined by
the Issuers, consistent with this covenant, that a Holder must follow in order
to have its Notes purchased; and (5) if such notice is mailed prior to the
occurrence of a Change of Control or Change of Control Triggering Event, that
such offer is conditioned on the occurrence of such Change of Control
Triggering Event.
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The Issuers will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, the Issuers will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under this covenant by virtue thereof.
The Change of Control Triggering Event purchase feature is a result of
negotiations between the Issuers and the Initial Purchasers. The Company has
no present plans to engage in a transaction involving a Change of Control,
although it is possible that the Company would decide to do so in the future.
Subject to the limitations discussed below, the Company could, in the future,
enter into certain transactions, including acquisitions, refinancings or
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of Indebtedness outstanding at
such time or otherwise affect the Company's capital structure or credit
ratings.
The occurrence of a Change of Control would constitute a default under the
Senior Credit Agreement. Agreements governing future Senior Indebtedness of
the Company may contain prohibitions of certain events that would constitute a
Change of Control or require such Senior Indebtedness to be repurchased or
repaid upon a Change of Control. Moreover, the exercise by the Holders of
their right to require the Issuers to repurchase the Notes could cause a
default under such agreements, even if the Change of Control itself does not,
due to the financial effect of such repurchase on the Issuers. Finally, an
Issuer's ability to pay cash to the Holders upon a repurchase may be limited
by such Issuer's then existing financial resources. There can be no assurance
that sufficient funds will be available when necessary to make any required
repurchases.
The definition of Change of Control includes a phrase relating to the sale
or other transfer of "all or substantially all" of the Company's assets, as
such phrase is used in the Revised Model Business Corporation Act. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise definition of the phrase under applicable law.
Accordingly, in certain circumstances there may be a degree of uncertainty in
ascertaining whether a particular transaction would involve a disposition of
"all or substantially all" of the assets of the Company, and therefore it may
be unclear as to whether a Change of Control has occurred and whether the
holders of the Notes have the right to require the Company to repurchase such
Notes.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness. (a) The Company will not, and will not permit
any Restricted Subsidiary to, Incur any Indebtedness; provided, however, that
the Company, either Issuer or any Subsidiary Guarantor may Incur Indebtedness
if on the date of the Incurrence of such Indebtedness, after giving effect to
the Incurrence thereof, the Consolidated Coverage Ratio would be greater than
2.00:1.00 if such Indebtedness is Incurred prior to May 1, 2001 or 2.25:1.00
if such Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness Incurred pursuant to the Senior Credit Facility
(including in respect of letters of credit or bankers' acceptances issued
or created thereunder) and Indebtedness of any Foreign Subsidiary Incurred
other than under the Senior Credit Facility, and (without limiting the
foregoing), in each case, any Refinancing Indebtedness in respect thereof,
in a maximum principal amount which, when taken together with the amount of
all Indebtedness Incurred pursuant to this clause (i) and then outstanding,
does not exceed the amount equal to (A) $100.0 million, plus (B) the
amount, if any, by which the Borrowing Base exceeds $65.0 million, plus (C)
in the case of any refinancing of the Senior Credit Facility or any portion
thereof, the aggregate amount of fees, underwriting discounts, premiums and
other costs and expenses incurred in connection with such refinancing;
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(ii) Indebtedness (A) of any Restricted Subsidiary issued to and held by
the Company or (B) of the Company or any Restricted Subsidiary issued to
and held by any Restricted Subsidiary; provided, however, that any
subsequent issuance or transfer of any Capital Stock of such Restricted
Subsidiary to which such Indebtedness is owed, or any other event, that
results in such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any other subsequent transfer of such Indebtedness (except to
the Company or a Restricted Subsidiary) will be deemed, in each case, an
Incurrence of such Indebtedness by the issuer thereof;
(iii) Indebtedness represented by the Notes, any Indebtedness (other than
the Indebtedness described in clauses (i) or (ii) above) outstanding on the
Issue Date and any Refinancing Indebtedness Incurred in respect of any
Indebtedness described in this clause (iii) or paragraph (a) above;
(iv) Purchase Money Obligations and Capitalized Lease Obligations, and
any Refinancing Indebtedness with respect thereto, in an aggregate
principal amount at any time outstanding not exceeding an amount equal to
6% of Consolidated Total Assets at any time outstanding;
(v) Indebtedness of any Foreign Subsidiary Incurred for working capital
purposes;
(vi) (A) Guarantees by the Company or any Restricted Subsidiary of
Indebtedness or any other obligation or liability of the Company or any
Restricted Subsidiary (other than Indebtedness Incurred in violation of the
covenant described hereunder) or (B) Indebtedness of the Company or any
Restricted Subsidiary arising by reason of any Lien granted by or
applicable to such Person securing Indebtedness of the Company or any
Restricted Subsidiary (other than Indebtedness Incurred in violation of the
covenant described hereunder);
(vii) Indebtedness of the Company or any Restricted Subsidiary (A)
arising from the honoring of a check, draft or similar instrument of such
Person drawn against insufficient funds, provided that such Indebtedness is
extinguished within five Business Days of its incurrence, or (B) consisting
of guarantees, indemnities, obligations in respect of earnouts or other
purchase price adjustments, or similar obligations, Incurred in connection
with the acquisition or disposition of any business, assets or Person
(including pursuant to the Acquisition);
(viii) Indebtedness of the Company or any Restricted Subsidiary in
respect of (A) letters of credit, bankers' acceptances or other similar
instruments or obligations issued, or relating to liabilities or
obligations incurred, in the ordinary course of business (including those
issued to governmental entities in connection with self-insurance under
applicable workers' compensation statutes), or (B) completion guarantees,
surety, judgment, appeal or performance bonds, or other similar bonds,
instruments or obligations, provided, or relating to liabilities or
obligations incurred, in the ordinary course of business, or (C) Hedging
Obligations entered into for bona fide hedging purposes in the ordinary
course of business, or (D) Management Guarantees or (E) the financing of
insurance premiums in the ordinary course of business;
(ix) Indebtedness of a Receivables Subsidiary secured by a Lien on all or
part of the assets disposed of in, or otherwise incurred in connection
with, a Financing Disposition;
(x) Indebtedness of any Person that is assumed by the Company or any
Restricted Subsidiary in connection with its acquisition of assets from
such Person or any Affiliate thereof or is issued and outstanding on or
prior to the date on which such Person was acquired by the Company or any
Restricted Subsidiary or merged or consolidated with or into the Company or
any Restricted Subsidiary (other than Indebtedness Incurred to finance, or
otherwise in connection with, such acquisition); provided, however, that on
the date of such acquisition, merger or consolidation, after giving effect
thereto, (x) with respect to any such Indebtedness of the Company, either
Issuer or any Subsidiary Guarantor, (A) the Company could Incur at least
$1.00 of additional Indebtedness pursuant to paragraph (a) above or (B) the
Consolidated Coverage Ratio is greater than it was on such date immediately
prior to giving effect to such acquisition and (y) with respect to any such
Indebtedness of any Restricted Subsidiary that is not a Subsidiary
Guarantor or an Issuer, the Company could Incur at least $1.00 of
additional Indebtedness pursuant to paragraph (a) above; and any
Refinancing Indebtedness with respect to any such Indebtedness;
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(xi) Indebtedness in an amount at any time outstanding not exceeding
twice the amount of Excluded Contributions made after the Issue Date;
provided, however, that the proceeds of such Indebtedness and the related
amount of such Excluded Contributions are used to finance the acquisition
of assets of any Person in a Related Business or the merger or
consolidation of such a Person into or with the Company or any Restricted
Subsidiary (including but not limited to payment of any related fees and
expenses), or to refinance any such acquisition, merger or consolidation
with such Indebtedness being Incurred for such refinancing within nine
months of the closing of such acquisition, merger or consolidation; and any
Refinancing Indebtedness with respect to any such Indebtedness; and
(xii) Indebtedness of the Company or any Restricted Subsidiary in an
aggregate principal amount which, when taken together with the amount of
all Indebtedness Incurred pursuant to this clause (xii) and then
outstanding, does not exceed an amount equal to 11.5% of Consolidated Total
Assets at any time outstanding.
(c) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this covenant, (i) any other obligation of the obligor on
such Indebtedness (or of any other Person who could have Incurred such
Indebtedness under this covenant) arising under any Guarantee, Lien or letter
of credit, bankers' acceptance or other similar instrument or obligation
supporting such Indebtedness shall be disregarded to the extent that such
Guarantee, Lien or letter of credit, bankers' acceptance or other similar
instrument or obligation secures the principal amount of such Indebtedness;
(ii) in the event that Indebtedness meets the criteria of more than one of the
types of Indebtedness described in paragraph (b) above, the Company, in its
sole discretion, shall classify such item of Indebtedness and only be required
to include the amount and type of such Indebtedness in one of such clauses;
and (iii) the amount of Indebtedness issued at a price that is less than the
principal amount thereof shall be equal to the amount of the liability in
respect thereof determined in accordance with GAAP.
(d) For purposes of determining compliance with any Dollar-denominated
restriction on the Incurrence of Indebtedness denominated in a foreign
currency, the Dollar-equivalent principal amount of such Indebtedness Incurred
pursuant thereto shall be calculated based on the relevant currency exchange
rate in effect on the date that such Indebtedness was Incurred, in the case of
term Indebtedness, or first committed, in the case of revolving credit
Indebtedness, provided that (x) the Dollar-equivalent principal amount of any
such Indebtedness outstanding on the Issue Date shall be calculated based on
the relevant currency exchange rate in effect on the Issue Date, (y) if such
Indebtedness is Incurred to refinance other Indebtedness denominated in a
foreign currency, and such refinancing would cause the applicable Dollar-
denominated restriction to be exceeded if calculated at the relevant currency
exchange rate in effect on the date of such refinancing, such Dollar-
denominated restriction shall be deemed not to have been exceeded so long as
the principal amount of such refinancing Indebtedness does not exceed the
principal amount of such Indebtedness being refinanced and (z) the Dollar-
equivalent principal amount of Indebtedness denominated in a foreign currency
and Incurred pursuant to the Senior Credit Facility shall be calculated based
on the relevant currency exchange rate in effect on, at the Company's option,
(i) the Issue Date, (ii) any date on which any of the respective commitments
under the Senior Credit Facility shall be reallocated between or among
facilities or subfacilities thereunder, or on which such rate is otherwise
calculated for any purpose thereunder, or (iii) the date of such Incurrence.
The principal amount of any Indebtedness Incurred to refinance other
Indebtedness, if Incurred in a different currency from the Indebtedness being
refinanced, shall be calculated based on the currency exchange rate applicable
to the currencies in which such respective Indebtedness is denominated that is
in effect on the date of such refinancing.
Limitation on Layering. The Company shall not permit either Issuer to Incur
any Indebtedness that is expressly subordinated in right of payment to any
Senior Indebtedness of such Issuer, unless such Indebtedness so Incurred ranks
pari passu in right of payment with, or is subordinated in right of payment
to, such Issuer's Indebtedness with respect to the Notes. The Company shall
not Incur any Indebtedness that is expressly subordinated in right of payment
to any Senior Indebtedness of the Company, unless such Indebtedness so
Incurred ranks pari passu in right of payment with the Company's Note
Guarantee, or is subordinated in right of payment to the Company's Note
Guarantee. The Company shall not permit any Subsidiary Guarantor to Incur
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any Indebtedness that is expressly subordinated in right of payment to any
Senior Indebtedness of such Subsidiary Guarantor, unless such Indebtedness so
Incurred ranks pari passu in right of payment with the such Subsidiary
Guarantor's Subsidiary Guarantee, or is subordinated in right of payment to
such Subsidiary Guarantee. Unsecured Indebtedness is not deemed to be
subordinate or junior to secured Indebtedness merely because it is unsecured,
and Indebtedness that is not guaranteed by a particular Person is not deemed
to be subordinate or junior to Indebtedness that is so guaranteed merely
because it is not so guaranteed.
Limitation on Restricted Payments. (a) The Company shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to (i) declare or
pay any dividend or make any distribution on or in respect of its Capital
Stock (including any such payment in connection with any merger or
consolidation to which the Company is a party) except (x) dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) and (y) dividends or distributions payable to the Company or any
Restricted Subsidiary (and, in the case of any such Restricted Subsidiary
making such dividend or distribution, to other holders of its Capital Stock on
no more than a pro rata basis, measured by value), (ii) purchase, redeem,
retire or otherwise acquire for value any Capital Stock of the Company held by
Persons other than the Company or a Restricted Subsidiary (other than any
acquisition of Capital Stock deemed to occur upon the exercise of options if
such Capital Stock represents a portion of the exercise price thereof), (iii)
purchase, repurchase, redeem, defease or otherwise acquire or retire for
value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment, any Subordinated Obligations (other than a purchase, redemption,
defeasance or other acquisition or retirement for value in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of such acquisition or
retirement) or (iv) make any Investment (other than a Permitted Investment) in
any Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition or retirement or Investment being herein
referred to as a "Restricted Payment"), if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company could not incur at least an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under "--
Limitation on Indebtedness"; or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to be
as determined in good faith by the Board of Directors, whose determination
shall be conclusive) declared or made subsequent to the Issue Date and then
outstanding would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from April 30, 1998 to the end of
the most recent fiscal quarter ending prior to the date of such
Restricted Payment for which consolidated financial statements of the
Company are available (or, in case such Consolidated Net Income shall
be a negative number, 100% of such negative number);
(B) the aggregate Net Cash Proceeds, and fair value (as determined in
good faith by the Board of Directors) of property or assets, received
(x) by the Company as capital contributions to the Company after the
Issue Date or from the issuance or sale (other than to a Restricted
Subsidiary) of its Capital Stock (other than Disqualified Stock) after
the Issue Date (other than Excluded Contributions) or (y) by the
Company or any Restricted Subsidiary from the issuance and sale by the
Company or any Restricted Subsidiary after the Issue Date of
Indebtedness that shall have been converted into or exchanged for
Capital Stock of the Company (other than Disqualified Stock), plus the
amount of cash, property or assets (determined as provided above)
received by the Company or any Restricted Subsidiary upon such
conversion or exchange;
(C) the aggregate amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (i) dividends, distributions,
interest payments, return of capital, repayments of Investments or
other transfers of assets to the Company or any Restricted Subsidiary
from any Unrestricted Subsidiary, or (ii) the redesignation of any
Unrestricted Subsidiary as a Restricted Subsidiary (valued in each case
as provided in the definition of "Investment"), not to exceed in the
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case of any such Unrestricted Subsidiary the aggregate amount of
Investments (other than Permitted Investments) made by the Company or
any Restricted Subsidiary in such Unrestricted Subsidiary after the
Issue Date; and
(D) in the case of any disposition or repayment of any Investment
constituting a Restricted Payment (without duplication of any amount
deducted in calculating the amount of Investments at any time
outstanding included in the amount of Restricted Payments), an amount
in the aggregate equal to the lesser of the return of capital,
repayment or other proceeds with respect to all such Investments and
the initial amount of all such Investments.
(b) The provisions of the foregoing paragraph (a) will not prohibit any of
the following (each, a "Permitted Payment"):
(i) any purchase, redemption, repurchase, defeasance or other acquisition
or retirement of Capital Stock of the Company or Subordinated Obligations
made by exchange (including any such exchange pursuant to the exercise of a
conversion right or privilege in connection with which cash is paid in lieu
of the issuance of fractional shares) for, or out of the proceeds of the
substantially concurrent issuance or sale of, Capital Stock of the Company
(other than Disqualified Stock and other than Capital Stock issued or sold
to a Subsidiary) or a substantially concurrent capital contribution to the
Company; provided, however, that the Net Cash Proceeds from such issuance,
sale or capital contribution shall be excluded in subsequent calculations
under clause (B) of the preceding paragraph (a);
(ii) any purchase, redemption, repurchase, defeasance or other
acquisition or retirement of Subordinated Obligations (x) made by exchange
for, or out of the proceeds of the substantially concurrent issuance or
sale of, Indebtedness of either Issuer or any Note Guarantor or Refinancing
Indebtedness Incurred in compliance with the covenant described under "--
Limitation on Indebtedness," (y) from Net Available Cash to the extent
permitted by the covenant described under "--Limitation on Sales of Assets
and Subsidiary Stock" or (z) to the extent required by the agreement
governing such Subordinated Obligations, following the occurrence of a
Change of Control (or other similar event described therein as a "change of
control"), but only if the Company shall have complied with the covenant
described under "--Change of Control" and, if required, purchased all Notes
tendered pursuant to the offer to repurchase all the Notes required
thereby, prior to purchasing or repaying such Subordinated Obligations;
(iii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with the preceding paragraph (a);
(iv) Investments or other Restricted Payments in an aggregate amount
outstanding at any time not to exceed the amount of Excluded Contributions;
provided, however, that such Excluded Contributions shall not include any
Excluded Contribution the proceeds of which were used to finance the
acquisition of assets from any Person in a Related Business or the merger
or consolidation of such a Person into or with the Company or any
Restricted Subsidiary pursuant to clause (xi) of paragraph (b) of the
covenant described under "--Limitation on Indebtedness";
(v) payments by the Company to repurchase or otherwise acquire Capital
Stock (including any options, warrants or other rights in respect thereof),
from Management Investors (including loans, advances, dividends or
distributions by the Company to a Parent to permit such Parent to make any
such repurchase or other acquisition), such payments, loans, advances,
dividends or distributions not to exceed an amount (net of repayments of
any such loans or advances) equal to (1) $10.0 million, plus (2) $2.0
million multiplied by the number of calendar years that have commenced
since the Issue Date, plus (3) the Net Cash Proceeds received by the
Company since the Issue Date from, or as a capital contribution from, the
issuance or sale to Management Investors of Capital Stock (including any
options, warrants or other rights in respect thereof), to the extent such
Net Cash Proceeds are not included in any calculation under clause
(3)(B)(x) of the preceding paragraph (a);
(vi) the payment of (or loans, advances, dividends or distributions by
the Company to a Parent to pay) dividends on the common stock or equity of
the Company (or such Parent) following a public offering of such common
stock or equity, in an amount not to exceed in any fiscal year 6% of the
aggregate gross proceeds received by the Company in or from such public
offering;
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(vii) Restricted Payments (including loans or advances) in an aggregate
amount which, when taken together with all Restricted Payments made
pursuant to this clause (vi) and then outstanding, net of repayments of any
such loans or advances, does not exceed $5.0 million at any time
outstanding;
(viii) payments by the Company or any Restricted Subsidiary to satisfy
obligations under the Management Agreements; and Permitted Parent Payments;
(ix) dividends or other distributions of Capital Stock, Indebtedness or
other securities of Unrestricted Subsidiaries; and
(x) the Transactions;
provided, that (A) in the case of clauses (iii), (vi) and (vii), the net
amount of any such Permitted Payment shall be included in subsequent
calculations of the amount of Restricted Payments, (B) in the case of clause
(v), at the time of any calculation of the amount of Restricted Payments, the
net amount of Permitted Payments that have then actually been made under
clause (v) that is in excess of 50% of the total amount of Permitted Payments
then permitted under clause (v) shall be included in such calculation of the
amount of Restricted Payments, (C) in all cases other than pursuant to clauses
(A) and (B) immediately above, the net amount of any such Permitted Payment
shall be excluded in subsequent calculations of the amount of Restricted
Payments and (D) solely with respect to clause (vii), no Default or Event of
Default shall have occurred or be continuing at the time of any such Permitted
Payment after giving effect thereto.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligations owed to the Company, (ii)
make any loans or advances to the Company or (iii) transfer any of its
property or assets to the Company, except any encumbrance or restriction:
(1) pursuant to an agreement or instrument in effect at or entered into
on the Issue Date (including the Senior Credit Facility), the Indenture or
the Notes;
(2) pursuant to any agreement or instrument of a Person, or relating to
Indebtedness or Capital Stock of a Person, which Person is acquired by or
merged or consolidated with or into the Company or any Restricted
Subsidiary, or which agreement or instrument is assumed by the Company or
any Restricted Subsidiary in connection with an acquisition of assets from
such Person, as in effect at the time of such acquisition, merger or
consolidation (except to the extent that such Indebtedness was incurred to
finance, or otherwise in connection with, such acquisition, merger or
consolidation); provided, however, that for purposes of this clause (2), if
a Person other than the Company or the relevant Issuer is the Successor,
any Subsidiary thereof or agreement or instrument of such Person or any
such Subsidiary shall be deemed acquired or assumed, as the case may be, by
the Company or a Restricted Subsidiary, as the case may be, when such
Person becomes the Successor;
(3) pursuant to an agreement or instrument (a "Refinancing Agreement")
effecting a refinancing of Indebtedness Incurred pursuant to, or that
otherwise extends, renews, refunds, refinances or replaces, an agreement or
instrument referred to in clause (1) or (2) of this covenant or this clause
(3) (an "Initial Agreement") or contained in any amendment, supplement or
other modification to an Initial Agreement (an "Amendment"); provided,
however, that the encumbrances and restrictions contained in any such
Refinancing Agreement or Amendment are not materially less favorable to the
Holders of the Notes taken as a whole than encumbrances and restrictions
contained in the Initial Agreement or Initial Agreements to which such
Refinancing Agreement or Amendment relates (as determined in good faith by
the Company);
(4) (A) that restricts in a customary manner the subletting, assignment
or transfer of any property or asset that is subject to a lease, license or
similar contract, or the assignment or transfer of any lease, license or
other contract, (B) by virtue of any transfer of, agreement to transfer,
option or right with respect to, or
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Lien on, any property or assets of the Company or any Restricted Subsidiary
not otherwise prohibited by the Indenture, (C) contained in mortgages,
pledges or other security agreements securing Indebtedness of a Restricted
Subsidiary to the extent restricting the transfer of the property or assets
subject thereto, (D) pursuant to customary provisions restricting
dispositions of real property interests set forth in any reciprocal
easement agreements of the Company or any Restricted Subsidiary, (E)
pursuant to Purchase Money Obligations that impose encumbrances or
restrictions on the property or assets so acquired, (F) on cash or other
deposits or net worth imposed by customers under agreements entered into in
the ordinary course of business, (G) pursuant to customary provisions
contained in agreements and instruments entered into in the ordinary course
of business (including leases and joint venture and other similar
agreements entered into in the ordinary course of business) or (H) that
arises or is agreed to in the ordinary course of business and does not
detract from the value of property or assets of the Company or any
Restricted Subsidiary in any manner material to the Company or such
Restricted Subsidiary;
(5) with respect to a Restricted Subsidiary (or any of its property or
assets) imposed pursuant to an agreement entered into for the direct or
indirect sale or disposition of all or substantially all the Capital Stock
or assets of such Restricted Subsidiary (or the property or assets that are
subject to such restriction) pending the closing of such sale or
disposition;
(6) required by any applicable law, rule, regulation or order or by any
regulatory authority having jurisdiction over the Company or any Restricted
Subsidiary or any of their businesses; or
(7) pursuant to an agreement or instrument (A) relating to any
Indebtedness permitted to be Incurred subsequent to the Issue Date pursuant
to the provisions of the covenant described under "--Limitation on
Indebtedness," if the Company determines that such encumbrance or
restriction will not cause the Issuers not to have the funds necessary to
pay the principal of or interest on the Notes, (B) relating to any sale of
receivables by a Foreign Subsidiary or (C) relating to Indebtedness of or a
Financing Disposition to or by any Receivables Entity.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will
not, and will not permit any Restricted Subsidiary to, make any Asset
Disposition unless
(i) the Company or such Restricted Subsidiary receives consideration
(including by way of relief from, or by any other Person assuming
responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Disposition at least equal to the fair market value of the
shares and assets subject to such Asset Disposition, as such fair market
value may be determined (and shall be determined, to the extent such Asset
Disposition or any series of related Asset Dispositions involves aggregate
consideration in excess of $5.0 million) in good faith by the Board of
Directors, whose determination shall be conclusive (including as to the
value of all noncash consideration);
(ii) in the case of any Asset Disposition (or series of related Asset
Dispositions) having a fair market value of $2.5 million or more, at least
75% of the consideration therefor (excluding any consideration by way of
relief from, or by any other Person assuming responsibility for, any
liabilities, contingent or otherwise, that are not Indebtedness) received
by the Company or such Restricted Subsidiary is in the form of cash, and
provided that this clause (ii) shall not apply to any Asset Disposition (or
series of related Asset Dispositions), involving assets that accounted for
less than two percent of Consolidated EBITDA during the period of the most
recent four consecutive fiscal quarters ending prior to the date of such
Asset Disposition for which consolidated financial statements of the
Company are available; and
(iii) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or any Restricted Subsidiary, as the
case may be) as follows:
(A) first, either (x) to the extent the Issuers elect (or to the
extent required by the terms of any Senior Indebtedness or any
Indebtedness of a Restricted Subsidiary), to prepay, repay or purchase
Senior Indebtedness or such Indebtedness of a Restricted Subsidiary (in
each case other than Indebtedness owed to the Company or a Restricted
Subsidiary) within 365 days after the date of such Asset Disposition,
or (y) to the extent the Company or such Restricted Subsidiary elects,
to reinvest in
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Additional Assets (including by means of an investment in Additional
Assets by a Restricted Subsidiary with Net Available Cash received by
the Company or another Restricted Subsidiary) within 365 days from the
date of such Asset Disposition or, if such reinvestment in Additional
Assets is a project that is authorized by the Board of Directors and
committed to by the Company or any Restricted Subsidiary and will take
longer than such 365 days to complete, the period of time necessary to
complete such project;
(B) second, to the extent of the balance of such Net Available Cash
after application in accordance with clause (A) above (such balance,
the "Excess Proceeds"), to make an offer (or to cause the Issuers to
make an offer) to purchase Notes and (to the extent the Issuers elect,
or to the extent required by the terms thereof) to purchase, redeem or
repay any other Senior Subordinated Indebtedness, pursuant and subject
to the conditions of the Indenture and the agreements governing such
other Indebtedness; and
(C) third, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B) above, to fund
(to the extent consistent with any other applicable provision of the
Indenture) any general corporate purpose (including the repurchase,
repayment or other acquisition or retirement of any Subordinated
Obligations);
provided, however, that in connection with any prepayment, repayment or
purchase of Indebtedness pursuant to clause (A)(x) or (B) above, the Company
or such Restricted Subsidiary will retire such Indebtedness and will cause the
related loan commitment (if any) to be permanently reduced in an amount equal
to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this covenant, the Company and
the Restricted Subsidiaries shall not be required to apply any Net Available
Cash in accordance with this covenant except to the extent that the aggregate
Net Available Cash from all Asset Dispositions that is not applied in
accordance with this covenant exceeds $10.0 million. If the aggregate
principal amount of Notes and Senior Subordinated Indebtedness validly
tendered and not withdrawn (or otherwise subject to purchase, redemption or
repayment) in connection with an offer pursuant to clause (B) above exceeds
the Excess Proceeds, the Excess Proceeds will be apportioned between the Notes
and such Senior Subordinated Indebtedness, with the portion of the Excess
Proceeds payable in respect of the Notes to equal the lesser of (x) the Excess
Proceeds amount multiplied by a fraction, the numerator of which is the
outstanding principal amount of the Notes and the denominator of which is the
sum of the outstanding principal amount of the Notes and the outstanding
principal amount of the relevant Senior Subordinated Indebtedness, and (y) the
aggregate principal amount of Notes validly tendered and not withdrawn.
For the purposes of clause (ii) of paragraph (a) above, the following are
deemed to be cash: (1) Temporary Cash Investments and Cash Equivalents, (2)
the assumption of Indebtedness of the Company (other than Disqualified Stock
of the Company) or any Restricted Subsidiary and the release of the Company or
such Restricted Subsidiary from all liability on payment of the principal
amount of such Indebtedness in connection with such Asset Disposition, (3)
Indebtedness of any Restricted Subsidiary that is no longer a Restricted
Subsidiary as a result of such Asset Disposition, to the extent that the
Company and each other Restricted Subsidiary are released from any Guarantee
of payment of the principal amount of such Indebtedness in connection with
such Asset Disposition, (4) securities received by the Company or any
Restricted Subsidiary from the transferee that are converted by the Company or
such Restricted Subsidiary into cash and (5) consideration consisting of
Indebtedness of the Company or any Restricted Subsidiary.
(b) In the event of an Asset Disposition that requires the purchase of Notes
pursuant to clause (iii)(B) of paragraph (a) above, the Issuers will be
required to purchase (on a several basis in proportion to each Issuer's
obligations in respect of the Notes) Notes tendered pursuant to an offer by
the Issuers for the Notes (the "Offer"), at a purchase price of 100% of their
principal amount plus accrued and unpaid interest to the Purchase Date, in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in the Indenture. If the aggregate purchase price
of the Notes tendered pursuant to the Offer is less than the Net Available
Cash allotted to the purchase of Notes, the remaining Net Available Cash will
be available to the
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Company and its Restricted Subsidiaries for use in accordance with clause
(iii)(B) of paragraph (a) above (to repay Senior Subordinated Indebtedness) or
clause (iii)(C) of paragraph (a) above. The Issuers shall not be required to
make an Offer for Notes pursuant to this covenant if the Net Available Cash
available therefor (after application of the proceeds as provided in clause
(iii)(A) of paragraph (a) above) is less than $10.0 million for any particular
Asset Disposition (which lesser amounts shall be carried forward for purposes
of determining whether an Offer is required with respect to the Net Available
Cash from any subsequent Asset Disposition).
(c) The Issuers will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Issuers will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this covenant by virtue thereof.
Limitation on Transactions With Affiliates. (a) The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, enter
into or conduct any transaction or series of related transactions (including
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of the Company (an "Affiliate Transaction") unless
(i) the terms of such Affiliate Transaction are not materially less favorable
to the Company or such Restricted Subsidiary, as the case may be, than those
that could be obtained at the time in a transaction with a Person who is not
such an Affiliate, and (ii) if such Affiliate Transaction involves aggregate
consideration in excess of $5.0 million, the terms of such Affiliate
Transaction have been approved by a majority of the Disinterested Directors.
For purposes of this paragraph, any Affiliate Transaction shall be deemed to
have satisfied the requirements set forth in this paragraph if (x) such
Affiliate Transaction is approved by a majority of the Disinterested Directors
or (y) in the event there are no Disinterested Directors, a fairness opinion
is provided by a nationally recognized appraisal or investment banking firm
with respect to such Affiliate Transaction.
(b) The provisions of the preceding paragraph (a) will not apply to:
(i) any Restricted Payment Transaction,
(ii) (1) the entering into, maintaining or performance of any employment
contract, collective bargaining agreement, benefit plan, program or
arrangement, related trust agreement or any other similar arrangement for
or with any employee, officer or director heretofore or hereafter entered
into in the ordinary course of business, including vacation, health,
insurance, deferred compensation, severance, retirement, savings or other
similar plans, programs or arrangements, (2) the payment of compensation,
performance of indemnification or contribution obligations, or any
issuance, grant or award of stock, options, other equity-related interests
or other securities, to employees, officers or directors in the ordinary
course of business, (3) the payment of fees to directors of the Company or
any of its Restricted Subsidiaries, (4) any transaction with an officer or
director in the ordinary course of business not involving more than
$100,000 in any one case, or (5) Management Advances and payments in
respect thereof,
(iii) any transaction with the Company, any Restricted Subsidiary or any
Receivables Entity,
(iv) any transaction arising out of agreements or instruments in
existence on the Issue Date, and any payments made pursuant thereto,
(v) execution, delivery and performance of the Management Agreements,
including (1) payment to CDR or any Affiliate of CDR of a fee of $2.7
million plus out-of-pocket expenses in connection with the Transactions,
and (2) payment to CDR or any Affiliate of CDR of fees of up to $1.0
million in any fiscal year plus all out-of-pocket expenses incurred by CDR
or any such Affiliate in connection with its performance of management
consulting, monitoring, financial advisory or other services with respect
to the Company and its Restricted Subsidiaries,
(vi) the Transactions, all transactions in connection therewith
(including the financing thereof), and, without duplication of clause (v)
above, all fees or expenses paid or payable in connection with the
Transactions,
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(vii) any transaction in the ordinary course of business on terms not
materially less favorable to the Company or the relevant Restricted
Subsidiary than those that could be obtained at the time in a transaction
with a Person who is not an Affiliate of the Company, and
(viii) any transaction in the ordinary course of business, or approved by
a majority of the Board of Directors, between the Company or any Restricted
Subsidiary and any Affiliate of the Company controlled by the Company that
is a joint venture or similar entity; provided, however, that no other
Affiliate of the Company (other than a Restricted Subsidiary) has any
Investment in such joint venture or similar entity.
Limitation on Liens. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or permit to exist
any Lien (other than Permitted Liens) on any of its property or assets
(including Capital Stock of any other Person), whether owned on the date of
the Indenture or thereafter acquired, securing any Indebtedness of either
Issuer or any Note Guarantor that by its terms is expressly subordinated in
right of payment to or ranks pari passu in right of payment with the Notes or
such Note Guarantor's Note Guarantee (the "Initial Lien"), unless
contemporaneously therewith effective provision is made to secure the
Indebtedness of such Issuer or Note Guarantor due under the Indenture and the
Notes or, in respect of Liens on any Restricted Subsidiary's property or
assets, any Note Guarantee of such Restricted Subsidiary, equally and ratably
with such obligation for so long as such obligation is so secured by such
Initial Lien. Any such Lien thereby created in favor of the Notes or any such
Note Guarantee will be automatically and unconditionally released and
discharged upon (i) the release and discharge of the Initial Lien to which it
relates, or (ii) any sale, exchange or transfer to any Person not an Affiliate
of the Company of the property or assets secured by such Initial Lien, or of
all of the Capital Stock held by the Company or any Restricted Subsidiary in,
or all or substantially all the assets of, any Restricted Subsidiary creating
such Lien.
Future Subsidiary Guarantors. Except as described below, the Company will
cause each U.S. Subsidiary of JCI that is organized or acquired by JCI after
the Issue Date to execute and deliver to the Trustee a supplemental indenture
or other instrument pursuant to which such Subsidiary will guarantee payment
of the Guaranteed JCI Obligations, whereupon such Subsidiary will become a
Subsidiary Guarantor. The Company will also cause each Restricted Subsidiary
of Jafra S.A. that is organized or acquired by Jafra S.A. after the Issue Date
to execute and deliver to the Trustee a supplemental indenture or other
instrument pursuant to which such Subsidiary will guarantee payment of the
Guaranteed Jafra S.A. Obligations, whereupon such Subsidiary will become a
Subsidiary Guarantor. The Company will not be required to cause any U.S.
Subsidiary of JCI to become a Subsidiary Guarantor unless and until such time
as such Subsidiary, together with any other U.S. Subsidiary of JCI that has
not then become a Subsidiary Guarantor, accounts for two percent or more of
Consolidated Total Assets. In addition, the Company may cause any Subsidiary
thereof that is not a Subsidiary Guarantor so to guarantee payment of the
Guaranteed Note Obligations of either Issuer and become a Subsidiary
Guarantor.
Subsidiary Guarantees will be subject to termination and discharge under
certain circumstances. See "--Note Guarantees."
SEC Reports. Notwithstanding that the Company may not be required to be or
remain subject to the reporting requirements of Section 13(a) or 15(d) of the
Exchange Act applicable to a "foreign private issuer" (as such term is defined
in Rule 3b-4 under the Exchange Act), from and after the date on which the
Company first becomes subject to such reporting requirements, the Company will
file with the SEC (unless such filing is not permitted under the Exchange Act
or by the SEC), so long as Notes are outstanding, the following reports by the
dates indicated (or, in the case of the first such report, if later, the date
that is 45 days after the effectiveness of a registration statement in respect
of Notes or Exchange Notes, as the case may be): (i) within 120 days from the
end of each fiscal year, an annual report on Form 20-F (or any successor form)
containing the information required to be contained therein for such fiscal
year, and (ii) within 60 days after the end of each of the first three
quarters in each fiscal year, quarterly reports on Form 6-K containing
unaudited financial statements (including a balance sheet and statement of
income, changes in stockholders' equity and cash flows) and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
and as of the end
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of such quarters (with comparable financial statements for such quarter of the
immediately preceding fiscal year). The Company will also, within 15 days
after the date on which the Company files such reports, transmit by mail to
all Holders, as their names and addresses appear in the Note Register, and to
the Trustee copies of any such information, documents and reports (without
exhibits) (or, in lieu of one or more of the quarterly reports for fiscal
1998, a registration statement filed with the SEC under the Securities Act or
any amendment thereto, provided such registration statement or amendment
contains the information that would have been included in each such report).
The Company will be deemed to have satisfied such requirements if a Parent
files and provides reports, documents and information of the types otherwise
so required to be filed by the Company, or of the types required to be filed
by a U.S. issuer with the SEC pursuant to Section 13(a) or 15(d) of the
Exchange Act, in each case within the applicable time periods, and the Company
is not required to file such reports, documents and information separately
under the applicable rules and regulations of the SEC (after giving effect to
any exemptive relief) because of the filings by such Parent. The Company also
will comply with the other provisions of TIA (S) 314(a).
MERGER AND CONSOLIDATION
The Company will not, and will not permit either Issuer to, consolidate with
or merge with or into, or convey, transfer or lease all or substantially all
its assets to, any Person, unless: (i) the resulting, surviving or transferee
Person (the "Successor") will be a Person organized and existing under the
laws of the United States of America, any State thereof or the District of
Columbia, or (in the case of the Company only) the Cayman Islands, Luxembourg,
Kingdom of the Netherlands (including the Netherlands Antilles) or any other
member of the European Union, or (in the case of Jafra S.A. only) Mexico, and
the Successor (if not the Company or such Issuer) will expressly assume all
the obligations of the Company or such Issuer under the Company's Note
Guarantee (in the case of the Company) or the Notes (in the case of such
Issuer) and the Indenture by executing and delivering to the Trustee a
supplemental indenture or one or more other documents or instruments in form
reasonably satisfactory to the Trustee; (ii) immediately after giving effect
to such transaction (and treating any Indebtedness that becomes an obligation
of the Successor or any Restricted Subsidiary as a result of such transaction
as having been Incurred by the Successor or such Restricted Subsidiary at the
time of such transaction), no Default will have occurred and be continuing;
(iii) immediately after giving effect to such transaction, either (A) the
Company (or, if applicable, its Successor) could Incur at least $1.00 of
additional Indebtedness pursuant to paragraph (a) of the covenant described
under "--Certain Covenants--Limitation on Indebtedness," or (B) the
Consolidated Coverage Ratio of the Company (or, if applicable, its Successor)
would equal or exceed the Consolidated Coverage Ratio of the Company
immediately prior to giving effect to such transaction; (iv) each Note
Guarantor (other than any party to any such consolidation or merger) shall
have delivered a supplemental indenture or other document or instrument in
form reasonably satisfactory to the Trustee, confirming its Note Guarantee;
and (v) the Company will have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each to the effect that such
consolidation, merger or transfer complies with the provisions described in
this paragraph; provided that (x) in giving such opinion such counsel may rely
on an Officer's Certificate as to compliance with the foregoing clauses (ii)
and (iii) and as to any matters of fact, and (y) no Opinion of Counsel will be
required for a consolidation, merger or transfer described in the last
paragraph of this covenant. Any Indebtedness that becomes an obligation of the
Company or any Restricted Subsidiary (or that is deemed to be Incurred by any
Restricted Subsidiary that becomes a Restricted Subsidiary) as a result of any
such transaction undertaken in compliance with this covenant, and any
Refinancing Indebtedness with respect thereto, shall be deemed to have been
Incurred in compliance with the covenant described under "--Certain
Covenants--Limitation on Indebtedness."
The Successor will succeed to, and be substituted for, and may exercise
every right and power of, the Company or the relevant Issuer under the
Indenture, and thereafter the predecessor Company or the relevant Issuer shall
be relieved of all obligations and covenants under the Indenture.
Clauses (ii) and (iii) of the first paragraph of this "Merger and
Consolidation" section will not apply to any transaction in which (1) any
Restricted Subsidiary consolidates with, merges into or transfers all or part
of its properties and assets to the Company or an Issuer or (2) the Company
consolidates or merges with or into or
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transfers all or substantially all its assets to (x) an Affiliate incorporated
or organized for the purpose of reincorporating or reorganizing the Company in
another jurisdiction in the United States of America, Cayman Islands,
Luxembourg or Kingdom of the Netherlands (including the Netherlands Antilles)
or any other member of the European Union, or changing its legal structure to
a corporation or other entity or (y) a Restricted Subsidiary of the Company so
long as all assets of the Company and the Restricted Subsidiaries immediately
prior to such transaction (other than Capital Stock of such Restricted
Subsidiary) are owned by such Restricted Subsidiary and its Restricted
Subsidiaries immediately after the consummation thereof. The first paragraph
of this "Merger and Consolidation" section will not apply to the Mergers.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in any
payment of interest on any Note when due, continued for 30 days, (ii) a
default in the payment of principal of any Note when due, whether at its
Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise, whether or not such payment is prohibited by the
provisions described under "--Ranking" above, (iii) the failure by the Company
or an Issuer to comply with its obligations under the covenants described
under "--Merger and Consolidation" above, (iv) the failure by the Company to
comply for 30 days after notice with any of its obligations under the
covenants described under "--Change of Control" above (other than a failure to
purchase Notes) and under "--Certain Covenants" (other than the covenant
described under "--Certain Covenants--SEC Reports"), (v) the failure by the
Company to comply for 60 days after notice with its other agreements contained
in the Notes or the Indenture, (vi) the failure by any Subsidiary Guarantor to
comply for 30 days after notice with its obligations under its Subsidiary
Guarantee, (vii) the failure by the Company, either of the Issuers or any
Significant Subsidiary to pay any Indebtedness within any applicable grace
period after final maturity or the acceleration of any such Indebtedness by
the holders thereof because of a default, if the total amount of such
Indebtedness so unpaid or accelerated exceeds $10.0 million or its foreign
currency equivalent (the "cross acceleration provision"), (viii) certain
events of bankruptcy, insolvency or reorganization of the Company, either of
the Issuers or a Significant Subsidiary (the "bankruptcy provisions"), (ix)
the rendering of any judgment or decree for the payment of money in an amount
(net of any insurance or indemnity payments actually received in respect
thereof prior to or within 90 days from the entry thereof, or to be received
in respect thereof in the event any appeal thereof shall be unsuccessful) in
excess of $10.0 million or its foreign currency equivalent against the
Company, either of the Issuers or a Significant Subsidiary that is not
discharged, or bonded or insured by a third Person, if such judgment or decree
remains outstanding for a period of 90 days following such judgment or decree
and is not discharged, waived or stayed (the "judgment default provision") or
(x) the failure of any Note Guarantee by the Company or a Subsidiary Guarantor
that is a Significant Subsidiary to be in full force and effect (except as
contemplated by the terms thereof or of the Indenture) or the denial or
disaffirmation in writing by the Company or any Subsidiary Guarantor that is a
Significant Subsidiary of its obligations under its Note Guarantee, if such
Default continues for 10 days.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body.
However, a Default under clause (iv), (v) or (vi) will not constitute an
Event of Default until the Trustee or the Holders of at least 25% in principal
amount of the outstanding Notes notify the Company of the Default and the
Company does not cure such Default within the time specified in such clause
after receipt of such notice.
If an Event of Default (other than a Default relating to certain events of
bankruptcy, insolvency or reorganization of an Issuer) occurs and is
continuing, the Trustee by notice to the Issuers, or the Holders of at least a
majority in principal amount of the outstanding Notes by notice to the Issuers
and the Trustee, may declare the principal of and accrued but unpaid interest
on all the Notes to be due and payable, provided that so long as any
Designated Senior Indebtedness of an Issuer shall be outstanding, such
acceleration shall not be effective until the earlier to occur of (x) five
Business Days following delivery of a written notice of such acceleration of
the Notes to the Issuers and the holders of all such Designated Senior
Indebtedness or each Representative
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thereof and (y) the acceleration of any such Designated Senior Indebtedness.
Upon the effectiveness of such a declaration, such principal and interest will
be due and payable immediately. Notwithstanding the foregoing, if an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Issuers occurs and is continuing, the principal of and accrued interest
on all the Notes will become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences.
Notwithstanding the foregoing, in the event of a declaration of acceleration
in respect of the Notes because an Event of Default specified in clause (vii)
above shall have occurred and be continuing, such declaration of acceleration
of the Notes and such Event of Default and all consequences thereof (including
any acceleration or resulting payment default) shall be annulled, waived and
rescinded, automatically and without any action by the Trustee or the Holders,
and be of no further effect, if within 30 days after such Event of Default
arose (x) the Indebtedness that is the basis for such Event of Default has
been discharged, or (y) the holders thereof have rescinded or waived the
acceleration, notice or action (as the case may be) giving rise to such Event
of Default, or (z) the default in respect of such Indebtedness that is the
basis for such Event of Default has been cured.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee
will be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such
Holders have offered to the Trustee reasonable indemnity or security against
any loss, liability or expense. Except to enforce the right to receive payment
of principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such Holder has
previously given the Trustee notice that an Event of Default is continuing,
(ii) Holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such Holders have offered
the Trustee reasonable security or indemnity against any loss, liability or
expense, (iv) the Trustee has not complied with such request within 60 days
after the receipt of the request and the offer of security or indemnity and
(v) the Holders of a majority in principal amount of the outstanding Notes
have not given the Trustee a direction inconsistent with such request within
such 60-day period. Subject to certain restrictions, the Holders of a majority
in principal amount of the outstanding Notes are given the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the Trustee or of exercising any trust or power conferred on the Trustee.
The Trustee, however, may refuse to follow any direction that conflicts with
law or the Indenture or that the Trustee determines is unduly prejudicial to
the rights of any other Holder or that would involve the Trustee in personal
liability. Prior to taking any action under the Indenture, the Trustee will be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the
Default within 90 days after it occurs. Except in the case of a Default in the
payment of principal of, or premium (if any) or interest on, any Note, the
Trustee may withhold notice if and so long as a committee of its Trust
Officers in good faith determines that withholding notice is in the interests
of the Noteholders. In addition, the Issuers are required to deliver to the
Trustee, within 120 days after the end of each fiscal year, a certificate
indicating whether the signers thereof know of any Default that occurred
during the previous year. The Issuers also are required to deliver to the
Trustee, within 30 days after the occurrence thereof, written notice of any
event that would constitute certain Defaults, their status and what action the
Issuers are taking or propose to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the Holders of a majority in principal amount of the Notes then outstanding
and any past default or compliance with any provisions may be waived with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding (including in each case, consents obtained in connection with a
tender offer or exchange offer for Notes). However, without the consent of
each Holder of an outstanding Note affected, no amendment or waiver may (i)
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reduce the principal amount of Notes whose Holders must consent to an
amendment or waiver, (ii) reduce the rate of or extend the time for payment of
interest on any Note, (iii) reduce the principal of or extend the Stated
Maturity of any Note, (iv) reduce the premium payable upon the redemption of
any Note or change the date on which any Note may be redeemed as described
under "--Optional Redemption" above, (v) make any Note payable in money other
than that stated in the Note, (vi) make any change to the subordination
provisions of the Indenture that adversely affects the rights of any Holder in
any material respect, (vii) impair the right of any Holder to receive payment
of principal of and interest on such Holder's Notes on or after the due dates
therefor
or to institute suit for the enforcement of any payment on or with respect to
such Holder's Notes or (viii) make any change in the amendment or waiver
provisions described in this sentence. In addition, without the consent of the
Holders of 75% in principal amount of the Notes then outstanding, no amendment
may release the Company or either Issuer from any of its obligations under its
Note Guarantee, except in compliance with the terms thereof or of the
Indenture.
Without the consent of any Holder, the Company, the Issuers, the Trustee and
(as applicable) any Subsidiary Guarantor may amend the Indenture to cure any
ambiguity, omission, defect or inconsistency, to provide for the assumption by
a successor of the obligations of the Company or an Issuer under the
Indenture, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to add Guarantees with respect to the Notes, to secure the
Notes, to confirm and evidence the release, termination or discharge of any
Guarantee or Lien with respect to or securing the Notes when such release,
termination or discharge is provided for under the Indenture, to add to the
covenants of the Company or an Issuer for the benefit of the Noteholders or to
surrender any right or power conferred upon the Company or an Issuer, to
provide that any Indebtedness that becomes or will become an obligation of a
Successor or a Note Guarantor pursuant to a transaction governed by the
provisions described under "--Merger and Consolidation" (and that is not a
Subordinated Obligation) is Senior Subordinated Indebtedness for purposes of
the Indenture, to provide for or confirm the issuance of Additional Notes, to
make any change that does not adversely affect the rights of any Holder, or to
comply with any requirement of the SEC in connection with the qualification of
the Indenture under the TIA or otherwise. However, no amendment may be made to
the subordination provisions of the Indenture that adversely affects the
rights of any holder of Senior Indebtedness then outstanding (which Senior
Indebtedness has been previously designated in writing by the Company to the
Trustee for this purpose) unless the holders of such Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
The consent of the Noteholders is not necessary under the Indenture to
approve the particular form of any proposed amendment or waiver. It is
sufficient if such consent approves the substance of the proposed amendment or
waiver. Until an amendment or waiver becomes effective, a consent to it by a
Noteholder is a continuing consent by such Noteholder and every subsequent
Holder of all or part of the related Note. Any such Noteholder or subsequent
holder may revoke such consent as to its Note by written notice to the Trustee
or the Company, received thereby before the date on which the Company
certifies to the Trustee that the Holders of the requisite principal amount of
Notes have consented to such amendment or waiver. After an amendment or waiver
under the Indenture becomes effective, the Company is required to mail to
Noteholders a notice briefly describing such amendment or waiver. However, the
failure to give such notice to all Noteholders, or any defect therein, will
not impair or affect the validity of the amendment or waiver.
DEFEASANCE
The Issuers at any time may concurrently (and not separately) terminate all
the respective obligations of the Company and the Issuers under the Notes and
the Indenture ("legal defeasance"), except for certain obligations, including
those relating to the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Issuers at any time may concurrently (and not separately) terminate
the respective obligations of the Company and the Issuers under certain
covenants under the Indenture, including the covenants described under "--
Certain Covenants" and "--Change of Control," the operation of the default
provisions relating to such covenants described under "--Defaults" above, the
operation of the cross acceleration provision, the bankruptcy
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provisions with respect to Subsidiaries and the judgment default provision
described under "--Defaults" above, and the limitations contained in clauses
(iii), (iv) and (v) under "--Merger and Consolidation" above ("covenant
defeasance"). If the Issuers exercise their legal defeasance option or its
covenant defeasance option, each Note Guarantor will be released from all its
obligations with respect to its Note Guarantee.
The Issuers may exercise their legal defeasance option notwithstanding their
prior exercise of their covenant defeasance option. If the Issuers exercise
their legal defeasance option, payment of the Notes may not be accelerated
because of an Event of Default with respect thereto. If the Issuers exercise
their covenant defeasance option, payment of the Notes may not be accelerated
because of an Event of Default specified in clause (iv), (v) (as it relates to
the covenants described under "--Certain Covenants" above), (vi), (vii),
(viii) (but only with
respect to events of bankruptcy, insolvency or reorganization of a Significant
Subsidiary), (ix) or (x) under "--Defaults" above or because of the failure of
the Company to comply with clause (iii), (iv) or (v) under "--Merger and
Consolidation" above.
Either defeasance option may be exercised to any redemption date or to the
maturity date for the Notes. In order to exercise either defeasance option,
the Issuers must irrevocably deposit in trust (the "defeasance trust") with
the Trustee money or U.S. Government Obligations, or a combination thereof,
for the payment of principal of, and premium (if any) and interest on, the
Notes to redemption or maturity, as the case may be, and must comply with
certain other conditions, including delivery to the Trustee of an Opinion of
Counsel to the effect that holders of the Notes will not recognize income,
gain or loss for Federal income tax purposes as a result of such deposit and
defeasance and will be subject to Federal income tax on the same amount and in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal
Revenue Service or other change in applicable Federal income tax law since the
Issue Date).
SATISFACTION AND DISCHARGE
The Indenture will be discharged and cease to be of further effect (except
as to surviving rights of registration of transfer or exchange of the Notes,
as expressly provided for in the Indenture) as to all outstanding Notes when
(i) either (a) all the Notes previously authenticated and delivered (other
than certain lost, stolen or destroyed Notes, and certain Notes for which
provision for payment was previously made and thereafter the funds have been
released to the Issuers) have been delivered to the Trustee for cancellation
or (b) all Notes not previously delivered to the Trustee for cancellation (x)
have become due and payable, (y) will become due and payable at their Stated
Maturity within one year or (z) are to be called for redemption within one
year under arrangements reasonably satisfactory to the Trustee for the giving
of notice of redemption by the Trustee in the name, and at the expense, of the
Issuers, (ii) the Issuers have irrevocably deposited or caused to be deposited
with the Trustee money, U.S. Government Obligations, or a combination thereof,
sufficient to pay and discharge the entire indebtedness on the Notes not
previously delivered to the Trustee for cancellation, for principal, premium,
if any, and interest to the date of deposit; (iii) the Issuers have paid or
caused to be paid all other sums payable under the Indenture by the Issuers;
and (iv) the Issuers have delivered to the Trustee an Officer's Certificate
and an Opinion of Counsel each to the effect that all conditions precedent
under the "Satisfaction and Discharge" section of the Indenture relating to
the satisfaction and discharge of the Indenture have been complied with,
provided that any such counsel may rely on any Officer's Certificate as to
matters of fact (including as to compliance with the foregoing clauses (i),
(ii) and (iii)).
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATORS AND
STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
the Issuers, any Note Guarantor or any Subsidiary of any thereof shall have
any liability for any obligation of the Company, the Issuers or any Note
Guarantor under the Indenture, the Notes or any Note Guarantee, or for any
claim based on, in respect of, or by reason of, any such obligation or its
creation. Each Noteholder, by accepting the Notes, waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Notes.
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CONCERNING THE TRUSTEE
State Street Bank and Trust Company is to be the Trustee under the Indenture
and has been appointed by the Issuers as Registrar and Paying Agent with
regard to the Notes.
The Indenture will provide that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are set forth
specifically in the Indenture. During the existence of an Event of Default,
the Trustee will exercise such of the rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a
prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and the TIA will impose certain limitations on the rights of
the Trustee, should it become a creditor of the Company, an Issuer or a Note
Guarantor, to obtain payment of claims in certain cases or to realize on
certain property received by it in respect of any such claims, as security or
otherwise. The Trustee is permitted to engage in other transactions; provided,
however, that if it acquires any conflicting interest as described in the TIA,
it must eliminate such conflict, apply to the SEC for permission to continue
as Trustee with such conflict, or resign.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York, without
giving effect to any principles of conflict of laws to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets that replace the
property or assets that are the subject of an Asset Disposition; (ii) any
property or assets (other than Indebtedness and Capital Stock) to be used by
the Company or a Restricted Subsidiary in a Related Business; (iii) the
Capital Stock of a Person that is engaged in a Related Business and becomes a
Restricted Subsidiary as a result of the acquisition of such Capital Stock by
the Company or another Restricted Subsidiary; or (iv) Capital Stock of any
Person that at such time is a Restricted Subsidiary, acquired from a third
party.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"all or substantially all" has the meaning given to such phrase in the
Revised Model Business Corporation Act and commentary thereto.
"Asset Disposition" means any sale, lease, transfer or other disposition of
shares of Capital Stock of a Restricted Subsidiary (other than Designated
Equity Interests, or (in the case of a Foreign Subsidiary) to the extent
required by applicable law), property or other assets (each referred to for
the purposes of this definition as a "disposition") by the Company or any of
its Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction), other than (i) a disposition to the
Company or any Restricted Subsidiary, (ii) a disposition in the ordinary
course of business, (iii) the sale or discount (with or without recourse, and
on customary or commercially reasonable terms) of accounts receivable or notes
receivable arising in the ordinary course of business, or the conversion or
exchange of accounts receivable for notes receivable, (iv) any Restricted
Payment Transaction, (v) a disposition that is governed by the provisions
described under "--Merger and Consolidation", (vi) any Financing Disposition,
(vii) any "fee in lieu" or other disposition of assets to any governmental
authority or agency that continue in use by the Company or any Restricted
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Subsidiary, so long as the Company or any Restricted Subsidiary may obtain
title to such assets upon reasonable notice by paying a nominal fee, (viii)
any exchange of like property pursuant to Section 1031 (or any successor
section) of the Code, (ix) any financing transaction with respect to property
built or acquired by the Company or any Restricted Subsidiary after the Issue
Date, including any sale/leaseback transaction or asset securitization, (x)
any disposition arising from foreclosure, condemnation or similar action with
respect to any property or other assets, (xi) any disposition of Capital
Stock, Indebtedness or other securities of an Unrestricted Subsidiary, (xii) a
disposition of Capital Stock of a Restricted Subsidiary pursuant to an
agreement or other obligation with or to a Person (other than the Company or a
Restricted Subsidiary) from whom such Restricted Subsidiary was acquired, or
from whom such Restricted Subsidiary acquired its business and assets (having
been newly formed in connection with such acquisition), entered into in
connection with such acquisition, (xiii) a disposition of not more than 5% of
the outstanding Capital Stock of a Foreign Subsidiary that has been approved
by the Board of Directors or (xiv) any disposition or series of related
dispositions for aggregate consideration not exceeding $1.0 million.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means (i) any and all amounts, whether outstanding on
the Issue Date or thereafter incurred, payable under or in respect of the
Senior Credit Facility, including principal, premium (if any), interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company, either Issuer or any
Restricted Subsidiary whether or not a claim for post-filing interest is
allowed in such proceedings), fees, charges, expenses, reimbursement
obligations, guarantees, other monetary obligations of any nature and all
other amounts payable thereunder or in respect thereof and (ii) all Hedging
Obligations arising in connection therewith to any party to the Senior Credit
Facility (or any affiliate thereof).
"Board of Directors" means the board of directors or other governing body of
the Company or any committee thereof duly authorized to act on behalf of such
board or governing body.
"Borrowing Base" means the sum (determined as of the end of the most
recently ended fiscal quarter for which consolidated financial statements of
the Company are available) of (1) 60% of Inventory of the Company and its
Restricted Subsidiaries and (2) 80% of Receivables of the Company and its
Restricted Subsidiaries.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banking institutions are authorized or required by law to
close in New York City.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Capitalized Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP. The Stated Maturity of any Capitalized Lease
Obligation shall be the date of the last payment of rent or any other amount
due under the related lease.
"Cash Equivalents" means any of the following: (a) securities issued or
fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof, (b) time deposits, certificates of deposit or
bankers' acceptances of (i) any lender under the Senior Credit Agreement or
(ii) any commercial bank having capital and surplus in excess of $500,000,000
and the commercial paper of the holding company of which is rated at least A-1
or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's (or if at such time neither is issuing ratings, then a comparable
rating of another nationally recognized rating agency), (c)
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commercial paper rated at least A-1 or the equivalent thereof by S&P or at
least P-1 or the equivalent thereof by Moody's (or if at such time neither is
issuing ratings, then a comparable rating of another nationally recognized
rating agency) and (d) investments in money market funds complying with the
risk limiting conditions of Rule 2a-7 or any successor rule of the SEC under
the Investment Company Act of 1940, as amended.
"CDR" means Clayton, Dubilier & Rice, Inc.
"CDR Fund V" means Clayton, Dubilier & Rice Fund V Limited Partnership, a
Cayman Islands exempted limited partnership, and any successor in interest
thereto.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means CDRJ Investments (Lux) S.A., a Luxembourg corporation, and
any successor in interest thereto.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated EBITDA of the Company and
its Restricted Subsidiaries for the period of the most recent four
consecutive fiscal quarters ending prior to the date of such determination for
which consolidated financial statements of the Company are available to (ii)
Consolidated Interest Expense for such four fiscal quarters (in each case,
determined, for each fiscal quarter (or portion thereof) of the four fiscal
quarters ending prior to the Issue Date, on a pro forma basis to give effect
to the Acquisition as if it had occurred at the beginning of such four-quarter
period); provided, that
(1) if since the beginning of such period the Company or any Restricted
Subsidiary has Incurred any Indebtedness that remains outstanding on such
date of determination or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness,
Consolidated EBITDA and Consolidated Interest Expense for such period shall
be calculated after giving effect on a pro forma basis to such Indebtedness
as if such Indebtedness had been Incurred on the first day of such period
(except that in making such computation, the amount of Indebtedness under
any revolving credit facility outstanding on the date of such calculation
shall be computed based on (A) the average daily balance of such
Indebtedness during such four fiscal quarters or such shorter period for
which such facility was outstanding or (B) if such facility was created
after the end of such four fiscal quarters, the average daily balance of
such Indebtedness during the period from the date of creation of such
facility to the date of such calculation),
(2) if since the beginning of such period the Company or any Restricted
Subsidiary has repaid, repurchased, redeemed, defeased or otherwise
acquired, retired or discharged any Indebtedness (each, a "Discharge")
since the beginning of the period or if the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio involves a Discharge of
Indebtedness (in each case other than Indebtedness Incurred under any
revolving credit facility unless such Indebtedness has been permanently
repaid), Consolidated EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to such
Discharge of such Indebtedness, including with the proceeds of such new
Indebtedness, as if such discharge had occurred on the first day of such
period,
(3) if since the beginning of such period the Company or any Restricted
Subsidiary shall have disposed of any company, any business or any group of
assets constituting an operating unit of a business (any such disposition,
a "Sale"), the Consolidated EBITDA for such period shall be reduced by an
amount equal to the Consolidated EBITDA (if positive) attributable to the
assets that are the subject of such Sale for such period or increased by an
amount equal to the Consolidated EBITDA (if negative) attributable thereto
for such period and Consolidated Interest Expense for such period shall be
reduced by an amount equal to (A) the Consolidated Interest Expense
attributable to any Indebtedness of the Company or any Restricted
Subsidiary repaid, repurchased, redeemed, defeased or otherwise acquired,
retired or discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Sale for such period
(including through the assumption of such Indebtedness by another Person)
plus (B) if the Capital Stock of
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any Restricted Subsidiary is sold, the Consolidated Interest Expense for
such period attributable to the Indebtedness of such Restricted Subsidiary
to the extent the Company and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such Sale,
(4) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger, consolidation or otherwise) shall have made an
Investment in any Person that thereby becomes a Restricted Subsidiary, or
otherwise acquired any company, any business or any group of assets
constituting an operating unit of a business, including any such Investment
or acquisition occurring in connection with a transaction causing a
calculation to be made hereunder (any such Investment or acquisition, a
"Purchase"), Consolidated EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto (including
the Incurrence of any related Indebtedness) as if such Purchase occurred on
the first day of such period, and
(5) if since the beginning of such period any Person became a Restricted
Subsidiary or was merged or consolidated with or into the Company or any
Restricted Subsidiary, and since the beginning of such period such Person
shall have Discharged any Indebtedness or made any Sale or Purchase that
would have required an adjustment pursuant to clause (2), (3) or (4) above
if made by the Company or a Restricted Subsidiary
during such period, Consolidated EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving pro forma effect thereto
as if such Discharge, Sale or Purchase occurred on the first day of such
period.
For purposes of this definition, whenever pro forma effect is to be given to
any Sale, Purchase or other transaction, or the amount of income or earnings
relating thereto and the amount of Consolidated Interest Expense associated
with any Indebtedness Incurred or repaid, repurchased, redeemed, defeased or
otherwise acquired, retired or discharged in connection therewith, the pro
forma calculations in respect thereof (including in respect of anticipated
cost savings or synergies relating to any such Sale, Purchase or other
transaction) shall be as determined in good faith by a responsible financial
or accounting Officer of the Company. If any Indebtedness bears a floating
rate of interest and is being given pro forma effect, the interest expense on
such Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any Interest Rate Agreement applicable to such Indebtedness). If any
Indebtedness bears, at the option of the Company or a Restricted Subsidiary, a
rate of interest based on a prime or similar rate, a eurocurrency interbank
offered rate or other fixed or floating rate, and such Indebtedness is being
given pro forma effect, the interest expense on such Indebtedness shall be
calculated by applying such optional rate as the Company or such Restricted
Subsidiary may designate. If any Indebtedness that is being given pro forma
effect was Incurred under a revolving credit facility, the interest expense on
such Indebtedness shall be computed based upon the average daily balance of
such Indebtedness during the applicable period. Interest on a Capitalized
Lease Obligation shall be deemed to accrue at an interest rate determined in
good faith by a responsible financial or accounting officer of the Company to
be the rate of interest implicit in such Capitalized Lease Obligation in
accordance with GAAP.
"Consolidated EBITDA" means, for any period, the Consolidated Net Income for
such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) provision for all taxes (whether or not paid,
estimated or accrued) based on income, profits or capital, (ii) Consolidated
Interest Expense and any Receivables Fees, (iii) depreciation, amortization
(including amortization of goodwill and intangibles and amortization and
write-off of financing costs) and all other non-cash charges or non-cash
losses, and (iv) any expenses or charges related to any Equity Offering,
Investment or Indebtedness permitted by the Indenture (whether or not
consummated or incurred).
"Consolidated Interest Expense" means, for any period, (i) the total
interest expense of the Company and its Restricted Subsidiaries to the extent
deducted in calculating Consolidated Net Income, net of any interest income of
the Company and its Restricted Subsidiaries, including any such interest
expense consisting of (a) interest expense attributable to Capitalized Lease
Obligations, (b) amortization of debt discount, (c) interest in respect of
Indebtedness of any other Person that has been Guaranteed by the Company or
any Restricted
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Subsidiary, but only to the extent that such interest is actually paid by the
Company or any Restricted Subsidiary, (d) non-cash interest expense, (e) the
interest portion of any deferred payment obligation, and (f) commissions,
discounts and other fees and charges owed with respect to letters of credit
and bankers' acceptance financing, plus (ii) Preferred Stock dividends paid in
cash in respect of Disqualified Stock of the Company held by Persons other
than the Company or a Restricted Subsidiary and minus (iii) to the extent
otherwise included in such interest expense referred to in clause (i) above,
Receivables Fees and amortization or write-off of financing costs, in each
case under clauses (i) through (iii) as determined on a Consolidated basis in
accordance with GAAP; provided, however, that gross interest expense shall be
determined after giving effect to any net payments made or received by the
Company and its Restricted Subsidiaries with respect to Interest Rate
Agreements.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its Restricted Subsidiaries, determined on a consolidated
basis in accordance with GAAP and before any reduction in respect of Preferred
Stock dividends; provided, however, that there shall not be included in such
Consolidated Net Income:
(i) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that (A) subject to the limitations contained
in clause (iv) below, the Company's equity in the net income of any
such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount actually distributed by such Person
during such period to the Company or a Restricted Subsidiary as a dividend
or other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in
clause (iii) below) and (B) the Company's equity in the net loss of such
Person shall be included to the extent of the aggregate Investment of the
Company or any of its Restricted Subsidiaries in such Person,
(ii) any net income (loss) of any Person acquired by the Company or a
Restricted Subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition,
(iii) any net income (loss) of any Restricted Subsidiary that is not an
Issuer or a Subsidiary Guarantor if such Restricted Subsidiary is subject
to restrictions, directly or indirectly, on the payment of dividends or the
making of similar distributions by such Restricted Subsidiary, directly or
indirectly, to the Company by operation of the terms of such Restricted
Subsidiary's charter or any agreement, instrument, judgment, decree, order,
statute or governmental rule or regulation applicable to such Restricted
Subsidiary or its stockholders (other than (x) restrictions that have been
waived or otherwise released, (y) restrictions pursuant to the Notes or the
Indenture and (z) restrictions in effect on the Issue Date with respect to
a Restricted Subsidiary and other restrictions with respect to such
Restricted Subsidiary that taken as a whole are not materially less
favorable to the Noteholders than such restrictions in effect on the Issue
Date), except that (A) subject to the limitations contained in clause (iv)
below, the Company's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of any dividend or distribution that was
or that could have been made by such Restricted Subsidiary during such
period to the Company or another Restricted Subsidiary (subject, in the
case of a dividend that could have been made to another Restricted
Subsidiary, to the limitation contained in this clause) and (B) the net
loss of such Restricted Subsidiary shall be included to the extent of the
aggregate Investment of the Company or any of its other Restricted
Subsidiaries in such Restricted Subsidiary,
(iv) any gain or loss realized upon the sale or other disposition of any
asset of the Company or any Restricted Subsidiary (including pursuant to
any sale/leaseback transaction) that is not sold or otherwise disposed of
in the ordinary course of business (as determined in good faith by the
Board of Directors),
(v) any item classified as an extraordinary, unusual or nonrecurring
gain, loss or charge (including (a) any compensation expense for stock
options that will be cashed out, converted, exchanged or otherwise retired
in connection with the Acquisition, (b) any charge or expense incurred for
employee bonuses in connection with the Acquisition, and (c) fees, expenses
and charges associated with the Acquisition or any acquisition, merger or
consolidation after the Issue Date),
(vi) the cumulative effect of a change in accounting principles,
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(vii) all deferred financing costs written off and premiums paid in
connection with any early extinguishment of Indebtedness,
(viii) any unrealized gains or losses in respect of Currency Agreements,
(ix) any unrealized foreign currency transaction gains or losses in
respect of Indebtedness of any Person denominated in a currency other than
the functional currency of such Person, and
(x) any non-cash compensation charge arising from any grant of stock,
stock options or other equity-based awards.
In the case of any unusual or nonrecurring gain, loss or charge not included
in Consolidated Net Income pursuant to clause (v) above in any determination
thereof, the Company will deliver an Officer's Certificate to the Trustee
promptly after the date on which Consolidated Net Income is so determined,
setting forth the nature and amount of such unusual or nonrecurring gain, loss
or charge.
"Consolidated Total Assets" means, as of any date of determination, the
total assets shown on the consolidated balance sheet of the Company and its
Restricted Subsidiaries as of the most recent date for which such a balance
sheet is available, determined on a consolidated basis in accordance with GAAP
(and, in the case of any determination relating to any Incurrence of
Indebtedness or any Investment, on a pro forma basis including any property or
assets being acquired in connection therewith), provided that for purposes of
paragraph (b) of the covenant described in "--Certain Covenants--Limitation on
Indebtedness" and the definition of "Permitted Investments," Consolidated
Total Assets shall not be less than $258.5 million. At December 31, 1997, on a
pro forma basis giving effect to the Acquisition and the issuance of the
Notes, Consolidated Total Assets was $258.5 million. See "Unaudited Pro Forma
Combined Financial Statements."
"Consolidation" means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of the Company in accordance with GAAP;
provided, however, that "Consolidation" will not include consolidation of the
accounts of any Unrestricted Subsidiary, but the interest of the Company or
any Restricted Subsidiary in any Unrestricted Subsidiary will be accounted for
as an investment. The term "Consolidated" has a correlative meaning.
"Currency Agreement" means, in respect of a Person, any foreign exchange
contract, currency swap agreement or other similar agreement or arrangements
(including derivative agreements or arrangements), as to which such Person is
a party or a beneficiary.
"Default" means any event or condition that is, or after notice or passage
of time or both would be, an Event of Default.
"Designated Equity Interests" means (i) directors' qualifying shares, or
(ii) in the case of a Foreign Subsidiary, Capital Stock required by law to be
held by a Person other than the Company or any Restricted Subsidiary.
"Designated Senior Indebtedness" with respect to a Person means (i) the Bank
Indebtedness and (ii) any other Senior Indebtedness of such Person that, at
the date of determination, has an aggregate principal amount equal to or under
which, at the date of determination, the holders thereof are committed to lend
up to, at least $10.0 million and is specifically designated by such Person in
an agreement or instrument evidencing or governing such Senior Indebtedness as
"Designated Senior Indebtedness" for purposes of the Indenture.
"Disinterested Director" means, with respect to any Affiliate Transaction, a
member of the Board of Directors having no material direct or indirect
financial interest in or with respect to such Affiliate Transaction. A member
of the Board of Directors shall not be deemed to have such a financial
interest in any Affiliate Transaction by reason of such member's holding
Capital Stock of the Company or a Parent or any options, warrants or other
rights in respect of such Capital Stock.
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"Disqualified Stock" means, with respect to any Person, any Capital Stock
(other than Management Stock) that by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable) or upon the happening of any event (other than following the
occurrence of a Change of Control or other similar event described under such
terms as a "change of control," or any Asset Disposition) (i) matures or is
mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or
(iii) is redeemable at the option of the holder thereof (other than following
the occurrence of a Change of Control or other similar event described under
such terms as a "change of control," or any Asset Disposition), in whole or in
part, in each case on or prior to the final Stated Maturity of the Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Contribution" means Net Cash Proceeds, or the fair value, as
determined in good faith by the Board of Directors, of property or assets,
received by the Company as capital contributions to the Company after the
Issue Date or from the issuance or sale (other than to a Subsidiary of the
Company) of Capital Stock (other
than Disqualified Stock) of the Company, in each case to the extent designated
as an Excluded Contribution pursuant to an Officer's Certificate of the
Company and not previously included in the calculation set forth in
subparagraph (a)(3)(B)(x) of the covenant described under "--Certain
Covenants--Limitation on Restricted Payments" for purposes of determining
whether a Restricted Payment may be made.
"Financing Disposition" means any sale, transfer, conveyance or other
disposition of property or assets by the Company or any Subsidiary thereof to
any Receivables Entity, or by any Receivables Subsidiary, in each case in
connection with the Incurrence by a Receivables Entity of Indebtedness, or
obligations to make payments to the obligor on Indebtedness, which may be
secured by a Lien in respect of such property or assets.
"Foreign Subsidiary" means (a) any Restricted Subsidiary of the Company that
is not organized under the laws of the United States of America or any state
thereof or the District of Columbia and (b) any Restricted Subsidiary of the
Company that has no material assets other than securities of one or more
Foreign Subsidiaries, and other assets relating to an ownership interest in
any such securities or Subsidiaries.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the Issue Date (for purposes of the definitions of
the terms "Consolidated Coverage Ratio," "Consolidated EBITDA," "Consolidated
Interest Expense," "Consolidated Net Income" and "Consolidated Total Assets,"
all defined terms in the Indenture to the extent used in or relating to any of
the foregoing definitions, and all ratios and computations based on any of the
foregoing definitions) and as in effect from time to time (for all other
purposes of the Indenture), including those set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as approved by a significant segment of the accounting profession. All
ratios and computations based on GAAP contained in the Indenture shall be
computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of
any other Person; provided, however, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is registered
in the Register.
"Holding Company Expenses" means (i) costs (including all professional fees
and expenses) incurred by a Parent to comply with its reporting obligations
under federal or state laws or under the Indenture, including any reports
filed with respect to the Securities Act, Exchange Act or the respective rules
and regulations promulgated
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thereunder, (ii) indemnification obligations of a Parent owing to directors,
officers, employees or other Persons under its charter or by-laws or pursuant
to written agreements with any such Person, (iii) other operational expenses
of a Parent incurred in the ordinary course of business, and (iv) expenses
incurred by a Parent in connection with any public offering of Capital Stock
or Indebtedness (x) where the net proceeds of such offering are intended to be
received by or contributed or loaned to the Company or a Restricted
Subsidiary, or (y) in a prorated amount of such expenses in proportion to the
amount of such net proceeds intended to be so received, contributed or loaned,
or (z) otherwise on an interim basis prior to completion of such offering so
long as a Parent shall cause the amount of such expenses to be repaid to the
Company or the relevant Restricted Subsidiary out of the proceeds of such
offering promptly if completed.
"Incur" means issue, assume, enter into any Guarantee of, incur or otherwise
become liable for; provided, however, that any Indebtedness or Capital Stock
of a Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary. Accrual of
interest, the accretion of accreted value and the
payment of interest in the form of additional Indebtedness will not be deemed
to be an Incurrence of Indebtedness. Any Indebtedness issued at a discount
(including Indebtedness on which interest is payable through the issuance of
additional Indebtedness) shall be deemed Incurred at the time of original
issuance of the Indebtedness at the initial accreted amount thereof.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal of indebtedness of such Person for borrowed money,
(ii) the principal of obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments,
(iii) all reimbursement obligations of such Person in respect of letters
of credit or other similar instruments (the amount of such obligations
being equal at any time to the aggregate then undrawn and unexpired amount
of such letters of credit or other instruments plus the aggregate amount of
drawings thereunder that have not then been reimbursed),
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property (except Trade Payables), which purchase price is
due more than one year after the date of placing such property in final
service or taking final delivery and title thereto,
(v) all Capitalized Lease Obligations of such Person,
(vi) the redemption, repayment or other repurchase amount of such Person
with respect to any Disqualified Stock of such Person or (if such Person is
a Subsidiary of the Company other than an Issuer or a Subsidiary Guarantor)
any Preferred Stock of such Subsidiary, but excluding, in each case, any
accrued dividends (the amount of such obligation to be equal at any time to
the maximum fixed involuntary redemption, repayment or repurchase price for
such Capital Stock, or if less (or if such Capital Stock has no such fixed
price), to the involuntary redemption, repayment or repurchase price
therefor calculated in accordance with the terms thereof as if then
redeemed, repaid or repurchased, and if such price is based upon or
measured by the fair market value of such Capital Stock, such fair market
value shall be as determined in good faith by the Board of Directors or the
board of directors or other governing body of the issuer of such Capital
Stock),
(vii) all Indebtedness of other Persons secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such Person;
provided, however, that the amount of Indebtedness of such Person shall be
the lesser of (A) the fair market value of such asset at such date of
determination (as determined in good faith by the Company) and (B) the
amount of such Indebtedness of such other Persons,
(viii) all Indebtedness of other Persons to the extent Guaranteed by such
Person, and
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(ix) to the extent not otherwise included in this definition, net Hedging
Obligations of such Person (the amount of any such obligation to be equal
at any time to the termination value of such agreement or arrangement
giving rise to such Hedging Obligation that would be payable by such Person
at such time).
The amount of Indebtedness of any Person at any date shall be determined as
set forth above or otherwise provided in the Indenture, or otherwise shall
equal the amount thereof that would appear on a balance sheet of such Person
(excluding any notes thereto) prepared in accordance with GAAP.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate protection agreement, interest rate future agreement, interest rate
option agreement, interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate hedge agreement or other similar
agreement or arrangement (including derivative agreements or arrangements), as
to which such Person is party or a beneficiary.
"Inventory" means goods held for sale or lease by a Person in the ordinary
course of business, net of any reserve for goods that have been segregated by
such Person to be returned to the applicable vendor for credit, as determined
in accordance with GAAP.
"Investment" in any Person by any other Person means any direct or indirect
advance, loan or other extension of credit (other than to customers,
suppliers, directors, officers or employees of any Person in the ordinary
course of business) or capital contribution (by means of any transfer of cash
or other property to others or any payment for property or services for the
account or use of others) to, or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by, such Person. For purposes
of the definition of "Unrestricted Subsidiary" and the covenant described
under "--Certain Covenants--Limitation on Restricted Payments," (i)
"Investment" shall include the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of any
Subsidiary of the Company at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary in an amount
(if positive) equal to (x) the Company's "Investment" in such Subsidiary at
the time of such redesignation less (y) the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of such Subsidiary at the time of such redesignation, (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer and (iii) in each case
under clause (i) or (ii) above, fair market value shall be as determined in
good faith by the Board of Directors. Guarantees shall not be deemed to be
Investments. The amount of any Investment outstanding at any time shall be the
original cost of such Investment, reduced (at the Company's option) by any
dividend, distribution, interest payment, return of capital, repayment or
other amount or value received in respect of such Investment; provided,
however, that to the extent that the amount of Restricted Payments outstanding
at any time is so reduced by any portion of any such amount or value that
would otherwise be included in the calculation of Consolidated Net Income,
such portion of such amount or value shall not be so included for purposes of
calculating the amount of Restricted Payments that may be made pursuant to
paragraph (a) of the covenant described under "--Certain Covenants--Limitation
on Restricted Payments."
"Investor" means CDR Fund V.
"Issue Date" means the first date on which Notes are issued.
"Jafra S.A. Subsidiary Guarantor" means each Restricted Subsidiary of Jafra
S.A. that enters into a Subsidiary Guarantee.
"JCI" means the U.S. Issuer.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
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"Management Advances" means (1) loans or advances made to directors,
officers or employees of a Parent, the Company or any Restricted Subsidiary
(x) in respect of travel, entertainment or moving-related expenses incurred in
the ordinary course of business, (y) in respect of moving-related expenses
incurred in connection with any closing or consolidation of any facility or
(z) in the ordinary course of business and (in the case of this clause (z))
not exceeding $2.5 million in the aggregate outstanding at any time, (2)
promissory notes of Management Investors acquired in connection with the
issuance of Management Stock to such Management Investors, (3) Management
Guarantees or (4) other guarantees of borrowings by Management Investors in
connection with the purchase of Management Stock, which guarantees are
permitted under the covenant described under "--Certain Covenants--Limitation
on Indebtedness."
"Management Agreements" means, collectively, the Consulting Agreement and
the Indemnification Agreement, each dated as of April 30, 1998, each between
the Company and CD&R (and its permitted successors and assigns thereunder), as
each may be amended, supplemented, waived or otherwise modified from time to
time in accordance with the terms thereof and of the Indenture.
"Management Guarantees" means guarantees (x) of up to an aggregate principal
amount of $10.0 million of borrowings by Management Investors in connection
with their purchase of Management Stock or (y) made on behalf of, or in
respect of loans or advances made to directors, officers or employees of a
Parent, the Company or any Restricted Subsidiary (1) in respect of travel,
entertainment and moving-related expenses incurred in the ordinary course of
business, or (2) in the ordinary course of business and (in the case of this
clause (2)) not exceeding $2.5 million in the aggregate outstanding at any
time.
"Management Investors" means the officers, directors, employees and other
members of the management of a Parent, the Company or any of its Subsidiaries,
or family members or relatives thereof, or trusts or partnerships for the
benefit of any of the foregoing, or any of their heirs, executors, successors
and legal representatives, who at any date beneficially own or have the right
to acquire, directly or indirectly, Capital Stock of the Company or a Parent.
"Management Stock" means Capital Stock of the Company or a Parent (including
any options, warrants or other rights in respect thereof) held by any of the
Management Investors.
"Mergers" means the merger of Acquisition Co. with the California
corporation then known as Jafra Cosmetics International, Inc., with JCI
surviving, and the merger of Jafra S.A. with and into Grupo Jafra, with Jafra
S.A. surviving.
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and
when received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations
relating to the properties or assets that are the subject of such Asset
Disposition or received in any other non-cash form) therefrom, in each case
net of (i) all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition (including as a consequence of any
transfer of funds in connection with the application thereof in accordance
with the covenant described under "--Certain Covenants--Limitation on Sales of
Assets and Subsidiary Stock"), (ii) all payments made, and all installment
payments required to be made, on any Indebtedness that is secured by any
assets subject to such Asset Disposition, in accordance with the terms of any
Lien upon such assets, or that must by its terms, or in order to obtain a
necessary consent to such Asset Disposition, or by applicable law, be repaid
out of the proceeds from such Asset Disposition, (iii) all
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distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset
Disposition, or to any other Person (other than the Company or a Restricted
Subsidiary) owning a beneficial interest in the assets disposed of in such
Asset Disposition and (iv) any liabilities or obligations associated with the
assets disposed of in such Asset Disposition and retained by the Company or
any Restricted Subsidiary after such Asset Disposition, including pension and
other post-employment benefit liabilities, liabilities related to
environmental matters, and liabilities relating to any indemnification
obligations associated with such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of any securities
of the Company or any Subsidiary by the Company or any Subsidiary, or any
capital contribution, means the cash proceeds of such issuance, sale or
contribution net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees actually incurred in connection with such issuance, sale or
contribution and net of taxes paid or payable as a result thereof.
"Note Guarantee" means any of (i) the Guarantee of the Notes by the Company,
the Guarantee of the Guaranteed JCI Obligations by Jafra S.A., the Guarantee
of the Guaranteed Jafra Obligations by JCI and the Subsidiary Guarantees, to
be entered into on the Issue Date as described under "--Note Guarantees," and
(ii) any Subsidiary Guarantee that may from time to time be entered into by a
Restricted Subsidiary pursuant to the covenant described under "--Certain
Covenants--Future Subsidiary Guarantors."
"Note Guarantor" means any of the Company and its Restricted Subsidiaries
that enters into a Note Guarantee.
"Officer" means with respect to the Company, an Issuer or any other obligor
upon the Notes, the Chairman of the Board, the President, the Chief Executive
Officer, the Chief Financial Officer, any Vice President, the Controller, the
Treasurer or the Secretary of such Person.
"Officer's Certificate" means with respect to the Company, an Issuer or any
other obligor upon the Notes, a certificate signed by one Officer of such
Person.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company, an Issuer or the Trustee.
"Parent" means any Person of which the Company at any time is or becomes a
Subsidiary after the Issue Date.
"Permitted Holder" means any of the following: (i) any of the Investor,
Management Investors, CDR and their respective Affiliates; (ii) any investment
fund or vehicle managed, sponsored or advised by CDR; (iii) any limited or
general partners of, or other investors in, any of the Investor and its
Affiliates, or any such investment fund or vehicle; and (iv) any Person acting
in the capacity of an underwriter in connection with a public or private
offering of Capital Stock of a Parent or the Company.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in, or consisting of, any of the following:
(i) a Restricted Subsidiary, the Company, or a Person that will, upon the
making of such Investment, become a Restricted Subsidiary;
(ii) another Person if as a result of such Investment such other Person
is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, or is liquidated into, the Company or a
Restricted Subsidiary;
(iii) Temporary Cash Investments or Cash Equivalents;
(iv) receivables owing to the Company or any Restricted Subsidiary, if
created or acquired in the ordinary course of business;
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(v) any securities or other Investments received as consideration in, or
retained in connection with, sales or other dispositions of property or
assets, including Asset Dispositions made in compliance with the covenant
described under "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock";
(vi) securities or other Investments received in settlement of debts
created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary, or as a result of foreclosure, perfection or
enforcement of any Lien, or in satisfaction of judgments, including in
connection with any bankruptcy proceeding or other reorganization of
another Person;
(vii) Investments in existence or made pursuant to legally binding
written commitments in existence on the Issue Date;
(viii) Currency Agreements, Interest Rate Agreements and related Hedging
Obligations, which obligations are Incurred in compliance with the covenant
described under "--Certain Covenants--Limitation on Indebtedness";
(ix) pledges or deposits (x) with respect to leases or utilities provided
to third parties in the ordinary course of business or (y) otherwise
described in the definition of "Permitted Liens" or made in connection with
Liens permitted under the covenant described under "--Certain Covenants--
Limitations on Liens";
(x) any Investment in a joint venture or similar entity that is not a
Restricted Subsidiary, or in any Related Business, in an aggregate amount
outstanding at any time not to exceed 4% of Consolidated Total Assets;
(xi) (1) Investments in any Receivables Subsidiary, or in connection with
a Financing Disposition by or to any Receivables Entity, including
Investments of funds held in accounts permitted or required by the
arrangements governing such Financing Disposition or any related
Indebtedness, or (2) any promissory note issued by the Company or a Parent
to a Receivables Subsidiary; provided that if such Parent receives cash
from the relevant Receivables Entity in exchange for such note, an equal
cash amount is contributed by such Parent to the Company;
(xii) bonds secured by assets leased to and operated by the Company or
any Restricted Subsidiary that were issued in connection with the financing
of such assets so long as the Company or any Restricted Subsidiary may
obtain title to such assets at any time by paying a nominal fee, canceling
such bonds and terminating the transaction;
(xiii) Notes;
(xiv) any Investment to the extent made using Capital Stock of the
Company (other than Disqualified Stock), or Capital Stock of a Parent, as
consideration;
(xv) Management Advances; and
(xvi) other Investments in an aggregate amount outstanding at any time
not to exceed 6% of Consolidated Total Assets.
"Permitted Liens" means:
(i) Liens for taxes, assessments or other governmental charges not yet
delinquent or the nonpayment of which in the aggregate would not reasonably
be expected to have a material adverse effect on the Company and its
Restricted Subsidiaries, or that are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Company or a Subsidiary thereof, as the case
may be, in accordance with GAAP;
(ii) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
in respect of obligations that are not overdue for a period of more than 60
days, or that are bonded or that are being contested in good faith and by
appropriate proceedings;
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(iii) pledges, deposits or Liens in connection with workers'
compensation, unemployment insurance and other social security and other
similar legislation or other insurance-related obligations (including,
without limitation, pledges or deposits securing liability to insurance
carriers under insurance or self-insurance arrangements);
(iv) pledges, deposits or Liens to secure the performance of bids,
tenders, trade, government or other contracts (other than for borrowed
money), obligations for utilities, leases, licenses, statutory obligations,
completion guarantees, surety, judgment, appeal or performance bonds, other
similar bonds, instruments or obligations, and other obligations of a like
nature incurred in the ordinary course of business;
(v) easements (including reciprocal easement agreements), rights-of-way,
building, zoning and similar restrictions, utility agreements, covenants,
reservations, restrictions, encroachments, changes, and other similar
encumbrances or title defects incurred, or leases or subleases granted to
others, in the ordinary course of business, which do not in the aggregate
materially interfere with the ordinary conduct of the business of the
Company and its Subsidiaries, taken as a whole;
(vi) Liens existing on, or provided for under written arrangements
existing on, the Issue Date, or (in the case of any such Liens securing
Indebtedness of the Company or any of its Subsidiaries existing or arising
under written arrangements existing on the Issue Date) securing any
Refinancing Indebtedness in respect of such Indebtedness so long as the
Lien securing such Refinancing Indebtedness is limited to all or part of
the same property or assets (plus improvements, accessions, proceeds or
dividends or distributions in respect thereof) that secured (or under such
written arrangements could secure) the original Indebtedness;
(vii) (i) mortgages, liens, security interests, restrictions,
encumbrances or any other matters of record that have been placed by any
developer, landlord or other third party on property over which the Company
or any Restricted Subsidiary of the Company has easement rights or on any
leased property and subordination or similar agreements relating thereto
and (ii) any condemnation or eminent domain proceedings affecting any real
property;
(viii) Liens securing Hedging Obligations, Purchase Money Obligations or
Capitalized Lease Obligations Incurred in compliance with the covenant
described under "--Certain Covenants--Limitation on Indebtedness";
(ix) Liens arising out of judgments, decrees, orders or awards in respect
of which the Company shall in good faith be prosecuting an appeal or
proceedings for review, which appeal or proceedings shall not have been
finally terminated, or if the period within which such appeal or
proceedings may be initiated shall not have expired;
(x) leases, subleases, licenses or sublicenses to third parties;
(xi) Liens securing (1) Indebtedness Incurred in compliance with clause
(b)(i), (b)(iv), (b)(v), (b)(vii), (b)(viii)(E) or (b)(x) of the covenant
described under "--Certain Covenants--Limitation on Indebtedness," or
clause (b)(iii) thereof (other than Refinancing Indebtedness Incurred in
respect of the Notes or Indebtedness described in paragraph (a) thereof),
(2) Bank Indebtedness, (3) commercial bank Indebtedness, (4) Indebtedness
of any Restricted Subsidiary that is not a Subsidiary Guarantor or an
Issuer, (5) the Notes or (6) Indebtedness or other obligations of any
Receivables Entity;
(xii) Liens existing on property or assets of a Person at the time such
Person becomes a Subsidiary of the Company (or at the time the Company or a
Restricted Subsidiary acquires such property or assets); provided, however,
that such Liens are not created in connection with, or in contemplation of,
such other Person becoming such a Subsidiary (or such acquisition of such
property or assets), and that such Liens are limited to all or part of the
same property or assets (plus improvements, accessions, proceeds or
dividends or distributions in respect thereof) that secured (or, under the
written arrangements under which such Liens arose, could secure) the
obligations to which such Liens relate;
(xiii) Liens on Capital Stock or other securities of an Unrestricted
Subsidiary that secure Indebtedness or other obligations of such
Unrestricted Subsidiary;
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(xiv) any encumbrance or restriction (including, but not limited to, put
and call agreements) with respect to Capital Stock of any joint venture or
similar arrangement pursuant to any joint venture or similar agreement; and
(xv) Liens securing Refinancing Indebtedness Incurred in respect of any
Indebtedness secured by, or securing any refinancing, refunding, extension,
renewal or replacement (in whole or in part) of any other obligation
secured by, any other Permitted Liens, provided that any such new Lien is
limited to all or part of the same property or assets (plus improvements,
accessions, proceeds or dividends or distributions in respect thereof) that
secured (or, under the written arrangements under which the original Lien
arose, could secure) the obligations to which such Liens relate.
"Permitted Parent Payments" means loans, advances, dividends or
distributions to a Parent or other payments by the Company or any Restricted
Subsidiary (A) to permit such Parent to satisfy obligations under the
Management Agreements or (B) to pay or permit such Parent to pay any Holding
Company Expenses or any Related Taxes.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation means
Capital Stock of any class or classes (however designated) that by its terms
is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Purchase Money Obligations" means any Indebtedness Incurred to finance or
refinance the acquisition, leasing, construction or improvement of property
(real or personal) or assets, and whether acquired through the direct
acquisition of such property or assets or the acquisition of the Capital Stock
of any Person owning such property or assets, or otherwise.
"Receivable" means a right to receive payment arising from a sale or lease
of goods or services by a Person pursuant to an arrangement with another
Person pursuant to which such other Person is obligated to pay for goods or
services under terms that permit the purchase of such goods and services on
credit, as determined in accordance with GAAP.
"Receivables Entity" means (x) any Receivables Subsidiary or (y) any other
Person that is engaged in the business of acquiring, selling, collecting,
financing or refinancing Receivables, accounts (as defined in the Uniform
Commercial Code as in effect in any jurisdiction from time to time), other
accounts and/or other receivables, and/or related assets.
"Receivables Fees" means distributions or payments made directly or by means
of discounts with respect to any participation interest issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Financing.
"Receivables Financing" means any financing of Receivables of the Company or
any Restricted Subsidiary that have been transferred to a Receivables Entity
in a Financing Disposition.
"Receivables Subsidiary" means a Subsidiary of the Company that (a) is
engaged solely in the business of acquiring, selling, collecting, financing or
refinancing Receivables, accounts (as defined in the Uniform Commercial Code
as in effect in any jurisdiction from time to time) and other accounts and
receivables (including any thereof constituting or evidenced by chattel paper,
instruments or general intangibles), all proceeds thereof and all rights
(contractual and other), collateral and other assets relating thereto, and any
business or activities incidental or related to such business, and (b) is
designated as a "Receivables Subsidiary" by the Board of Directors.
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"refinance" means refinance, refund, replace, renew, repay, modify, restate,
defer, substitute, supplement, reissue, resell or extend (including pursuant
to any defeasance or discharge mechanism); and the terms "refinances,"
"refinanced" and "refinancing" as used for any purpose in the Indenture shall
have a correlative meaning.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refinance
any Indebtedness existing on the date of the Indenture or Incurred in
compliance with the Indenture (including Indebtedness of the Company that
refinances Indebtedness of any Restricted Subsidiary (to the extent permitted
in the Indenture) and Indebtedness of any Restricted Subsidiary that
refinances Indebtedness of another Restricted Subsidiary) including
Indebtedness that refinances Refinancing Indebtedness; provided, however, that
with respect to any Refinancing Indebtedness (other than Bank Indebtedness),
(i) if the Indebtedness being refinanced is a Subordinated Obligation, the
Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life of
the Indebtedness being refinanced, (ii) such Refinancing Indebtedness is
Incurred in an aggregate principal amount (or if issued with original issue
discount, an aggregate issue price) that is equal to or less than the sum of
(x) the aggregate principal amount (or if issued with original issue discount,
the aggregate accreted value) then outstanding of the Indebtedness being
refinanced, plus (y) fees, underwriting discounts, premiums and other costs
and expenses incurred in connection with such Refinancing Indebtedness, and
(iii) Refinancing Indebtedness shall not include (x) Indebtedness of a
Restricted Subsidiary that is not a Subsidiary Guarantor or an Issuer that
refinances Indebtedness of the Company, an Issuer or a Subsidiary Guarantor
that was Incurred by such Company, Issuer or Subsidiary Guarantor pursuant to
paragraph (a) of the covenant described under "--Certain Covenants--Limitation
on Indebtedness" or (y) Indebtedness of the Company or a Restricted Subsidiary
that refinances Indebtedness of an Unrestricted Subsidiary.
"Related Business" means those businesses in which the Company or any of its
Subsidiaries is engaged on the Issue Date, or that are related, complementary,
incidental or ancillary thereto or extensions, developments or expansions
thereof.
"Related Taxes" means (x) any taxes, charges or assessments, including but
not limited to sales, use, transfer, rental, ad valorem, value-added, stamp,
property, consumption, franchise, license, capital, net worth, gross receipts,
excise, occupancy, intangibles or similar taxes, charges or assessments (other
than federal, state or local taxes measured by income and federal, state or
local withholding imposed on payments made by a Parent), required to be paid
by such Parent by virtue of its being incorporated or having Capital Stock
outstanding (but not by virtue of owning stock or other equity interests of
any corporation or other entity other than the Company or any of its
Subsidiaries), or being a holding company parent of the Company or having
received Capital Stock of the Company as a capital contribution, or receiving
dividends from or other distributions in respect of the Capital Stock of the
Company, or having guaranteed any obligations of the Company or any Subsidiary
thereof, or having made any payment in respect of any of the items for which
the Company is permitted to make payments to such Parent pursuant to the
covenant described under "--Certain Covenants --Limitation on Restricted
Payments," or (y) any other U.S. or non-U.S. taxes measured by income for
which such Parent is liable up to an amount not to exceed with respect to U.S.
federal taxes the amount of any such taxes that the Company would have been
required to pay on a separate company basis or on a consolidated basis if the
Company had filed a consolidated return on behalf of an affiliated group (as
defined in Section 1504 of the Code) of which it were the common parent, or
with respect to non-U.S. taxes and U.S. state and local taxes, on a combined
basis if the Company had filed a combined return on behalf of an affiliated
group consisting only of the Company and its Subsidiaries.
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness.
"Restricted Payment Transaction" means any Restricted Payment permitted
pursuant to the covenant described under "--Certain Covenants--Limitation on
Restricted Payments," any Permitted Payment, any Permitted Investment, or any
transaction (other than Guarantees) specifically excluded from the definition
of the term "Restricted Payment."
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"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" with respect to a Person means any Indebtedness of
such Person secured by a Lien.
"Senior Credit Agreement" means the credit agreement dated as of April 30,
1998, among the Company, the Issuers, the lenders named therein and Credit
Suisse First Boston, as administrative agent, as such agreement may be assumed
by any successor in interest, and as such agreement may be amended,
supplemented, waived or otherwise modified from time to time, or refunded,
refinanced, restructured, replaced, renewed, repaid, increased or extended
from time to time (whether in whole or in part, whether with the original
agent and lenders or other agents and lenders or otherwise, and whether
provided under the original Senior Credit Agreement or otherwise).
"Senior Credit Facility" means the collective reference to the Senior Credit
Agreement, any Loan Documents (as defined therein), any notes and letters of
credit issued pursuant thereto and any guarantee and collateral agreement,
patent and trademark security agreement, mortgages, letter of credit
applications and other guarantees, pledge agreements, security agreements and
collateral documents, and other instruments and documents, executed and
delivered pursuant to or in connection with any of the foregoing, in each case
as the same may be amended, supplemented, waived or otherwise modified from
time to time, or refunded, refinanced, restructured, replaced, renewed,
repaid, increased or extended from time to time (whether in whole or in part,
whether with the original agent and lenders or other agents and lenders or
otherwise, and whether provided under the original Senior Credit Agreement or
one or more other credit agreements, indentures (including the Indenture) or
financing agreements or otherwise). Without limiting the generality of the
foregoing, the term "Senior Credit Facility" shall include any agreement (i)
changing the maturity of any Indebtedness incurred thereunder or contemplated
thereby, (ii) adding Subsidiaries of the Company as additional borrowers or
guarantors thereunder, (iii) increasing the amount of Indebtedness incurred
thereunder or available to be borrowed thereunder or (iv) otherwise altering
the terms and conditions thereof.
"Senior Subordinated Indebtedness" with respect to either Issuer or any Note
Guarantor means the Notes (in the case of such Issuer) or the Note Guarantee
of such Person (in the case of such Note Guarantor) and any other Indebtedness
of such Person that ranks pari passu with the Notes or such Note Guarantee, as
the case may be.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC, as in effect on the Issue Date.
"S&P" means Standard & Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc., and its successors.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligations" with respect to either Issuer or any Note
Guarantor means any Indebtedness of such Person (whether outstanding on the
Issue Date or thereafter Incurred) that is expressly subordinated in right of
payment to the Notes (in the case of such Issuer) or to the Note Guarantee of
such Person (in the case of such Note Guarantor), pursuant to a written
agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other equity interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person or (ii) one or
more Subsidiaries of such Person.
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"Subsidiary Guarantee" means any of (i) the Guarantees of the Guaranteed JCI
Obligations by the U.S. Subsidiary Guarantors and the Guarantees of the
Guaranteed Jafra Obligations by the Jafra S.A Subsidiary Guarantors, to be
entered into on the Issue Date as described under "--Note Guarantees," and
(ii) any Guarantee in respect of the Notes that may from time to time be
entered into by a Restricted Subsidiary pursuant to the covenant described
under "--Certain Covenants--Future Subsidiary Guarantors."
"Subsidiary Guarantor" means any Restricted Subsidiary that enters into a
Subsidiary Guarantee.
"Successor" shall have the meaning assigned thereto in clause (i) under "--
Merger and Consolidation."
"Temporary Cash Investments" means any of the following: (i) any investment
in (x) direct obligations of the United States of America or any agency or
instrumentality thereof or obligations Guaranteed by the United States of
America or any agency or instrumentality thereof or (y) direct obligations of
any foreign country recognized by the United States of America rated at least
"A" by S&P or "A-1" by Moody's (or, in either case, the equivalent of such
rating by such organization or, if no rating of S&P or Moody's then exists,
the equivalent of such rating by any nationally recognized rating
organization), (ii) overnight bank deposits, and investments in time deposit
accounts, certificates of deposit, bankers' acceptances and money market
deposits (or, with respect to foreign banks, similar instruments) maturing not
more than one year after the date of acquisition thereof issued by (x) any
lender under the Senior Credit Agreement or (y) a bank or trust company that
is organized under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States of America having
capital and surplus aggregating in excess of $250 million (or the foreign
currency equivalent thereof) and whose long term debt is rated at least "A" by
S&P or "A-1" by Moody's (or, in either case, equivalent of such rating by such
organization or, if no rating of S&P or Moody's then exists, the equivalent of
such rating by any nationally recognized rating organization) at the time such
Investment is made, (iii) repurchase obligations with a term of not more than
30 days for underlying securities of the types described in clause (i) or (ii)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) Investments in commercial paper, maturing not more than 270
days after the date of acquisition, issued by a Person (other than the Company
or any of its Subsidiaries) with a rating at the time as of which any
Investment therein is made of "P-2" (or higher) according to Moody's or "A-2"
(or higher) according to S&P (or, in either case, the equivalent of such
rating by such organization or, if no rating of S&P or Moody's then exists,
the equivalent of such rating by any nationally recognized rating
organization), (v) Investments in securities maturing not more than one year
after the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by S&P or "A"
by Moody's (or, in either case, the equivalent of such rating by such
organization or, if no rating of S&P or Moody's then exists, the equivalent of
such rating by any nationally recognized rating organization), (vi) Preferred
Stock (other than of the Company or any of its Subsidiaries) having a rating
of A or higher by S&P or A2 or higher by Moody's (or, in either case, the
equivalent of such rating by such organization or, if no rating of S&P or
Moody's then exists, the equivalent of such rating by any nationally
recognized rating organization), (vii) investment funds investing 95% of their
assets in securities of the type described in clauses (i)-(vii) above (which
funds may also hold reasonable amounts of cash pending investment or
distribution), (viii) any money market deposit accounts issued or offered by a
domestic commercial bank or a commercial bank organized and located in a
country recognized by the United States of America, in each case, having
capital and surplus in excess of $250 million (or the foreign currency
equivalent thereof), or investments in money market funds complying with the
risk limiting conditions of Rule 2a-7 (or any successor rule) of the SEC,
under the Investment Company Act of 1940, as amended and (ix) similar short-
term investments approved by the Board of Directors in the ordinary course of
business.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-7bbbb)
as in effect on the Issue Date.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
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"Transactions" means, collectively, the Acquisition, the Mergers, the
initial equity investment by the Investor and (if applicable) one or more
Management Investors, the offering and the issuance of the Notes, the initial
borrowings under the Senior Credit Facility, and all other transactions
relating to the Acquisition or the financing thereof.
"Trustee" means the party named as such in the Indenture until a successor
replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or any other
officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination is an Unrestricted Subsidiary, as designated by the
Board of Directors in the manner provided below, and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
of the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any other Restricted Subsidiary of the
Company that is not a Subsidiary of the Subsidiary to be so designated;
provided, however, that either (A) the Subsidiary to be so designated has
total consolidated assets of $1,000 or less or (B) if such Subsidiary has
consolidated assets greater than $1,000, then such designation would be
permitted under the covenant described under "--Certain Covenants--Limitation
on Restricted Payments." The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation either (x) the Company could incur at
least $1.00 of additional Indebtedness under paragraph (a) in the covenant
described under "--Certain Covenants--Limitation on Indebtedness" or (y) the
Consolidated Coverage Ratio would be greater than it was immediately prior to
giving effect to such designation. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the resolution of the Company's Board of Directors giving
effect to such designation and an Officer's Certificate certifying that such
designation complied with the foregoing provisions.
"U.S. Subsidiary" means any Restricted Subsidiary of the Company other than
a Foreign Subsidiary.
"U.S. Subsidiary Guarantor" means any U.S. Subsidiary of JCI that enters
into a Subsidiary Guarantee.
"Voting Stock" of an entity means all classes of Capital Stock of such
entity then outstanding and normally entitled to vote in the election of
directors or all interests in such entity with the ability to control the
management or actions of such entity.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the material United States federal income
tax consequences of the exchange of Existing Notes for New Notes as of the
date hereof. The discussion below is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and
judicial decisions as of the date hereof, and such authorities may be
repealed, revoked or modified so as to result in federal income tax
consequences different from those discussed below. Certain Holders (including
insurance companies, tax-exempt organizations, financial institutions, broker-
dealers, foreign corporations and persons who are not citizens or residents of
the United States) may be subject to special rules not discussed below.
The exchange of Existing Notes for New Notes pursuant to the Exchange Offer
should not be a taxable event for U.S. federal income tax purposes because the
New Notes should not be considered to differ materially from the Existing
Notes. As a result, there should be no material U.S. federal income tax
consequences to a holder exchanging Existing Notes for the New Notes pursuant
to the Exchange Offer.
EACH HOLDER OF EXISTING NOTES SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR
AS TO THE PARTICULAR TAX CONSEQUENCES OF EXCHANGING EXISTING NOTES FOR NEW
NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR NON-U.S.
TAX LAWS.
BOOK-ENTRY; DELIVERY AND FORM
The New Notes will be issued in fully registered form without interest
coupons. The Notes will be represented by one or more permanent global Notes
in definitive, fully registered form without coupons (the "Global Security")
and will be registered in the name of a nominee of DTC and deposited with the
Trustee as custodian for DTC for credit to the respective accounts of the
purchasers (or to such other accounts as they may direct).
DTC has advised the Company that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a "banking
organization" within the meaning of the New York Banking Law, (iii) a member
of the Federal Reserve System, (iv) a "clearing corporation" within the
meaning of the Uniform Commercial Code, and (v) a "Clearing Agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participants and facilitate the clearance and
settlement of securities transactions between participants through electronic
book-entry changes in accounts of its participants, thereby eliminating the
need for physical movement of certificates. Participants include securities
brokers and dealers, banks, trust companies and clearing corporations and
certain other organizations. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
The Company expects, pursuant to procedures established by DTC, that upon
deposit of the Global Security, DTC or its custodian will credit, on its
internal system, the respective principal amount of the individual beneficial
interests represented by such Global Security to the accounts of persons who
have accounts with such depositary. Such accounts initially will be designated
by or on behalf of the Initial Purchasers. Ownership of beneficial interests
in the Global Security will be limited to persons who have accounts with DTC
("participants") or persons who hold interests through participants. Ownership
of beneficial interests in the Global Security will be shown on, and the
transfer of that ownership will be effected only through, records maintained
by DTC or its nominee (with respect to interests of participants) and the
records of participants (with respect to interests of persons other than
participants). QIBs may hold their interests in the Global Security directly
through DTC if they are participants in such system, or indirectly through
organizations which are participants in such system.
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The Indenture will not provide for issuance of Notes in definitive form
except in limited circumstances, described below under "--Certificated Notes."
The laws of some states require that certain persons take physical delivery in
definitive form of securities that they own and that security interests in
negotiable instruments can only be perfected by delivery of certificates
representing the instruments. Consequently, the ability to transfer the Notes
or to pledge the Notes as collateral to persons in such states will be limited
to such extent. For certain other restrictions on the transferability of the
Notes, see "Transfer Restrictions."
So long as DTC or its nominee is the registered owner or holder of the
Global Security, DTC or such nominee, as the case may be, will be considered
the sole record owner or holder of the Notes represented by such Global
Security for all purposes under the Indenture and the Notes. No beneficial
owners of an interest in the Global Security will be able to transfer that
interest except in accordance with the applicable procedures of DTC or
Euroclear, in addition to those provided for under the Indenture. Beneficial
owners of an interest in a Global Security will not be entitled to have Notes
represented by such Global Security registered in their names, will not
receive or be entitled to receive physical delivery of Notes in definitive
form, and will not be considered the owners or holders thereof under the
Indenture for any purpose, including with respect to the giving of any
direction, instruction or approval to the Trustee thereunder. As a result, the
ability of a person having a beneficial interest in Notes represented by a
Global Security to pledge or transfer such interest to persons or entities
that do not participate in DTC's system or otherwise to take action with
respect to such interest, may be affected by lack of a physical certificate
evidencing such interest.
Accordingly, each holder owning a beneficial interest in a Global Security
must rely on the procedures of DTC or Euroclear and, if such holder is not a
participant or an indirect participant, on the procedures of the participant
through which such holder owns its interest, to exercise any rights of a
holder of Notes under the Indenture or such Global Security. The Company
understands that under existing practice, in the event the Company requests
any action of holders of Notes or a holder that is an owner of a beneficial
interest in a Global Security requests any action of holders of Notes or a
holder that is an owner of a beneficial interest in a Global Security desires
to take any action that DTC as the holder of such Global Security, is entitled
to take, DTC would authorize the participants to take such action and the
participant would authorize holders owning through such participants to take
such action or would otherwise act upon the instruction of such holders.
Payments of the principal of, premium, if any, and interest on the Global
Security will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. Neither the Company, the Trustee, nor any paying
agent will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
the Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of the Global Security,
will credit participants' accounts with payments in amounts proportionate to
their respective beneficial ownership interests in the principal amount of
such Global Security, as shown on the records of DTC or its nominee. The
Company also expects that payments by participants to owners of beneficial
interests in such Global Security held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in immediately available
funds.
Neither the Company nor the Trustee will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations. Although DTC and its participants have agreed to the foregoing
procedures to facilitate transfers of interests in the Global Security among
participants, it is under no obligation to perform such procedures, and
117
<PAGE>
such procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under
the rules and procedures governing their operations.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depository or DTC ceases to be registered as a
clearing agency under the Exchange Act and the Company is unable to locate a
qualified successor within 90 days, (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture or (iii) upon the occurrence of certain
other events, then, upon surrender by DTC of its Global Securities, definitive
Notes in registered form without coupons will be issued, subject to certain
certification requirements, to each person that DTC identifies as the
beneficial owner of the Notes represented by the Global Security.
118
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Existing Notes
where such Existing Notes were acquired as a result of market-making
activities or other trading activities. The Issuers have agreed that, for a
period of 90 days after the Expiration Date, they will make this Prospectus,
as amended or supplemented, available to any broker-dealer for use in
connection with any such resale. In addition, until , 1998, all dealers
effecting transactions in the New Notes may be required to deliver a
prospectus.
The Issuers will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer or the purchasers of any such New Notes. Any broker-
dealer that resells New Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit or any such resale of New Notes
and any commissions or concessions received by any such persons may be deemed
to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Issuers will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the
Letter of Transmittal. The Issuers have agreed to pay all expenses incident to
the Exchange Offer (including the expenses of one counsel for the Holders of
the Existing Notes) other than commissions or concessions of any broker-
dealers and will indemnify the Holders of the Existing Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
Credit Suisse First Boston, a Swiss Bank and an affiliate of Credit Suisse
First Boston Corporation, is the administrative agent with respect to the
Senior Credit Agreement. Credit Suisse First Boston Corporation provided
certain financial advisory services to the Company in connection with the
Acquisition and received customary compensation in connection therewith. In
addition, Credit Suisse First Boston and its affiliates perform various
investment banking and commercial banking services from time to time for
Sponsor and its affiliates.
Chase Securities Inc. is an affiliate of The Chase Manhattan Bank which is a
lender to the Issuers under the Senior Credit Agreement and has provided loans
to certain members of management in connection with their purchase of equity
of Parent. In addition, Chase Securities Inc. and its affiliates perform
various investment banking and commercial banking services from time to time
for Sponsor and its affiliates, and an affiliate of Chase Securities Inc. is a
limited partner of CD&R Fund V.
LEGAL MATTERS
The validity of the Notes and the Guarantees will be passed upon for the
Issuers and the Note Guarantors by Debevoise & Plimpton, New York, New York
and certain other matters will be passed upon for the Parent, Jafra S.A. and
the Note Guarantors by Bonn & Schmitt, Luxembourg, and Ritch, Heather y
Mueller, S.C., Mexico City, Mexico. Franci J. Blassberg, Esq., a member of
Debevoise & Plimpton, is married to Joseph L. Rice, III, who is a shareholder
of the general partner of CD&R Fund V.
119
<PAGE>
EXPERTS
The audited combined financial statements of the Company and its
subsidiaries as of December 31, 1997 and 1996 and for each of the years in the
three-year period ended December 31, 1997 have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
The combined balance sheet of CDRJ Investments (Lux) S.A. as of April 28,
1998 included in this prospectus has been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and is
included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
120
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Combined Balance Sheets -- As of December 31, 1997 and 1996............... F-3
Combined Statements of Operations -- For the years ended December 31,
1997, 1996 and 1995...................................................... F-4
Combined Statements of Divisional Equity -- For the years ended December
31, 1997, 1996 and 1995.................................................. F-5
Combined Statements of Cash Flows -- For the years ended December 31,
1997, 1996 and 1995...................................................... F-6
Notes to Combined Financial Statements.................................... F-7
Independent Auditors' Report.............................................. F-20
Combined Balance Sheet -- CDRJ Investments (Lux) S.A. -- as of April 28,
1998..................................................................... F-21
Notes to Combined Balance Sheet........................................... F-22
Unaudited:
Consolidated Balance Sheet -- As of June 30, 1998....................... F-23
Consolidated Statements of Operations for the periods ended June 30,
1998, April 30, 1998 and June 30, 1997................................. F-24
Consolidated Statements of Cash Flows for the periods ended June 30,
1998, April 30, 1998 and June 30, 1997................................. F-25
Notes to Consolidated Financial Statements.............................. F-26
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
Jafra Cosmetics International:
We have audited the accompanying combined financial statements of Jafra
Cosmetics International, as defined in note 1, as listed in the accompanying
index. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Jafra Cosmetics
International as of December 31, 1997 and 1996 and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
February 27, 1998
Los Angeles, California
F-2
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
COMBINED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 10,231 $ 8,662
Receivables, less allowance for doubtful accounts of
$2,057 and
$1,919, respectively..................................... 27,298 26,271
Inventories (note 3)...................................... 38,028 45,141
Due from Gillette and other divisions (note 9)............ 39,885 24,416
Prepaid expenses and other current assets................. 3,197 2,540
Prepaid income taxes (note 7)............................. -- 814
--------- --------
Total current assets.................................... 118,639 107,844
Property, plant and equipment, at cost, net (note 4)........ 43,682 41,795
Goodwill, less accumulated amortization..................... 10,269 10,591
Other assets................................................ 2,660 4,231
--------- --------
$ 175,250 $164,461
========= ========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Short-term notes payable to bank (note 5)................. $ 8,513 $ --
Accounts payable and accrued liabilities (note 6)......... 35,384 39,066
Due to Gillette and other divisions (note 9).............. 45,440 41,046
Deferred income taxes (note 7)............................ 711 3,307
Income taxes payable (note 7)............................. 5,978 --
--------- --------
Total current liabilities............................... 96,026 83,419
Other long-term liabilities................................. 1,920 2,401
--------- --------
Total liabilities....................................... 97,946 85,820
--------- --------
Divisional equity........................................... 77,304 78,641
Commitments and contingencies (note 11)
--------- --------
$ 175,250 $164,461
========= ========
</TABLE>
See accompanying notes to combined financial statements.
F-3
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales....................................... $229,524 $224,544 $218,431
Cost of sales................................... 59,129 58,216 54,310
-------- -------- --------
Gross profit................................ 170,395 166,328 164,121
Selling, general and administrative expenses
(note 9)....................................... 149,430 155,759 154,024
-------- -------- --------
Income from operations...................... 20,965 10,569 10,097
Other (expense) income:
Exchange gain (loss).......................... 312 (7) 25,459
Interest income, net (note 9)................. 306 834 4,343
Other expense, net............................ (1,318) (1,383) (982)
-------- -------- --------
Income before income taxes and extraordinary
credit..................................... 20,265 10,013 38,917
Income taxes (note 7)........................... 4,816 2,620 6,095
-------- -------- --------
Income before extraordinary credit.......... 15,449 7,393 32,822
Extraordinary credit, net of tax of $934--for-
giveness of debt (note 9) -- 2,646 --
-------- -------- --------
Net income.................................. $ 15,449 $ 10,039 $ 32,822
======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-4
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
COMBINED STATEMENTS OF DIVISIONAL EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL CURRENCY TOTAL
COMMON PAID- TRANSLATION RETAINED DIVISIONAL
STOCK IN CAPITAL ADJUSTMENT EARNINGS EQUITY
------- ---------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1994....................... $46,853 $1,918 $ (7,613) $83,774 $124,932
Net income.................. -- -- -- 32,822 32,822
Dividends paid to Gillette.. -- -- -- (5,600) (5,600)
Capital of new division
included in combined group. 788 -- -- -- 788
Translation adjustment...... -- -- (45,444) -- (45,444)
Divestiture of an
international division..... -- -- 1,237 -- 1,237
------- ------ -------- ------- --------
Balance at December 31,
1995....................... 47,641 1,918 (51,820) 110,996 108,735
Net income.................. -- -- -- 10,039 10,039
Dividends paid to Gillette.. -- -- -- (37,970) (37,970)
Translation adjustment...... -- -- (2,163) -- (2,163)
------- ------ -------- ------- --------
Balance at December 31,
1996....................... 47,641 1,918 (53,983) 83,065 78,641
Net income.................. -- -- -- 15,449 15,449
Dividends paid to Gillette.. -- -- -- (18,355) (18,355)
Capital of new division
included in combined group. 1,926 -- -- -- 1,926
Translation adjustment...... -- -- (357) -- (357)
------- ------ -------- ------- --------
Balance at December 31,
1997....................... $49,567 $1,918 $(54,340) $80,159 $ 77,304
======= ====== ======== ======= ========
</TABLE>
See accompanying notes to combined financial statements.
F-5
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 15,449 $10,039 $32,822
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss (gain) on disposal of property and
equipment..................................... (126) 3,462 --
Depreciation and amortization.................. 4,361 3,317 2,761
Changes in assets and liabilities:
(Increase) decrease in:
Receivables.................................. (1,027) (3,733) 7,660
Inventories.................................. 7,113 (8,406) 4,151
Prepaid expenses and other current assets.... (657) 1,011 2,304
Other assets................................. 1,571 636 (22)
Increase (decrease) in:
Accounts payable and accrued liabilities..... (3,682) (976) (7,364)
Deferred income taxes........................ (2,596) (9,253) 10,288
Income taxes payable......................... 6,792 9,245 (25,287)
Other long-term liabilities.................. (481) 66 154
-------- ------- -------
Net cash provided by operating activities... 26,717 5,408 27,467
-------- ------- -------
Cash flows from investing activities:
Proceeds from sale of property and equipment..... 3,132 5,805 6,428
Purchases of property and equipment.............. (8,932) (10,313) (20,319)
-------- ------- -------
Net cash used in investing activities....... (5,800) (4,508) (13,891)
-------- ------- -------
Cash flows from financing activities:
Net proceeds from bank debt...................... 8,513 -- --
Capital contributions by Gillette................ 1,926 -- 788
Dividends paid to Gillette....................... (18,355) (37,970) (5,600)
Transactions with Gillette and other divisions... (11,075) 40,365 (8,567)
-------- ------- -------
Net cash (used in) provided by financing
activities................................. (18,991) 2,395 (13,379)
-------- ------- -------
Effect of exchange rate change on cash............ (357) (2,163) 894
-------- ------- -------
Net increase in cash and cash equivalents... 1,569 1,132 1,091
Cash and cash equivalents at beginning of year.... 8,662 7,530 6,439
-------- ------- -------
Cash and cash equivalents at end of year.......... $ 10,231 $ 8,662 $ 7,530
======== ======= =======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest....................................... $ 2,811 $ 3,657 $ 5,767
Taxes.......................................... $ 4,313 $ 441 $ 4,157
-------- ------- -------
</TABLE>
See accompanying notes to combined financial statements.
F-6
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) BASIS OF PRESENTATION
The combined financial statements of Jafra Cosmetics International (the
"Company") include the following subsidiaries and divisions of The Gillette
Company ("Gillette"): Jafra Cosmetics International, Inc., a California
corporation; Jafra Cosmetics GmbH, a German company; Jafra Cosmetics
International B.V., a Netherlands company; Jafra Cosmetics S.p.A., an Italian
company; Jafra Cosmetics A.G., a Swiss company; Grupo Jafra, S.A. de C.V., a
Mexican company, and its Subsidiaries, together with certain operating assets
and the related operating profit of Gillette Braun used in the Jafra business
in Mexico (the "Braun Assets"); the divested operations of the Company,
principally in Portugal, Spain, Brazil and the United Kingdom (collectively
the "Divested Markets"); the Jafra related operations of Gillette affiliates
in Austria, Argentina, Colombia and Venezuela; and the assets related to the
Jafra intellectual property, held by Gillette, that are used in the Jafra
business.
All interdivisional balances and transactions between the entities have been
eliminated. Accounts of subsidiaries and operations outside the United States
are included on the basis of fiscal years generally ending November 30.
Accordingly, the accompanying combined financial statements include the
accounts of these subsidiaries and operations for the twelve months ended
November 30.
The common stock of the Company primarily represents the stock of Jafra
Cosmetics International, Inc., a California corporation. Given the combined
group are all subsidiaries of Gillette, earnings per share data is omitted
from the accompanying combined financial statements.
The Company is a leading direct seller of high-quality skin and body care
products, color cosmetics, fragrances, nutritional supplements and other
personal care products. The Company's products are sold through a personalized
direct selling system comprised of approximately 221,000 self-employed sales
representatives operating worldwide. The Company is headquartered in Westlake
Village, California and has major manufacturing operations in Westlake Village
and in Naucalpan, Mexico.
The accompanying combined financial statements were prepared in
contemplation of the transaction between Gillette and a third party, effective
April 30, 1998. Upon consummation of this transaction certain purchase
accounting adjustments were made pursuant to generally accepted accounting
principles. No such adjustments were made to the accompanying combined
financial statements.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash, time deposits and all highly liquid
debt instruments with an original maturity of three months or less.
INVENTORIES
Inventories are stated at the lower of cost, as determined by the first-in,
first-out (FIFO) basis, or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation of plant and
equipment is provided over the estimated useful lives of the respective assets
on the straight-line method. Estimated useful lives are 40 years for building
and improvements and 3 to 10 years for machinery and equipment.
F-7
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
Maintenance and repairs, including cost of minor replacements, are charged
to operations as incurred. Costs of additions and betterments are added to
property and equipment accounts provided that such expenditures increase the
useful life or the value of the asset.
INTANGIBLE ASSETS
Intangible assets principally consist of goodwill, which is amortized on the
straight-line method, generally over a period of 37.5 years. The carrying
amounts of intangible assets are assessed for impairment when income from
operations from the applicable related business indicates that the carrying
amounts of the assets may not be recoverable. No write-downs for impairment
were recorded during the years ended December 31, 1997, 1996 and 1995.
IMPAIRMENT OF LONG-LIVED ASSETS AND ASSETS HELD FOR SALE
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The statement is effective for fiscal years
beginning after December 15, 1995. The statement establishes accounting
standards for the recognition and measurement of impairment of long-lived
assets, certain identifiable intangibles and goodwill either to be held or
disposed of. The Company adopted Statement No. 121 in 1996. The adoption did
not have a material impact on the Company's financial position or results of
operations.
As part of an ongoing review of the valuation and amortization of intangible
assets, management assesses the carrying value of the Company's intangible
assets if facts and circumstances suggest that it may be impaired. If this
review indicates that the intangibles will not be recoverable, as determined
by an undiscounted operating cash flow analysis over the remaining
amortization period, the carrying value of the Company's intangibles would be
reduced to its estimated fair market value.
FINANCIAL INSTRUMENTS
The carrying amounts of cash, short-term investments, receivables, accounts
payable and accrued liabilities, and loans payable approximate fair value
because of the short-term maturities of these instruments. The carrying
amounts of other long-term liabilities are based upon the present value of
such liabilities. The carrying amounts of interdivisional accounts approximate
fair value.
The fair value of the Company's short-term debt instruments, which
approximate the carrying values, are based upon the current rates offered to
the Company for similar maturities.
ADVERTISING
Advertising costs are expensed as incurred. Total advertising expense
aggregated $250,000, $348,000 and $409,000 for the years ended December 31,
1997, 1996 and 1995, respectively.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred. Total research and
development expense aggregated $2,911,000, $3,319,000 and $3,098,000 for the
years ended December 31, 1997, 1996 and 1995, respectively.
OTHER EXPENSES
Included in other, net are credit card fees incurred of $904,000, $841,000
and $637,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
F-8
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
INCOME TAXES
Income taxes are recorded using the asset and liability method whereby
deferred tax assets and liabilities are recognized for the temporary
differences between the financial statement carrying amounts and the tax bases
of the Company's assets, liabilities and loss and tax credit carryforwards at
income tax rates expected to be in effect when such amounts are realized or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in earnings in the period that includes the enactment
date.
FOREIGN CURRENCY TRANSLATION
All assets and liabilities of foreign subsidiaries and divisions are
translated into U.S. dollars at fiscal year-end exchange rates. Income and
expense items are translated at average exchange rates prevailing during the
fiscal year. Where the U.S. dollar is the functional currency, translation
adjustments are recorded in income.
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" (SFAS 130), and Statement No. 131,
"Disclosure about Segments of an Enterprise and Related Information" (SFAS
131). The Company is required to adopt these statements in fiscal year 1998.
SFAS 130 establishes new standards for reporting and displaying comprehensive
income and its components. SFAS 131 requires disclosure of certain information
regarding operating segments, products and services, geographic areas of
operations and major customers. Management has not yet determined whether the
above statements will have a material impact on the Company's combined
financial position, results of operations or cash flows.
USE OF ESTIMATES
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions. These affect the reported amounts of assets,
liabilities, revenues and expenses and the amount of any contingent assets or
liabilities disclosed in the financial statements. Actual results could differ
from the estimates made.
(3) INVENTORIES
Inventories are summarized as follows at December 31, 1997 and 1996 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Raw materials and supplies............................... $ 8,439 $ 9,246
Work in process.......................................... 198 1,385
Finished goods........................................... 29,391 34,510
------- -------
$38,028 $45,141
======= =======
</TABLE>
F-9
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows at December 31, 1997
and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Land................................................... $ 6,072 $ 6,072
Buildings.............................................. 17,150 16,925
Machinery and equipment................................ 40,173 35,923
------- --------
63,395 58,920
Less accumulated depreciation.......................... (26,528) (23,681)
------- --------
36,867 35,239
Land held for sale..................................... 6,815 6,556
------- --------
$43,682 $ 41,795
======= ========
</TABLE>
(5) SHORT-TERM NOTES PAYABLE TO BANK
Short-term notes payable to bank consist of three loans to foreign banks
which are payable in foreign currencies and bear interest at rates ranging
between 2.9% and 3.15%. All loans are due in fiscal year 1998.
(6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities are summarized as follows at
December 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accounts payable......................................... $12,688 $16,375
Advertising and sales promotion.......................... 12,608 11,748
Payroll and payroll taxes................................ 2,427 3,306
State and local sales taxes.............................. 1,455 1,318
Miscellaneous............................................ 6,206 6,319
------- -------
$35,384 $39,066
======= =======
</TABLE>
(7) INCOME TAXES
The Company's income is included in Gillette's consolidated U.S. income tax
return. For financial reporting purposes, the Company has provided income
taxes (benefit) on a separate-company basis. Income tax expense is summarized
as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current:
Federal...................................... $ 222 $(1,095) $(1,388)
Foreign:
Mexico..................................... 4,717 3,391 7,743
Western Europe............................. 1,938 1,954 1,584
United Kingdom............................. -- -- 804
Canada..................................... 854 -- --
Other...................................... -- 127 154
------- ------- -------
7,731 4,377 8,897
State........................................ (170) (380) (568)
------- ------- -------
Total current............................ 7,561 3,997 8,329
Deferred -- foreign -- Mexico.................. (2,745) (443) (2,234)
------- ------- -------
$ 4,816 $ 3,554 $ 6,095
======= ======= =======
</TABLE>
F-10
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
Actual income tax rate differs from the "expected" tax rate (computed by
applying the U.S. Federal corporate rate of 35% to income before income taxes)
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Statutory Federal tax rate............................ 35.0% 35.0% 35.0%
State taxes, net of Federal tax benefit............... .1 (.7) (.3)
Reduction in valuation allowance...................... (2.5) (2.1) (.8)
Effect of foreign operations.......................... (11.4) (10.9) (20.4)
Other................................................. 2.6 4.8 2.2
----- ----- -----
Effective tax rate.................................. 23.8% 26.1% 15.7%
===== ===== =====
</TABLE>
The components of deferred tax assets and deferred tax liabilities are shown
below (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance for
doubtful accounts........................................ $ 584 $ 534
Inventory, principally due to additional costs capitalized
for tax purposes and accrued reserves.................... 1,833 2,376
Accrued liability relating to compensation-related ex-
pense.................................................... 299 291
Advertising and sales promotion........................... 1,946 1,701
Other accrued liabilities................................. 819 724
Fixed assets, principally attributable to differences in
depreciation methods..................................... 1,274 1,428
Other..................................................... 1,319 1,220
------- --------
Total deferred tax assets............................... 8,074 8,274
Less valuation allowance.................................. (965) (1,524)
------- --------
Net deferred tax assets................................. 7,109 6,750
------- --------
Deferred tax liabilities:
Depreciation.............................................. (1,841) (1,684)
Inventory reserves........................................ (5,979) (8,373)
------- --------
Total deferred tax liabilities.......................... (7,820) (10,057)
------- --------
Net deferred tax liabilities............................ $ (711) $ (3,307)
======= ========
</TABLE>
The Company records a valuation allowance on the deferred tax assets to
reduce the total to an amount that management believes will ultimately be
realized. Realization of deferred tax assets is dependent upon sufficient
future taxable income during the period that temporary differences and
carryforwards are expected to be available to reduce taxable income.
(8) RETIREMENT BENEFITS
The Company participates in The Gillette Company Retirement Plan (the Plan)
which is a defined benefit pension plan covering substantially all of
Gillette's domestic employees. Benefits are based on age, years of service and
the level of compensation during the final years of employment. Gillette's
funding policy is to contribute annually to the Plan the amount necessary to
meet the minimum funding standards established by the Employee Retirement
Income Security Act.
F-11
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
The components of Gillette's net pension expense for the Plan for the years
ended December 31, 1997, 1996 and 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost--benefits earned.............. $ 29,892 $ 28,828 $ 24,185
Interest cost on projected benefit
obligation................................ 60,245 55,731 53,440
Actual return on Plan assets............... (184,649) (118,046) (152,662)
Net amortization and deferral.............. 116,569 64,129 113,161
--------- --------- ---------
Pension expense.......................... $ 22,057 $ 30,642 $ 38,124
========= ========= =========
</TABLE>
The Company's share of the above pension expense was $970,000, $1,223,000
and $1,250,000 in 1997, 1996 and 1995, respectively. The Company's share of
pension expense is based on the Company's payroll covered by the Plan as a
percentage of total payroll covered by the Plan.
The funded status of the Plan is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ---------
<S> <C> <C> <C>
Vested benefits.............................. $693,835 $629,252 $ 601,462
Nonvested benefits........................... 94,981 89,185 88,062
-------- -------- ---------
Accumulated benefit obligation............. 788,816 718,437 689,524
Benefit obligation related to future
compensation levels......................... 170,642 160,792 147,752
-------- -------- ---------
Projected benefit obligation............... 959,458 879,229 837,276
Fair value of Plan assets, invested primarily
in equities and debt securities............. 990,026 815,737 689,658
-------- -------- ---------
Projected benefit obligation in excess of
Plan assets............................... 30,568 (63,492) (147,618)
Unrecognized transition obligation........... 1,648 1,097 325
Unrecognized prior service cost.............. 11,478 7,750 17,720
Unrecognized net loss........................ 9,178 97,173 158,801
Minimum liability adjustment................. (25,459) (25,828) (23,352)
-------- -------- ---------
Gillette's prepaid pension cost.............. $ 27,413 $ 16,700 $ 5,876
======== ======== =========
</TABLE>
The primary assumptions used in determining obligations of the Plan are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Discount rate............................................ 7.00% 7.00% 6.75%
Increase in compensation levels.......................... 5.00 5.00 5.00
Long-term rate of return on assets....................... 9.00% 9.00% 9.00%
==== ==== ====
</TABLE>
The Company also participates in Gillette's plans which provide certain
health care and life insurance benefits to retired employees. Substantially
all of the Company's employees become eligible for these benefits upon
retirement. At the time of retirement, employees who elect to participate are
required to pay some portion of such medical costs if hired before July 1,
1990, or all of such costs if hired after that date. Gillette's employee stock
ownership plan (ESOP) was established to assist employees who retire after
January 1, 1992 to finance their retiree medical costs.
F-12
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
The Company recognizes the cost of postretirement benefits other than
pensions during employees' active working lives. The components of Gillette's
net other postretirement benefit expense follow (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Interest cost................................... $17,008 $19,181 $23,376
Service cost.................................... 4,758 1,652 151
Actual return on assets......................... (6,010) (3,543) (3,360)
Net amortization expense........................ (3,631) (906) (993)
------- ------- -------
Other postretirement benefit expense.......... $12,125 $16,384 $19,174
======= ======= =======
</TABLE>
The Company's share of the above other postretirement benefit expense for
1997, 1996 and 1995 was $128, $205 and $306, respectively. The status of
Gillette's plans and the amounts recognized in the balance sheets follow (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Retirees..................................... $162,739 $171,854 $182,179
Fully eligible active employees.............. 18,356 25,341 30,770
Other active employees....................... 66,735 69,126 67,208
-------- -------- --------
Accumulated postretirement benefit
obligation................................ 247,830 266,321 280,157
Fair value of plan assets.................... (33,249) (24,000) (17,375)
Unrecognized net gain........................ 86,947 67,636 47,327
-------- -------- --------
Gillette's accrued postretirement liability.. $301,528 $309,957 $310,109
======== ======== ========
</TABLE>
The accumulated postretirement benefit obligation was determined using an
assumed discount rate of 7.00%, 7.00% and 6.75% in 1997, 1996 and 1995,
respectively. The assumed health care cost trend rate was 9%, 10% and 11% in
1997, 1996 and 1995, respectively, decreasing to 5% by the year 2001. A one
percentage point increase in the trend rate would have increased Gillette's
accumulated postretirement benefit obligation by 12% and interest and service
cost by 14% in 1997.
ESOP shares allocated to participants reduce Gillette obligations over the
period of allocation. The account balance is assumed to have an annual yield
of 12%. In addition, Gillette established a retiree health benefits account
within its pension plan that will be used to partially fund health care
benefits for future retirees.
Certain of the Company's Germany employees participate in the Germany Plan,
which is a defined benefit pension plan covering key employees. Benefits are
based on age, years of service and the level of compensation during the final
years of employment. The Company's funding policy is to contribute annually to
the Germany Plan the amount necessary to meet the minimum funding standards.
The total pension expense amounted to $140,000, $245,000 and $321,000 for the
years ended December 31, 1997, 1996 and 1995, respectively.
Under Mexican Labor Laws, employees of Grupo Jafra, S.A. de C.V. and its
Subsidiaries are entitled to a payment when they leave the Company if they
have fifteen or more years of service. In addition, the Company makes
government mandated employee profit sharing distributions equal to ten percent
of the taxable income of the company in which they work.
Certain key employees of the Company have been granted options to purchase
stock of The Gillette Company. Gillette applies APB Opinion No. 25 and related
Interpretations in accounting for these options. Accordingly, no compensation
cost has been allocated to the Company. The fair value of each option granted
by
F-13
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
Gillette has been estimated on the date of the grant using the Black Scholes
option pricing model. Had the Company recorded a charge for the fair value of
options granted consistent with FASB Statement 123, net income would have been
reduced by $2,800,000, $1,800,000 and $1,100,000 for the years ended December
31, 1997, 1996 and 1995, respectively.
(9) RELATED PARTIES
Certain expenses are charged by Gillette to the Company. Management believes
the amounts and methods of allocation are reasonable and approximate actual
services provided. Such services include legal, trademark and patent support,
internal audit, and other administrative costs. Total related net charges were
$2,045,000, $2,495,000 and $2,550,000 in 1997, 1996 and 1995, respectively,
and are included in selling, general and administrative expenses in the
accompanying combined statements of operations.
Jafra Cosmetics International, Inc. provides certain management services to
Grupo Jafra, S.A. de C.V., an affiliated subsidiary of the Company, which are
general and administrative in nature. Total related services amounted to
$5,373,000, $3,933,000 and $3,613,000 in 1997, 1996 and 1995, respectively,
and have been eliminated in the accompanying combined statements of
operations.
During 1997, Jafra Cosmetics International, Inc. wrote off approximately
$3,200,000 of payables due from its affiliate in Canada, as a result of the
decision to close the market in Canada. The division in Canada recorded this
as a credit to earnings. Accordingly, these transactions offset in
combination.
Interest is charged and earned on affiliated payables and receivables at the
LIBOR rate. The total related interest was $592,000, $41,000 and $2,890,000 in
1997, 1996 and 1995, respectively, and is included in interest, net in the
accompanying combined statements of operations.
The Company transferred $32,330,000, $20,058,000 and $17,894,000 of
inventory to intercompanies and affiliates at prices covering materials, labor
and overhead during 1997, 1996 and 1995, respectively.
Extraordinary credit for the year ended December 31, 1996 represents the
forgiveness of liabilities due to an affiliate (Gillette) related to the
divestiture of the Brazil market. All other assets and liabilities were
liquidated with a nominal impact on the combined financial statements. The
amount has been recorded net of the income tax effect of $934,000.
In addition, Gillette acts as a cash manager for the Company. As such,
balances due to/from Gillette and other divisions consist of amounts related
to this and the above transactions.
Included in income from operations for the year ended December 31, 1996 is a
$5,400,000 charge for write-off of certain computer system and related costs.
The Company brought legal action against the computer systems contractor and
obtained a settlement resulting in a cash recovery of $2,300,000. This
recovery is included in income from operations for the year ended December 31,
1997.
Included in income from operations for the years ended December 31, 1997,
1996 and 1995 are net charges of $3,500,000, $700,000 and $9,600,000,
respectively, related to the write-off of certain net assets and expenses
incurred due to the reorganization and closure of various markets.
F-14
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
(10) FINANCIAL INFORMATION BY GEOGRAPHIC AREA
The following financial information is provided by geographic area (in
thousands):
<TABLE>
<CAPTION>
WESTERN LATIN TOTAL UNITED
EUROPE AMERICA MEXICO OTHER FOREIGN STATES TOTAL
------- ------- ------- ------- -------- ------- --------
1997
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $46,806 $14,204 $97,577 $ 300 $158,887 $70,637 $229,524
======= ======= ======= ======= ======== ======= ========
Income (loss) from oper-
ations................. $ 717 $(2,879) $16,363 $(1,366)(1) $ 12,835(1) $ 8,130(1) $ 20,965
======= ======= ======= ======= ======== ======= ========
Identifiable assets..... $37,277 $10,727 $83,032 $ 4,462 $135,498 $55,510 $191,008
Consolidating and com-
bining adjustments..... (1,104) -- (731) -- (1,835) (13,923) (15,758)
------- ------- ------- ------- -------- ------- --------
Identifiable assets... $36,173 $10,727 $82,301 $ 4,462 $133,663 $41,587 $175,250
======= ======= ======= ======= ======== ======= ========
1996
Net sales............... $60,202 $11,012 $79,548 $ 1,188 $151,950 $72,594 $224,544
======= ======= ======= ======= ======== ======= ========
Income (loss) from oper-
ations................. $ 687 $(1,874) $11,572 $ (978) $ 9,407 $ 1,162 $ 10,569
======= ======= ======= ======= ======== ======= ========
Identifiable assets..... $29,346 $11,019 $82,843 $ 2,956 $126,164 $52,485 $178,649
Consolidating and com-
bining adjustments..... (996) -- (2,764) -- (3,760) (10,428) (14,188)
------- ------- ------- ------- -------- ------- --------
Identifiable assets... $28,350 $11,019 $80,079 $ 2,956 $122,404 $42,057 $164,461
======= ======= ======= ======= ======== ======= ========
1995
Net sales............... $59,815 $12,676 $76,246 $ 918 $149,655 $68,776 $218,431
======= ======= ======= ======= ======== ======= ========
Income (loss) from oper-
ations................. $ 724 $ (166) $12,249 $(1,225) $ 11,582 $(1,026) $ 10,556
Consolidating and com-
bining adjustments..... 552 -- -- (71) 481 (940) (459)
------- ------- ------- ------- -------- ------- --------
Income (loss) from op-
erations............. $ 1,276 $ (166) $12,249 $(1,296) $ 12,063 $(1,966) $ 10,097
======= ======= ======= ======= ======== ======= ========
</TABLE>
All material intercompany transactions have been eliminated.
(1) During 1997, Jafra Cosmetics International, Inc. (United States) wrote off
approximately $3,200,000 of payables due from its affiliate in Canada
(other), as a result of the decision to close the market in Canada. The
division in Canada recorded this as a credit to earnings, accordingly,
these transactions offset in combination. The effects of these
transactions in the above table, however, have been eliminated from the
separate segment presentation to reflect the income from operations
exclusive of this transaction.
(11) COMMITMENTS AND CONTINGENCIES
The Company leases office and warehouse facilities as well as manufacturing,
transportation and data processing equipment under operating leases which
expire at various dates through March 2004. Future minimum lease payments
under noncancelable operating leases as of December 31, 1997 are (in
thousands):
<TABLE>
<S> <C>
1998............................................ $1,322
1999............................................ 1,030
2000............................................ 882
2001............................................ 878
2002............................................ 414
Thereafter...................................... 513
------
$5,039
======
</TABLE>
Certain of the aforementioned operating leases may be terminated upon
transfer or sale of the Company (note 1).
Rental expense amounted to $1,500,000, $1,800,000 and $1,800,000 for the
years ended December 31, 1997, 1996 and 1995, respectively.
The Company is subject to legal proceedings and claims arising out of its
business. Management, after review and consultation with counsel, considers
that any liability from such pending legal proceedings and claims would not
materially affect the combined financial position, results of operations or
liquidity of the Company.
F-15
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
(12) SUPPLEMENTAL INFORMATION
Combining condensed statement of operations data for the years ended December
31, 1997, 1996 and 1995 is summarized as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------------------
JAFRA COSMETICS INTERNATIONAL,
INC. (1)
--------------------------------- OTHER
GUARANTOR NONGUARANTOR TOTAL GRUPO JAFRA REGIONS AND TOTAL
ENTITY ENTITIES COMBINED S.A. DE C.V. (2) ELIMINATIONS COMBINED
--------- ------------ -------- ---------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $70,637 $46,806 $117,443 $97,577 $14,504 $229,524
Cost of sales........... 18,519 9,638 28,157 27,124 3,848 59,129
------- ------- -------- ------- ------- --------
Gross profit........... 52,118 37,168 89,286 70,453 10,656 170,395
Selling, general and
administrative
expenses............... 43,988(4) 36,451 80,439 54,090 14,901(4) 149,430
------- ------- -------- ------- ------- --------
Income (loss) from
operations............ 8,130 717 8,847 16,363 (4,245) 20,965
Other (income) expense.. 2,001 170 2,171 591 (2,062) 700
------- ------- -------- ------- ------- --------
Income (loss) before
income taxes.......... 6,129 547 6,676 15,772 (2,183) 20,265
Income taxes............ 52 1,938 1,990 1,972 854 4,816
------- ------- -------- ------- ------- --------
Net income (loss)...... $ 6,077 $(1,391) $ 4,686 $13,800 $(3,037) $ 15,449
======= ======= ======== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------------------
JAFRA COSMETICS INTERNATIONAL,
INC.(1)
---------------------------------
OTHER
GUARANTOR NONGUARANTOR TOTAL GRUPO JAFRA REGIONS AND TOTAL
ENTITY ENTITIES COMBINED S.A. DE C.V. (2) ELIMINATIONS COMBINED
--------- ------------ -------- ---------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $72,594 $60,202 $132,796 $79,548 $12,200 $224,544
Cost of sales........... 17,872 12,296 30,168 24,696 3,352 58,216
------- ------- -------- ------- ------- --------
Gross profit........... 54,722 47,906 102,628 54,852 8,848 166,328
Selling, general and
administrative
expenses............... 53,560(4) 47,219 100,779 43,280 11,700 155,759
------- ------- -------- ------- ------- --------
Income (loss) from
operations............ 1,162 687 1,849 11,572 (2,852) 10,569
Other (income) expense.. 2,037 269 2,306 (2,014) 264 556
------- ------- -------- ------- ------- --------
Income (loss) before
income taxes
(benefit)............. (875) 418 (457) 13,586 (3,116) 10,013
Income taxes (benefit).. (1,475) 1,954 479 2,948 (807) 2,620
------- ------- -------- ------- ------- --------
Income (loss) before
extraordinary credit.. 600 (1,536) (936) 10,638 (2,309) 7,393
Extraordinary credit.... -- -- -- -- 2,646 2,646
------- ------- -------- ------- ------- --------
Net income (loss)...... $ 600 $(1,536) $ (936) $10,638 $ 337 $ 10,039
======= ======= ======== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------------------
JAFRA COSMETICS INTERNATIONAL,
INC. (1)
------------------------------- OTHER
GUARANTOR NONGUARANTOR TOTAL GRUPO JAFRA REGIONS AND TOTAL
ENTITY ENTITIES COMBINED S.A. DE C.V. (2) ELIMINATIONS COMBINED
--------- ------------ -------- --------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $68,776 $59,815 $128,591 $76,246 $13,594 $218,431
Cost of sales........... 20,539 13,736 34,275 19,698 337 54,310
------- ------- -------- ------- ------- --------
Gross profit........... 48,237 46,079 94,316 56,548 13,257 164,121
Selling, general and
administrative
expenses............... 49,263 45,355 94,618 44,299 15,107 154,024
------- ------- -------- ------- ------- --------
Income (loss) from
operations............ (1,026) 724 (302) 12,249 (1,850) 10,097
Other (income) expense.. 1,368 147 1,515 (28,562)(3) (1,773) (28,820)(3)
------- ------- -------- ------- ------- --------
Income (loss) before
income taxes
(benefit)............. (2,394) 577 (1,817) 40,811 (77) 38,917
Income taxes (benefit).. (1,956) 1,584 (372) 5,509 958 6,095
------- ------- -------- ------- ------- --------
Net income (loss)...... $ (438) $(1,007) $ (1,445) $35,302 $(1,035) $ 32,822
======= ======= ======== ======= ======= ========
</TABLE>
F-16
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
Combining condensed balance sheet data as of December 31, 1997 and 1996 is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
----------------------------------------------------------------------
JAFRA COSMETICS INTERNATIONAL,
INC. (1)
------------------------------- OTHER
GUARANTOR NONGUARANTOR TOTAL GRUPO JAFRA REGIONS AND TOTAL
ENTITY ENTITIES COMBINED S.A. DE C.V. (2) ELIMINATIONS COMBINED
--------- ------------ -------- ---------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Receivables............. $ 4,090 $ 6,225 $10,315 $14,323 $2,660 $ 27,298
Inventories............. 17,452 8,635 26,087 10,329 1,612 38,028
Due from parent company. 14,192 17,457 31,649 14,270 (6,034) 39,885
Other current assets.... 2,057 2,445 4,502 8,310 616 13,428
------- ------- ------- ------- ------ --------
Total current assets... 37,791 34,762 72,553 47,232 (1,146) 118,639
Property, plant and
equipment.............. 17,369 1,497 18,866 23,980 836 43,682
Other assets........... 350 1,018 1,368 11,820 (259) 12,929
------- ------- ------- ------- ------ --------
Total assets............ $55,510 $37,277 $92,787 $83,032 $ (569) $175,250
======= ======= ======= ======= ====== ========
Accounts payable and
accrued expenses....... $11,011 $ 6,471 $17,482 $15,461 $2,441 $ 35,384
Due to parent........... 14,621 21,418 36,039 13,347 (3,946) 45,440
Other current
liabilities............ 2,364 10,625 12,989 2,852 (639) 15,202
------- ------- ------- ------- ------ --------
Total current
liabilities........... 27,996 38,514 66,510 31,660 (2,144) 96,026
Other liabilities....... -- 1,900 1,900 -- 20 1,920
------- ------- ------- ------- ------ --------
Total liabilities...... 27,996 40,414 68,410 31,660 (2,124) 97,946
Divisional equity....... 27,514 (3,137) 24,377 51,372 1,555 77,304
------- ------- ------- ------- ------ --------
Total liabilities and
equity................ $55,510 $37,277 $92,787 $83,032 $ (569) $175,250
======= ======= ======= ======= ====== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
---------------------------------------------------------------------
JAFRA COSMETICS INTERNATIONAL,
INC.(1)
------------------------------- OTHER
GUARANTOR NONGUARANTOR TOTAL GRUPO JAFRA REGIONS AND TOTAL
ENTITY ENTITIES COMBINED S.A. DE C.V.(2) ELIMINATIONS COMBINED
--------- ------------ -------- --------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Receivables............. $ 4,136 $ 7,780 $11,916 $11,823 $2,532 $ 26,271
Inventories............. 16,536 8,891 25,427 13,332 6,382 45,141
Due from parent company. 12,259 6,531 18,790 12,096 (6,470) 24,416
Other current assets.... 1,431 3,364 4,795 9,669 (2,448) 12,016
------- ------- ------- ------- ------ --------
Total current assets... 34,362 26,566 60,928 46,920 (4) 107,844
Property, plant and
equipment.............. 17,267 1,672 18,939 21,839 1,017 41,795
Other assets............ 856 1,108 1,964 14,084 (1,226) 14,822
------- ------- ------- ------- ------ --------
Total assets........... $52,485 $29,346 $81,831 $82,843 $ (213) $164,461
======= ======= ======= ======= ====== ========
Accounts payable and
accrued expenses....... $ 9,540 $ 8,252 $17,792 $19,008 $2,266 $ 39,066
Due to parent........... 18,416 15,918 34,334 7,622 (910) 41,046
Other current
liabilities............ 50 2,023 2,073 5,421 (4,187) 3,307
------- ------- ------- ------- ------ --------
Total current
liabilities........... 28,006 26,193 54,199 32,051 (2,831) 83,419
Other liabilities....... -- 2,381 2,381 -- 20 2,401
------- ------- ------- ------- ------ --------
Total liabilities...... 28,006 28,574 56,580 32,051 (2,811) 85,820
Divisional equity....... 24,479 772 25,251 50,792 2,598 78,641
------- ------- ------- ------- ------ --------
Total liabilities and
equity................ $52,485 $29,346 $81,831 $82,843 $ (213) $164,461
======= ======= ======= ======= ====== ========
</TABLE>
F-17
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
Combining condensed statement of cash flows data for the years ended
December 31, 1997, 1996 and 1995 is summarized as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------------------------------
JAFRA COSMETICS INTERNATIONAL,
INC.(1)
-------------------------------- OTHER
GUARANTOR NONGUARANTOR TOTAL GRUPO JAFRA REGIONS AND TOTAL
ENTITY ENTITIES COMBINED S.A. DE C.V.(2) ELIMINATIONS COMBINED
--------- ------------ -------- --------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by
(used in) operating
activities............. $ 13,467 $(4,031) $ 9,436 $ 11,534 $ 5,747 $ 26,717
Net cash provided by
(used in) investing
activities............. (2,130) (437) (2,567) 4,162 (7,395) (5,800)
Net cash provided by
(used in) financing
activities............. (11,228) 4,347 (6,881) (13,220) 1,110 (18,991)
Effect of exchange rate
changes on cash........ 158 (587) (429) (200) 272 (357)
Cash at beginning of
period................. 492 2,021 2,513 5,182 967 8,662
-------- ------- ------- -------- -------- --------
Cash at end of period... $ 759 $ 1,313 $ 2,072 $ 7,458 $ 701 $ 10,231
======== ======= ======= ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------------------
JAFRA COSMETICS INTERNATIONAL,
INC.(1)
-------------------------------- OTHER
GUARANTOR NONGUARANTOR TOTAL GRUPO JAFRA REGIONS AND TOTAL
ENTITY ENTITIES COMBINED S.A. DE C.V.(2) ELIMINATIONS COMBINED
--------- ------------ -------- --------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by
(used in) operating
activities............. $ 5,286 $(4,107) $ 1,179 $ 9,174 $ (4,945) $ 5,408
Net cash provided by
(used in) investing
activities............. (3,787) (309) (4,096) 24,133 (24,545) (4,508)
Net cash used in
financing activities... (1,007) 2,246 1,239 (30,000) 31,156 2,395
Effect of exchange rate
changes on cash........ -- (488) (488) (90) (1,585) (2,163)
Cash at beginning of
period................. -- 4,679 4,679 1,965 886 7,530
-------- ------- ------- -------- -------- --------
Cash at end of period... $ 492 $ 2,021 $ 2,513 $ 5,182 $ 967 $ 8,662
======== ======= ======= ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------------------
JAFRA COSMETICS INTERNATIONAL,
INC.(1)
--------------------------------
OTHER
GUARANTOR NONGUARANTOR TOTAL GRUPO JAFRA REGIONS AND TOTAL
ENTITY ENTITIES COMBINED S.A. DE C.V.(2) ELIMINATIONS COMBINED
--------- ------------ -------- --------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by
(used in) operating
activities............. $ (3,689) $ 4,846 $ 1,157 $ 32,529 $ (6,219) $ 27,467
Net cash provided by
(used in) investing
activities............. (3,647) (863) (4,510) (30,514) 21,133 (13,891)
Net cash provided by
(used in) financing
activities............. 6,832 (2,927) 3,905 (76) (17,208) (13,379)
Effect of exchange rate
changes on cash........ 6 356 362 (32) 564 894
Cash at beginning of pe-
riod................... 498 3,267 3,765 58 2,616 6,439
-------- ------- ------- -------- -------- --------
Cash at end of period... $ -- $ 4,679 $ 4,679 $ 1,965 $ 886 $ 7,530
======== ======= ======= ======== ======== ========
</TABLE>
- --------
(1) The combined financial statements of Jafra Cosmetics International, Inc.
include the accounts of the following subsidiaries of the Gillette
Company: Jafra Cosmetics International, Inc., a California corporation
(the Guarantor entity); Jafra Cosmetics GmbH, a German company; Jafra
Cosmetic International B.V., a Netherlands company; Jafra Cosmetics
S.p.A., an Italian company; Jafra Cosmetics A.G., a Swiss company; the
Jafra related operations of a Gillette affiliate in Austria; and the
assets related to the Jafra intellectual properties, held by the Gillette
Company, that are used in the Jafra business (collectively, the
Nonguarantor entities).
F-18
<PAGE>
JAFRA COSMETICS INTERNATIONAL (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
(2) The combined financial statements of Grupo Jafra, S.A. de C.V. include the
accounts of Grupo Jafra, S.A. de C.V. and all of its subsidiaries together
with certain operating assets and the related operating profit of Gillette
Braun used in the Jafra business in Mexico and the assets related to the
Jafra intellectual properties held by the Gillette Company.
(3) Includes foreign currency gains of $25,501.
(4) During 1997, Jafra Cosmetics International, Inc., the Guarantor entity,
wrote off approximately $3,200,000 of payables due from its affiliate in
Canada (Other), as a result of the decision to close the market in Canada.
The division in Canada recorded this as a credit to earnings, accordingly,
these transactions offset in combination. The effects of these
transactions in the above table, however, have been eliminated from the
above presentation to reflect the income from operations exclusive of this
transaction.
(13) YEAR 2000
The Company has developed plans to address the possible exposures related to
the impact on its computer systems of the year 2000. Key financial,
information and operational systems have been assessed and detailed plans have
been developed to address systems modifications required by December 31, 1999.
The financial impact of making the required systems changes is not expected to
be material to the Company's combined financial position, results of
operations or cash flows.
F-19
<PAGE>
INDEPENDENT AUDITORS' REPORT
CDRJ Investments (Lux) S.A.
We have audited the accompanying combined balance sheet of CDRJ Investments
(Lux) S.A. as of April 28, 1998. This combined balance sheet is the
responsibility of CDRJ Investments (Lux) S.A.'s management. Our responsibility
is to express an opinion on the combined balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined balance sheet is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined balance sheet.
An audit also includes assessing the accounting principles used and the
significant estimates made by management, as well as evaluating the overall
presentation of the combined balance sheet. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, such combined balance sheet presents fairly, in all material
respects, the combined financial position of CDRJ Investments (Lux) S.A. as of
April 28, 1998 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
August 25, 1998
F-20
<PAGE>
CDRJ INVESTMENTS (LUX) S.A.
COMBINED BALANCE SHEET
APRIL 28, 1998
ASSETS
<TABLE>
<S> <C>
Cash.................................................................. $243,798
========
STOCKHOLDER'S EQUITY
Common Stock, par value $2.00 per share; 20,000 shares authorized;
20,000
shares issued and outstanding........................................ 40,000
Additional paid-in-capital............................................ 203,798
--------
Total stockholder's equity.......................................... $243,798
========
</TABLE>
See accompanying notes to combined balance sheet.
F-21
<PAGE>
CDRJ INVESTMENTS (LUX) S.A.
NOTES TO COMBINED BALANCE SHEET
APRIL 28, 1998
1. ORGANIZATION
CDRJ Investments (Lux) S.A., a Luxembourg company (the "Company"), its
indirect wholly owned subsidiary, CDRJ Acquisition Corporation, a Delaware
corporation ("Acquisition Co."), a related company, Jafra Cosmetics
International S.A. de C.V., a Mexican corporation ("Jafra S.A.") and certain
other related companies were formed on behalf of Clayton, Dubilier & Rice Fund
V Limited Partnership ("Fund V"), a Cayman Islands exempted limited
partnership, managed by Clayton, Dubilier & Rice, Inc. ("CD&R"), and other
investors to acquire (the "Acquisition") the worldwide Jafra cosmetics
business (the "Jafra Business") from The Gillette Company.
2. PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of the Company, its
subsidiaries and other related companies which were formed by Fund V in
connection with the Acquisition after the elimination of all intercompany
account and transactions.
3. COMBINING CONDENSED BALANCE SHEET
Combining condensed balance sheet data as of April 28, 1998 is summarized as
follows:
<TABLE>
<CAPTION>
AS OF APRIL 28, 1998
-------------------------------------------------------------------------------
CDRJ ACQUISITION CORP.
--------------------------
JAFRA NONGUARANTOR
COSMETICS CDRJ SUBSIDIARIES
PARERX INTERNATIONAL, INVESTMENTS AND TOTAL
ONLY SUBSIDIARIES TOTAL S.A. DE C.V. (LUX) S.A. ELIMINATIONS CONSOLIDATED
------ ------------ ------ -------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash.................... 1,000 69,933 70,933 -- -- 172,865 243,798
Liabilities............. -- -- -- -- -- -- --
Stockholder's Equity.... 1,000 69,933 70,933 -- -- 172,865 243,798
</TABLE>
4. STOCKHOLDERS' EQUITY
Additional paid-in capital has been reduced by a $25,000 receivable from
Fund V resulting from the initial capitalization of the Company. The
shareholders purchased 20,000 shares for $40,000 of which $15,000 was paid and
$25,000 is receivable from the shareholders. In addition, the shareholder
contributed $178,798, which has been included in additional paid in capital.
5. SUBSEQUENT EVENT (UNAUDITED)
On April 30, 1998, the Company acquired the Jafra Business, pursuant to
which (i) Jafra Cosmetics International, Inc., a California corporation
("JCI") merged with Acquisition Co., with the surviving entity in such merger
assuming the name Jafra Cosmetics International, Inc. (ii) Jafra S.A. acquired
all of the outstanding capital stock of Grupo Jafra, which was then merged
with and into Jafra S.A. (iii) indirect subsidiaries of the Company purchased
the stock of Gillette subsidiaries conducting the Jafra Business in Germany,
Italy, the Netherlands and Switzerland; and (iv) indirect subsidiaries of the
Company acquired from various Gillette subsidiaries certain assets used in the
Jafra Business in Austria, Argentina, Colombia and Venezuela. The Acquisition
will be accounted for as a purchase business combination. The total purchase
cost of $206.3 million (including approximately $6.3 million of transaction
expenses) was funded by the issuance of the Company's common stock for $78.9
million (certain members of management and Fund V have committed to invest an
additional $1.1 million by September 22, 1998), the issuance of $100.0 million
of 11 3/4% Senior Subordinated Notes due 2008 and borrowings of approximately
$40.0 million under a Senior Credit Facility.
F-22
<PAGE>
CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998 (UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 18,371
Receivables, less allowance for doubtful accounts of $2,013........ 18,962
Inventories (Note 3)............................................... 38,637
Prepaid taxes...................................................... 6,865
Prepaid expenses and other current assets.......................... 5,841
--------
Total current assets............................................. 88,676
Property, plant and equipment, net (Note 4).......................... 56,179
Other assets:
Goodwill, net (Note 5)............................................. 62,452
Trademarks, net (Note 5)........................................... 53,576
Deferred financing fees and other (Notes 2 and 8).................. 16,404
--------
Total............................................................ $277,287
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities (Note 6).................. $ 48,953
Income taxes payable (Note 7)...................................... 5,418
--------
Total current liabilities........................................ 54,371
Long-term debt (Note 8):
Revolving credit facility.......................................... 15,000
Term loan facility................................................. 25,000
Senior subordinated notes.......................................... 100,000
--------
Total long-term debt............................................. 140,000
Deferred income taxes.............................................. 3,407
Other long-term liabilities........................................ 1,316
--------
Total liabilities................................................ 199,094
--------
Commitments and contingencies (Note 9)
Stockholders' equity:
Common stock, par value $2.00; authorized, 1,020,000 shares; issued
and outstanding, 789,503 shares..................................... 1,579
Additional paid-in capital......................................... 77,371
Accumulated deficit................................................ (581)
Cumulative foreign currency translation............................ (176)
--------
Total stockholders' equity....................................... 78,193
--------
Total............................................................ $277,287
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-23
<PAGE>
CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) (IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
----------------------
TWO MONTHS FOUR MONTHS
ENDED ENDED SIX MONTHS
JUNE 30, APRIL 30, ENDED JUNE
1998 1998 30, 1997
---------- ----------- ----------
<S> <C> <C> <C>
Net sales................. $41,008 $77,282 $110,166
Cost of sales............. 11,792 20,322 28,148
------- ------- --------
Gross profit.............. 29,216 56,960 82,018
Selling, general and
administrative expenses.. 25,593 51,519 73,587
------- ------- --------
Income from operations.... 3,623 5,441 8,431
Other (expense) income:
Exchange gain (loss).... (1,297) 1,376 99
Interest, net (Note 8).. (2,707) 78 80
Other, net.............. 157 104 1
------- ------- --------
Income (loss) before
income taxes............. (224) 6,999 8,611
Provision for income taxes
(Note 7)................. 357 2,899 2,070
------- ------- --------
Net income (loss)......... $ (581) $ 4,100 $ 6,541
======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements
F-24
<PAGE>
CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
------------------
TWO FOUR SIX
MONTHS MONTHS MONTHS
ENDED ENDED ENDED
JUNE 30, APRIL 30, JUNE 30,
1998 1998 1997
-------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................ $ (581) $ 4,100 $ 6,541
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization.................. 1,283 1,363 1,404
Deferred income taxes.......................... (1,113) 3,211 2,784
Change in assets and liabilities:
(Increase) decrease in:
Receivables.................................. 1,392 (2,063) (8,831)
Inventories.................................. 766 (512) 4,628
Prepaid expenses and other current assets.... (6,139) (7,457) (4,800)
Other assets................................. (1,326) 3,948 1,109
Increase (decrease) in:
Accounts payable and accrued liabilities..... 8,526 (7,144) 3,287
Income taxes payable......................... 5,419 (3,083) (682)
Other long-term liabilities.................. (37) (408) (287)
-------- ------- -------
Net cash provided by (used in) operating
activities................................ 8,190 (8,045) 5,153
Cash flows from investing activities:
Purchase of Jafra Business, net of cash received
of $2,339....................................... (184,732)
Withholding taxes on purchase price.............. (12,929)
Purchases of marketable securities............... (97)
Proceeds from sale of property and equipment..... 5,900 299
Purchases of property and equipment.............. (464) (3,213) (3,712)
-------- ------- -------
Net cash provided by (used in) investing
activities................................ (198,125) 2,590 (3,413)
Cash flows from financing activities:
Dividends paid to Gillette....................... (20,990) (3,270)
Capital contributions by Gillette................ 31,735 500
Transactions with Gillette and other divisions... (19,524) 5,307
Proceeds from issuance of subordinated debt...... 100,000
Proceeds from revolving credit facility.......... 15,000
Proceeds from term loan.......................... 25,000
Contribution of equity........................... 78,722
Acquisition and financing fees................... (10,468)
-------- ------- -------
Net cash provided by (used in) financing
activities................................ 208,254 (8,779) 2,537
Effect of exchange rate changes on cash............ (176) (333) (1,389)
Effect of accounting calendar change on cash (Note
1)................................................ 6,276
-------- ------- -------
Net (increase) decrease in cash and cash
equivalents....................................... 18,143 (8,291) 2,888
Cash and cash equivalents at beginning of period... 228 10,231 8,662
-------- ------- -------
Cash and cash equivalents at end of period......... $ 18,371 $ 1,940 $11,550
======== ======= =======
Supplemental disclosure of cash flow information...
Cash paid during the year for:
Interest....................................... $ 97 $ 501 $ 541
Taxes.......................................... 4,135 1,154
</TABLE>
See accompanying notes to consolidated financial statements.
F-25
<PAGE>
CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme (the "Parent"),
CDRJ Acquisition Corporation (to be renamed Jafra Cosmetics International,
Inc.), a Delaware corporation (JCI), Jafra Cosmetics International, S.A. de
C.V. a sociedad anonima de capital variable organized under the laws of the
United Mexican States ("Jafra S.A.") and certain other subsidiaries of the
Parent were organized to acquire the worldwide Jafra Cosmetics business (the
"Jafra Business") of The Gillette Company ("Gillette"). JCI and Jafra S.A. are
indirect, wholly owned subsidiaries of the Parent. The Parent and its
subsidiaries (collectively, the "Company") were formed by Clayton, Dubilier &
Rice Fund V Limited Partnership, a Cayman Islands exempted limited partnership
managed by Clayton, Dubilier & Rice, Inc. ("CD&R"). On April 30, 1998 pursuant
to an acquisition agreement between the Parent, certain of its subsidiaries
and Gillette (the "Acquisition"), (i) Jafra Cosmetics International Inc., a
California corporation merged with JCI, with JCI as the surviving entity, (ii)
Jafra S.A. acquired the stock of Grupo Jafra, S.A. de C.V., a Mexican Company
(Grupo Jafra), which merged with and into Jafra S.A. following the
consummation of the acquisition, with Jafra S.A. as the surviving entity,
(iii) indirect subsidiaries of the Parent purchased the stock of Gillette
subsidiaries conducting the Jafra Business in Germany, Italy, the Netherlands
and Switzerland; and (iv) indirect subsidiaries of the Parent acquired from
various Gillette subsidiaries certain assets used in the Jafra Business in
Austria, Argentina, Colombia and Venezuela.
The purchase price for the Jafra Business of approximately $206.3 million
includes $200 million in cash, and an estimated $6.3 million of direct costs.
The Acquisition has been accounted for under the purchase method of
accounting. Accordingly, the purchase price has been allocated to the assets
and liabilities acquired based upon estimates of their respective fair values
at the date of acquisition based on valuations and other studies that have not
yet been finalized. A preliminary allocation of the purchase price has been
made to major categories of assets and liabilities based on Company estimates.
The actual allocation of purchase cost and the resulting effect on income from
operations may differ significantly from the preliminary amounts included
herein. Although the final allocation has not yet been determined, the
following sets forth certain preliminary allocations (amounts in thousands):
<TABLE>
<S> <C>
Net tangible assets acquired............................................ $ 75,590
Allocation of excess purchase price:
Property, plant and equipment......................................... 18,420
Deferred income tax liability......................................... (647)
Accrual of restructuring/rationalization costs........................ (4,000)
Other assets.......................................................... 423
Goodwill and other intangibles........................................ 116,514
--------
Total............................................................... $206,300
========
</TABLE>
Pursuant to the Acquisition Agreement, the purchase price paid by the Parent
for the Jafra Business is to be adjusted by the difference, if any, between
the adjusted net book value (as defined) of the Jafra Business as of the
closing date, and the adjusted net book value as of September 30, 1997. On
June 22, 1998, Gillette sent to the Parent a notice requesting an additional
payment of approximately $6.9 million (net of a receivable from Gillette of
$5.0). On July 10, 1998, the Parent delivered a notice disputing certain
items, and requested payment of $5.0 million from Gillette. Under the terms of
the Acquisition Agreement, the parties are required to submit their dispute
over the purchase price adjustment to arbitration if such dispute cannot be
resolved. The Parent and Gillette are continuing to discuss the resolution of
this matter. Although management cannot predict the outcome of the purchase
price adjustment dispute at this time, management does not believe that the
resolution of such dispute will have a material adverse effect on the
Company's business, financial condition or results of operations. Accordingly,
the impact of the dispute has not been reflected in the estimate of the cost
of the Acquisition.
F-26
<PAGE>
CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
The accompanying consolidated financial statements as of and for the two
months ended June 30, 1998 reflect the operations of the Parent and its
subsidiaries. The accompanying combined financial statements for the four
months ended April 30, 1998 and the six months ended June 30, 1997, reflect
the operations of the Jafra Business prior to the Acquisition and are referred
to as the "Predecessor" operations. Because of the debt financing incurred in
connection with the Acquisition, the exclusion of certain assets and
liabilities not acquired and the adjustments made to allocate the excess of
the aggregate purchase price over the historical value of the net assets
acquired, the accompanying financial statements of the Parent and its
subsidiaries are not directly comparable to those of the Predecessor.
The accompanying financial statements for the six months ended June 30, 1997
include the operating results of the Predecessor's foreign subsidiaries for
the six months ended May 31, 1997. Beginning January 1, 1998, the reporting
period for the foreign operations was changed from a fiscal year ending
November 30 to a calendar year ending December 31. The results of operations
for the period December 1, 1997 through December 31, were as follows (in
thousands):
<TABLE>
<S> <C>
Net sales......................................................... $ 9,619
Gross profit...................................................... 7,201
Loss from operations.............................................. 727
Income taxes...................................................... 470
Net loss.......................................................... 1,197
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL STATEMENTS--The interim consolidated financial data for
the two months ended June 30, 1998, the four months ended April 30, 1998, and
the six months ended June 30, 1997 is unaudited. This information reflects all
adjustments, consisting of normal recurring adjustments, that in the opinion
of management, are necessary to present fairly the financial position and
results of operations of the Company for the periods indicated. Results of
operations for the interim periods are not necessarily indicative of the
results of operations for the full year.
DEFERRED FINANCING COSTS--In connection with the acquisition of the Jafra
Business, the Company incurred approximately $13.7 million of fees and
expenses related to the Senior Subordinated Notes Offering, the Revolving
Credit Facility and the Term Loan Facility (see Note 8). Such costs are being
amortized over the term of the related debt.
NEW ACCOUNTING STANDARDS--In June 1997, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
131, "Disclosure about Segments of an Enterprise and Related Information." The
Company is required to adopt this statement as of December 31, 1998. SFAS No.
131 requires disclosure of certain information regarding operating segments,
products and services, geographic areas of operations and major customers. The
Company has not analyzed the impact of adopting this statement.
In February 1998, the FASB issued SFAS No. 132, "Employers Disclosures about
Pensions and Other Post Retirement Benefits." SFAS No. 132 requires disclosure
of certain information regarding pensions and other post retirement benefits.
The effect of adopting this statement will not be material to the Company's
consolidated financial statements.
In March 1998, the AICPA's Accounting Standards Executive Committee
("AcSEC") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed for Internal Use." SOP 98-1 provides guidance
on the capitalization of software for internal use. Effective as of January 1,
1998, the Company adopted the SOP. Management is currently assessing the
impact of this SOP on the financial statements.
F-27
<PAGE>
CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
In April 1998, AcSEC issued SOP 98-5, "Reporting on the Cost of Start-Up
Activities." SOP 98-5 requires that all the costs of start-up activities,
including organizational costs, be expensed as incurred. The Company adopted
SOP 98-5 effective as of May 1, 1998. The effects of adopting this SOP was not
material to the Company's financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement will be effective January
1, 2000. The Company has not yet analyzed the impact of adopting the
statement.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes new standards for reporting and displaying
comprehensive income, its components and accumulated balances. A
reconciliation of net income as reported and comprehensive income for the
periods presented is as follows (amounts in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
----------------------
TWO MONTHS FOUR MONTHS
ENDED ENDED SIX MONTHS
JUNE 30, APRIL 30, ENDED JUNE
1998 1998 30, 1997
---------- ----------- ----------
<S> <C> <C> <C>
Net income (loss) as reported ......... $ (581) $4,100 $ 6,541
Foreign currency translation adjust-
ment.................................. (176) (333) (1,389)
------ ------ -------
Comprehensive income (loss) ........... $ (757) $3,767 $ 5,152
====== ====== =======
</TABLE>
3. INVENTORIES
Inventories consist of the following at June 30, 1998 (amounts in
thousands):
<TABLE>
<S> <C>
Raw materials and supplies....................................... $ 9,418
Work in process.................................................. 16
Finished goods................................................... 29,203
-------
Total inventories................................................ $38,637
=======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at June 30, 1998
(amounts in thousands):
<TABLE>
<S> <C>
Land............................................................ $ 20,126
Buildings....................................................... 15,774
Machinery and equipment......................................... 21,078
--------
56,978
Less accumulated depreciation................................... 799
--------
Property, plant and equipment, net.............................. $ 56,179
========
</TABLE>
5. OTHER ASSETS
Amounts included in goodwill and trademarks result from the Company's
acquisition of the Jafra Business from Gillette. Such amounts are being
amortized over their estimated useful lives of 40 years. Accumulated
amortization of goodwill and trademarks at June 30, 1998 was $261,000 and
$223,000, respectively.
F-28
<PAGE>
CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following at June
30, 1998 (amounts in thousands):
<TABLE>
<S> <C>
$ 24,295
Accounts payable................................................
Advertising and sales promotion................................. 11,038
Accrued restructuring/rationalization costs..................... 4,000
Accrued Interest................................................ 2,443
Payroll and payroll taxes....................................... 1,828
State and local sales taxes..................................... 1,422
Miscellaneous................................................... 3,927
--------
$ 48,953
========
</TABLE>
The accrual for restructing/rationalization costs represents non-recurring
charges the Company estimates that it will incur prior to April 30, 1999 to
rationalize certain distribution and administrative functions.
7. INCOME TAXES
The actual income tax rate differs from the "expected" tax rate (computed by
applying the U.S. federal corporate rate of 35% to income before taxes) for
the two months ended June 30, 1998 principally as a result of valuation
allowances applied to losses of the JCI and certain foreign subsidiaries and
non-deductible goodwill in certain foreign subsidiaries (principally Mexico).
8. LONG TERM DEBT
Effective as of the date of the acquisition, the Company issued $100 million
of Senior Subordinated Notes (the "Notes") pursuant to an Indenture dated as
of April 30, 1998 (the "Indenture"). The Notes represent the several
obligation of JCI and Jafra S.A. in the amount of $60 million and $40 million,
respectively, with each participating on a pro rata basis upon redemption. The
Notes mature in the year 2008 and bear a fixed interest rate of 11.75% payable
semi-annually. The Notes are unsecured and are generally non-callable for five
years. Subsequently, the notes will be callable at premiums declining to par
in the eighth year. Prior to May 1, 2001, the Company at its option may
concurrently redeem the Notes on a pro rata basis in an aggregate principal
amount equal to up to 35% of the original aggregate principal amount of the
Notes not exceeding the aggregate cash proceeds of one or more Equity
Offerings, at a redemption price of 111.75% plus accrued interest. The Notes
are required to be registered in a registered exchange offer under the
Securities Act of 1933 within approximately 240 days from the effective date
of the acquisition. Failure to register the debt will cause an increase in the
interest required to be paid by the Company.
In addition, the Company entered into a Senior Credit Agreement (the
"Agreement") that provides for senior secured credit facilities in an
aggregate principal amount of $90 million, consisting of a multicurrency
revolving credit facility of $65 million (the "Revolver") and a term loan
facility of $25 million (the "Term Loan"). Loans under the Term Loan are
payable in quarterly installments of principal and interest over 6 years. The
loans under the Revolver mature on April 30, 2004. Borrowings under the
Agreement bear interest at an annual rate of LIBOR plus a margin not to exceed
2.625% or an alternate base rate (the higher of the prime rate or federal
funds rate plus 1%, plus an applicable margin not to exceed 1.625%).
Both the Indenture and the Agreement contain certain covenants which limit
the Company's ability to incur indebtedness, pay cash dividends and make
certain other payments. These debt agreements also require the Company to
maintain certain financial ratios including a minimum EBITDA to cash interest
expense coverage ratio and a maximum debt to EBITDA ratio.
F-29
<PAGE>
CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
9. COMMITMENTS AND CONTINGENCIES
The Company is involved form time to time in routine legal matters
incidental to its business. The Company believes that the resolution of such
matters will not have a material adverse effect on the Company's business,
financial condition or results of operation.
10. MANAGEMENT INCENTIVE ARRANGEMENTS
The Company has adopted a stock incentive plan (the "Stock Incentive Plan"),
providing for the sale to members of senior management an aggregate of 52,734
shares of common stock of the Parent and the issuance of options to purchase
up to 105,468 additional shares of common stock. As of June 30, 1998, 19,903
shares have been sold subject to the Stock Incentive Plan.
In connection with the purchase of common stock of the Parent, each senior
executive officer is expected to be granted options to purchase two additional
shares of common stock for each share purchased at not less than the fair
market value at the date of grant. Options covering one-half of the shares are
expected to vest in three equal installments on the first three anniversaries
of the date of grant, subject to the senior executive's continued employment.
The remaining options covering 50% of the shares vest on the ninth anniversary
of such senior executive officer's employment if such executive is employed on
such date. Such options may vest at an earlier date if the Company achieves
certain annual and/or cumulative EBITDA targets that are expected to be
specified in the agreements pursuant to which such options are granted.
In addition, certain senior executive officers have employment agreements
which provide for annual bonuses if the Company achieves the performance goals
established under its annual incentive plan for executives.
11. TRANSACTIONS WITH AFFILIATES
CD&R received a fee of $2.7 million for providing services related to the
structuring, implementation and consummation of the acquisition of the Jafra
Business, in addition to the reimbursement of out-of-pocket expenses. Pursuant
to a consulting agreement entered into following the acquisition, until the
10th anniversary of the acquisition or the date on which CD&R Fund V no longer
has an investment in the Company, CD&R will receive an annual fee of $500,000
(and reimbursement of out-of-pocket expenses) for providing advisory,
management consulting and monitoring services to the Company.
12. SUPPLEMENTAL INFORMATION
The consolidating financial statement data, as of June 30, 1998, and for the
two months ended June 30, 1998 has been aggregated by the Guarantor entities,
JCI and Jafra S.A. and the Nonguarantor entities. The Nonguarantor entities
include those of the Company's European subsidiaries (Germany, Holland,
Switzerland, Italy, and Austria) and those of its South American subsidiaries
(Colombia, Argentina, and Venezuela).
The combined financial statements of the Predecessor for the four months
ended April 30, 1998, and the six months ended June 30, 1997 include the
accounts of the following subsidiaries of the Gillette Company: Jafra
Cosmetics International, Inc., a California corporation (the Guarantor
entity); Jafra Cosmetics GmbH, a German company; Jafra Cosmetic International
B.V., a Netherlands company; Jafra Cosmetics S.p.A., an Italian company; Jafra
Cosmetics A.G., a Swiss company; the Jafra related operations of a Gillette
affiliate in Austria; and the assets related to the Jafra intellectual
properties, held by the Gillette Company, that are used in the Jafra business
(collectively, the Nonguarantor entities). Additionally, the combined
financial statements of Grupo Jafra S.A. de C.V. include the accounts of Grupo
Jafra, S.A. de C.V. and all of its subsidiaries together with certain
operating assets and the related operating profit of Gillette Braun used in
the Jafra business in Mexico and the assets related to the Jafra intellectual
properties held by the Gillette Company.
F-30
<PAGE>
CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
TWO MONTHS ENDED JUNE 30, 1998
-------------------------------------------------------------------
GUARANTOR ENTITIES OTHER
--------------------------- NONGUARANTOR REGIONS AND TOTAL
JCI JAFRA S.A. TOTAL ENTITIES ELIMINATIONS CONSOLIDATED
------- ---------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $12,962 $18,951 $31,913 $ 9,095 $ 41,008
Cost of sales........... 3,433 6,058 9,491 2,301 11,792
------- ------- ------- ------- ------ --------
Gross profit............ 9,529 12,893 22,422 6,794 -- 29,216
Selling, general and
administrative
expenses............... 8,990 8,641 17,631 7,962 25,593
------- ------- ------- ------- ------ --------
Income (loss) from
operations............. 539 4,252 4,791 (1,168) -- 3,623
Other (income) expense.. 1,017 3,287 4,304 (457) 3,847
------- ------- ------- ------- ------ --------
Income (loss) before
income taxes........... (478) 965 487 (711) -- (224)
Income taxes............ -- 357 357 -- 357
------- ------- ------- ------- ------ --------
Net income (loss)....... $ (478) $ 608 $ 130 $ (711) $ -- $ (581)
======= ======= ======= ======= ====== ========
<CAPTION>
FOUR MONTHS ENDED APRIL 30, 1998
-------------------------------------------------------------------
GUARANTOR ENTITIES OTHER
--------------------------- NONGUARANTOR REGIONS AND TOTAL
JCI JAFRA S.A. TOTAL ENTITIES ELIMINATIONS COMBINED
------- ---------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $23,611 $35,722 $59,333 $13,047 $4,902 $ 77,282
Cost of sales........... 6,415 9,984 16,399 2,962 961 20,322
------- ------- ------- ------- ------ --------
Gross profit............ 17,196 25,738 42,934 10,085 3,941 56,960
Selling, general and
administrative
expenses............... 16,783 20,201 36,984 10,743 3,792 51,519
------- ------- ------- ------- ------ --------
Income (loss) from
operations............. 413 5,537 5,950 (658) 149 5,441
Other (income) expense.. 864 (2,791) (1,927) 353 16 (1,558)
------- ------- ------- ------- ------ --------
Income (loss) before
income taxes........... (451) 8,328 7,877 (1,011) 133 6,999
Income taxes ........... 1 2,524 2,525 374 -- 2,899
------- ------- ------- ------- ------ --------
Net income (loss)....... $ (452) $ 5,804 $ 5,352 $(1,385) $ 133 $ 4,100
======= ======= ======= ======= ====== ========
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
-------------------------------------------------------------------
GUARANTOR ENTITIES OTHER
--------------------------- NONGUARANTOR REGIONS AND TOTAL
JCI JAFRA S.A. TOTAL ENTITIES ELIMINATIONS COMBINED
------- ---------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $35,236 $44,934 $80,170 $23,853 $6,143 $110,166
Cost of sales........... 9,756 11,903 21,659 4,990 1,499 28,148
------- ------- ------- ------- ------ --------
Gross profit............ 25,480 33,031 58,511 18,863 4,644 82,018
Selling, general and
administrative
expenses............... 22,401 26,151 48,552 19,557 5,478 73,587
------- ------- ------- ------- ------ --------
Income (loss) from
operations............. 3,079 6,880 9,959 (694) (834) 8,431
Other (income) expense.. (387) 112 (275) 95 -- (180)
------- ------- ------- ------- ------ --------
Income (loss) before
income taxes........... 3,466 6,768 10,234 (789) (834) 8,611
Income taxes ........... 267 1,033 1,300 770 -- 2,070
------- ------- ------- ------- ------ --------
Net income (loss)....... $ 3,199 $ 5,735 $ 8,934 $(1,559) $ (834) $ 6,541
======= ======= ======= ======= ====== ========
</TABLE>
F-31
<PAGE>
CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
----------------------------------------------------------------------
GUARANTOR ENTITIES
------------------------------ NONGUARANTOR TOTAL
JCI JAFRA S.A. TOTAL ENTITIES ELIMINATIONS CONSOLIDATED
-------- ---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Receivables............ $ 2,466 $ 10,876 $ 13,342 $ 5,620 $ -- $ 18,962
Inventories............ 16,428 13,642 30,070 8,567 -- 38,637
Other current assets... 23,912 15,403 39,315 34,349 (42,587) 31,077
-------- -------- --------- -------- --------- ---------
Total current assets... 42,806 39,921 82,727 48,536 (42,587) 88,676
Property, plant and
equipment.............. 25,650 27,143 52,793 3,386 56,179
Other assets:
Goodwill, net.......... 34,518 21,493 56,011 6,441 62,452
Trademarks............. 20,912 26,888 47,800 5,776 53,576
Other.................. 17,159 1,270 18,429 987 (3,012) 16,404
-------- -------- --------- -------- --------- ---------
Total.................. $141,045 $116,715 $ 257,760 $ 65,126 $ (45,599) $ 277,287
======== ======== ========= ======== ========= =========
<CAPTION>
AS OF JUNE 30, 1998
----------------------------------------------------------------------
GUARANTOR ENTITIES
------------------------------
JAFRA NONGUARANTOR TOTAL
JCI S.A. TOTAL ENTITIES ELIMINATIONS CONSOLIDATED
-------- ---------- --------- ------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C>
Current Liabilities:
Accounts payable and
accrued expenses...... $ 22,335 $ 19,434 $ 41,769 $ 7,960 $ (776) $ 48,953
Other current
liabilties............ 2,628 531 3,159 29,916 (27,657) 5,418
-------- -------- --------- -------- --------- ---------
Total current
liabilities........... 24,963 19,965 44,928 37,876 (28,433) 54,371
Total long term debt.... 80,000 60,000 140,000 12,500 (12,500) 140,000
Other liabilities....... -- -- -- 1,055 3,668 4,723
-------- -------- --------- -------- --------- ---------
Total liabilities....... 104,963 79,965 184,928 51,431 (37,265) 199,094
Stockholders' equity.... 36,082 36,750 72,832 13,695 (8,334) 78,193
-------- -------- --------- -------- --------- ---------
Total................... $141,045 $116,715 $ 257,760 $ 65,126 $ (45,599) $ 277,287
======== ======== ========= ======== ========= =========
<CAPTION>
TWO MONTHS ENDED JUNE 30, 1998
----------------------------------------------------------------------
GUARANTOR ENTITIES
------------------------------ NONGUARANTOR TOTAL
JCI JAFRA S.A. TOTAL ENTITIES ELIMINATIONS CONSOLIDATED
--- ---------- ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by
(used in)
Operating Activities... $ 246 $ 6,032 $ 6,278 $ 1,912 -- $ 8,190
Investing Activities... (83,832) (90,556) (174,388) (23,737) -- (198,125)
Financing Activities... 89,422 92,247 181,669 26,585 -- 208,254
Effect of Exchange rate
changes on cash........ -- -- -- (176) -- (176)
Cash at beginning of pe-
riod................... -- -- -- 228 -- 228
-------- -------- --------- -------- --------- ---------
Cash at end of period... $ 5,836 $ 7,723 $ 13,559 $ 4,812 -- $ 18,371
======== ======== ========= ======== ========= =========
</TABLE>
F-32
<PAGE>
CDRJ INVESTMENTS (LUX) S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
FOUR MONTHS ENDED APRIL 30, 1998
------------------------------------------------------------
GUARANTOR ENTITIES OTHER
------------------------ REGIONS
JAFRA NONGUARANTOR AND TOTAL
JCI S.A. TOTAL ENTITIES ELIMINATIONS COMBINED
--- ----- ----- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by
(used in)
Operating Activities... $1,361 $(7,425) $(6,064) $(7,860) $ 5,879 $(8,045)
Investing Activities... (528) 546 18 (242) 2,814 2,590
Financing Activities... (1,138) (6,232) (7,370) 7,276 (8,685) (8,779)
Effect of Exchange rate
changes on cash........ -- (181) (181) 364 (516) (333)
Effect of Accounting
Calendar change on
cash................... -- 6,358 6,358 (82) -- 6,276
Cash at beginning of pe-
riod................... 759 7,458 8,217 1,370 644 10,231
------ ------- ------- ------- ------- -------
Cash at end of period... $ 454 $ 524 $ 978 $ 826 $ 136 $ 1,940
====== ======= ======= ======= ======= =======
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
------------------------------------------------------------
GUARANTOR ENTITIES OTHER
------------------------ REGIONS
JAFRA NONGUARANTOR AND TOTAL
JCI S.A. TOTAL ENTITIES ELIMINATIONS COMBINED
--- ----- ----- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by
(used in)
Operating Activities... $6,696 $ (37) $ 6,659 $(3,058) $ 1,552 $ 5,153
Investing Activities... (378) (3,083) (3,461) (15) 63 (3,413)
Financing Activities... (6,507) 10,635 4,128 24 (1,615) 2,537
Effect of Exchange rate
changes on cash........ -- (78) (78) (1,311) -- (1,389)
Cash at beginning of pe-
riod................... 841 2,101 2,942 5,182 538 8,662
------ ------- ------- ------- ------- -------
Cash at end of period... $ 652 $ 9,538 $10,190 $ 822 $ 538 $11,550
====== ======= ======= ======= ======= =======
</TABLE>
F-33
<PAGE>
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE
ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER
THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER,
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE ACCOMPANYING LETTER
OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... iv
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 17
Use of Proceeds........................................................... 25
Capitalization............................................................ 26
Unaudited Pro Forma Combined Statements of Operations .................... 27
Unaudited Pro Forma Combined Statement of Operations...................... 29
Selected Historical Combined Financial Data............................... 32
Management's Discussion And Analysis of Financial Condition And Results of
Operations............................................................... 34
Business.................................................................. 42
Management................................................................ 55
Ownership of Capital Stock................................................ 59
The Transactions.......................................................... 60
Certain Relationships and Related Transactions............................ 61
Description of the Senior Credit Agreement................................ 62
The Exchange Offer........................................................ 64
Registration Rights....................................................... 71
Description of Notes...................................................... 73
Certain U.S. Federal Income Tax Considerations............................ 116
Book-entry; Delivery and Form............................................. 116
Plan of Distribution...................................................... 119
Legal Matters............................................................. 119
Experts................................................................... 120
Index to Financial Statements............................................. F-1
</TABLE>
---------------
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
JAFRA COSMETICS INTERNATIONAL
Offer to Exchange
11 3/4% Senior Subordinated Notes,
Series A
due 2008, which have been
registered under the
Securities Act of 1933
as amended, for any and all
outstanding 11 3/4% Senior
Subordinated Notes due 2008.
---------------
PROSPECTUS
---------------
, 1998
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF PARENT
Under the laws of Luxembourg, members of the board of a societe anonyme,
such as Parent, do not in principle incur any personal liability for the debts
and obligations of the company. Directors are however liable for damages
caused through their fault. Article 59 of the August 15, 1915 Luxembourg law
on commercial companies, for instance, provides that Directors are responsible
to the company, in accordance with the general provisions of Luxembourg law,
for the execution of the mandate for which they have been appointed and for
the faults committed during their management. They are jointly and severally
liable either to the company or to third parties for all damages resulting
from infringements of the law or of the company's articles. They shall be
discharged from this liability for infringements in which they did not take
part, only if no fault is imputable to them and if they denounce the
infringements to the next general meeting of the shareholders after the date
at which they became aware thereof. The members of the board of directors may
be discharged from their liability by the company's shareholders, but such
dischargement remains strictly internal to the company. Directors may not be
discharged from their obligations towards third parties. Furthermore, in the
event of bankruptcy of the company, according to article 495-1 of the
Luxembourg Commercial Code, the Luxembourg court may hold the company's
directors liable to reimburse any indebtedness of the bankrupt company,
whenever the company's assets are not sufficient and the director's serious
and wrongful offences have led to the bankruptcy of the company. Under article
495 of the Luxembourg Commercial Code, Directors may be declared personally
bankrupt if (i) they abusively pursued, for their interest, a nonprofitable
business which resulted in the company becoming insolvent or (ii) they
disposed of corporate assets in the same manner as if those had been their own
personal assets or (iii) they carried out business on behalf of the company
for their personal interest.
Article 11 of the Statuts coordonnes of Parent provides for the
indemnification of officers and directors of Parent as follows:
The corporation shall indemnify any director, any member of any committee
designated by the board of directors and any fonde de pouvoir and his or her
heirs, executors and administrators, against expenses (including attorneys'
fees) judgments and fines in connection with any action, suit or proceeding or
appeal therefrom, to which he or she may be made a party by reason of his or
her being or having been a director or a member of any committee designated by
the board of directors or a fonde de pouvoir of the corporation, or, at the
request of the corporation, of any other corporation partnership, joint
venture, trust or other enterprise in which the corporation holds a direct or
indirect ownership interest or of which the corporation is a direct or
indirect creditor and by which he or she is not entitled to be indemnified,
provided that he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding had no
reasonable cause to believe his or her conduct was unlawful; and in the event
of a settlement, such indemnification shall be provided for all expenses
incurred and amounts paid in connection with such settlement unless the
corporation is advised by its legal counsel that the person to be indemnified
did not meet the above-indicated standard of conduct; except that in the case
of an action or suit brought by the corporation against such a director,
committee member or fonde de pouvoir to procure a judgment in favor of the
corporation (1) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the
defense or settlement of such action or suit, and (2) notwithstanding any
other provisions hereof, no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Luxembourg
Courts or the courts in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such costs and expenses as the Luxembourg Court or
such other court may deem legal and proper.
II-1
<PAGE>
The corporation may purchase and maintain insurance on behalf of any person
who is or was or has agreed to become a director, committee member or fonde de
pouvoir of the corporation, or is or was serving at the request of the
corporation in any equivalent position in any such other corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against him and incurred by him or on his behalf in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of this Article, provided that such insurance is available on
acceptable terms, which determination shall be made by a vote of a majority of
the entire board of directors.
If this Article or any portion hereof shall be invalidated on any ground by
any court of competent jurisdiction, then the corporation shall nevertheless
indemnify each such director, committee member or fonde de pouvoir and may
indemnify each employee or agent of the corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the
fullest extent permitted by applicable law.
Subject to the appliable provisions of Luxembourg law and in particular
Section 59 of the Luxembourg Law on Commercial Companies, no director,
committee member or fonde de pouvoir of the corporation shall be liable to the
corporation or its stockholders for his actions or omissions when performing
his duties as a director, committee member or fonde de pouvoir, provided that
nothing contained in these Articles of Incorporation shall eliminate or limit
the liability of a director, committee member or fonde de pouvoir (i) for any
breach of his duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involves intentional misconduct
or a knowing violation of the law, or (iii) for any transaction from which the
director derived an improper personal benefit.
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF U.S. ISSUER
Section 145 of the Delaware Corporation Law, as amended, provides in regards
to indemnification of directors and officers as follows:
"145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE.--(a) A corporation shall have power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that
his conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
a manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no
II-2
<PAGE>
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made,
with respect to a person who is a director or officer at the time of such
determination (1) by a majority vote of the directors who are not parties
to such action, suit or proceeding, even though less than a quorum, or (2)
by a committee of such directors designated by majority vote of such
directors, even though less than a quorum, or (3) if there are no such
directors, or if such directors so direct, by independent legal counsel in
a written opinion, or (4) by the stockholders.
(e) Expenses (including attorney's fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by former
directors and officers or other employees and agents may be so paid upon
such terms and conditions, if any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to
action in such person's official capacity and as to action in another
capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not
the corporation would have the power to indemnify such person against such
liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a
II-3
<PAGE>
director, officer, employee or agent of the corporation which imposes
duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such
person reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in
a manner "not opposed to the best interests of the corporation" as referred
to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person."
The Certificate of Incorporation and Article VI of the By-Laws of the U.S.
Issuer authorize indemnification of officers and directors to the full extent
permitted under Delaware law, including a provision eliminating (except under
certain enumerated circumstances) the liability of directors for duty of care
violations.
The indemnification provided for the Delaware General Corporation Law is not
exclusive of any other rights of indemnification, and a corporation may
maintain insurance against liabilities for which indemnification is not
expressly provided by the Delaware General Corporation Law.
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF JAFRA S.A.
Under Mexican law, when a duly appointed officer acts within the scope of
his or her authority, the corporation will respond to affected third parties
for any liabilities or expenses resulting from the performance of the duties
any such officer absent negligence or misconduct of the relevant officer.
Articles 35 through 42 of Jafra S.A.'s by-laws (estatutos sociales) provide
as follows:
THIRTY FIVE. Indemnity. The Company shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was or
has agreed to become a director or officer of the Company, or is or was
serving or has agreed to serve at the request of the Company as a director
or officer, of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a
party or is threatened to be made a party to such an action, suit or
proceeding by reason of the fact that he is or was or has agreed to become
an employee or agent of the Company, or is or was serving or has agreed to
serve at the request of the Company as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom,
if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding had no reasonable cause to believe his
conduct was unlawful; except that in the case of an action or suit by or in
the right of the Company to procure a judgment in its favor (1) such
indemnification shall be limited to expenses (including attorneys' fees)
actually and reasonably incurred by such person in the defense or
settlement of such action or suit, and (2) no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Company unless and only to the extent the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the corresponding court shall
deem proper.
The termination of any action, suit or proceeding by judgment, order
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
II-4
<PAGE>
THIRTY SIX. Successful Defense. To the extent that a director, officer,
employee or agent of the Company has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
Article Thirty Five hereof or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
THIRTY SEVEN. Determination That Indemnification Is Proper. Any
indemnification of a director or officer of the Company under Article
Thirty Five hereof (unless ordered by a court) shall be made by the Company
unless a determination is made that indemnification of the director or
officer is not proper in the circumstances because he has not met the
applicable standard of conduct set forth in Article Thirty Five hereof. Any
indemnification of an employee or agent of the Company under Article Thirty
Five hereof (unless ordered by a court) may be made by the Company upon a
determination that indemnification of the employee or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in Article Thirty Five hereof. Any such determination shall be made
(1) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2)
if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
THIRTY EIGHT. Payment of Expenses. Expenses (including attorneys' fees)
incurred by a director or officer in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by
the Company in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director
or officer to repay such amount if it shall ultimately be determined that
he is not entitled to be indemnified by the Company as authorized in this
Article. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if any,
as the Board of Directors deems appropriate. The Board of Directors may
authorize the Company's counsel to represent such director, officer,
employee or agent in any action, suit or proceeding, whether or not the
Company is a party to such action, suit or proceeding.
THIRTY NINE. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the Company under Articles
Thirty Five and Thirty Six, or advance of costs, charges and expenses to a
director or officer under Article Thirty Eight hereof, shall be made
promptly, and in any event within 30 days, upon the written request of the
director or officer. If a determination by the Company that the director or
officer is entitled to indemnification pursuant to this Article is
required, and the Company fails to respond within sixty days to a written
request for indemnity, the Company shall be deemed to have approved such
request. If the Company denies a written request for indemnity or
advancement of expenses, in whole or in part, or if payment in full
pursuant to such request is not made within 30 days, the right to
indemnification or advances as granted by this Article shall be enforceable
by the director or officer in any court of competent jurisdiction. Such
person's costs and expenses incurred in connection with successfully
establishing his right to indemnification, in whole or in part, in any such
action shall also be indemnified by the Company. It shall be a defense to
any such action (other than an action brought to enforce a claim for the
advance of costs, charges and expenses under Article Thirty Eight where the
required undertaking, if any, has been received by the Company) that the
claimant has not met the standard of conduct set forth in Article Thirty
Five hereof, but the burden of proving such defense shall be on the
Company. Neither the failure of the Company (including its Board of
Directors, its independent legal counsel, and its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he
has met the applicable standard of conduct set forth in Article Thirty Five
hereof, nor the fact that there has been an actual determination by the
Company (including its Board of Directors, its independent legal counsel,
and its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of
conduct.
FORTY. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Company and each director, officer, employee and agent who serves in any
such capacity at any time while these provisions are in effect and any
repeal or modification thereof
II-5
<PAGE>
shall not affect any right or obligation then existing with respect to any
state of facts then or previously existing or any action, suit or
proceeding previously or thereafter brought or threatened based in whole or
in part upon any such state of facts. Such a contract right may not be
modified retroactively without the consent of such director, officer,
employee or agent.
The indemnification contemplated in these by-laws shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as
to action in another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer, employee or agent
and shall inure to the benefit of the heirs, executors and administrators
of such a person.
FORTY ONE. Insurance. The Company shall purchase and maintain insurance
on behalf of any person who is or was or has agreed to become a director or
officer of the Company, or is or was serving at the request of the Company
as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against
him and incurred by him or on his behalf in any such capacity, or arising
out of his status as such, whether or not the Company would have the power
to indemnify him against such liability under the provisions of these by-
laws, provided that such insurance is available on acceptable terms, which
determination shall be made by a vote of a majority of the entire Board of
Directors.
FORTY TWO. Severability. If this chapter of these by-laws or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Company shall nevertheless indemnify each director
or officer and may indemnify each employee or agent of the Company as to
costs, charges and expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement with respect to any action, suit or
proceeding, whether civil, criminal, administrative or investigative,
including an action by or in the right of the Company, to the fullest
extent permitted by any applicable portion of these by-laws that shall not
have been invalidated and to the fullest extent permitted by applicable
law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
3.1 Articles of Association (Statuts Coordonnes) of CDRJ Investments (Lux)
S.A., as restated on July 21, 1998.
3.2 Certificate of Incorporation of CDRJ Acquisition Corporation, dated
March 31, 1998.
3.3 Certificate of Merger of Jafra Cosmetics International, Inc. into CDRJ
Acquisition Corporation, dated April 30, 1998.
3.4 Amended and Restated By-laws of Jafra Cosmetics International, Inc.
(formerly CDRJ Acquisition Corporation), as adopted on July 21, 1998.
3.5 Deed of Incorporation (acta constitutiva), including all amendments
thereto, and current by-laws (estatutos sociales) of Jafra Cosmetics
International, S.A. de C.V., together with a unofficial summary
thereof in English.
3.6 Deed of Incorporation (acta constitutiva), including all amendments
thereto, and current by-laws (estatutos sociales) of Consultoria
Jafra, S.A. de C.V., together with a unofficial summary thereof in
English.*
3.7 Deed of Incorporation (acta constitutiva), including all amendments
thereto, and current by-laws (estatutos sociales) of Dirsamex, S.A. de
C.V., together with a unofficial summary thereof in English.*
</TABLE>
- --------
* To be filed by amendment
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
3.8 Deed of Incorporation (acta constitutiva), including all amendments
thereto, and current by-laws (estatutos sociales) of Distribuidora
Venus, S.A. de C.V., together with a unofficial summary thereof in
English.*
3.9 Deed of Incorporation (acta constitutiva), including all amendments
thereto, and current by-laws (estatutos sociales) of Jafra Cosmetics
S. de R.L. de C.V., together with a unofficial summary thereof in
English.*
3.10 Deed of Incorporation (acta constitutiva), including all amendments
thereto, and current by-laws (estatutos sociales) of Qualifax, S.A. de
C.V., together with a unofficial summary thereof in English.*
3.11 Deed of Incorporation (acta constitutiva), including all amendments
thereto, and current by-laws (estatutos sociales) of Reday, S.A. de
C.V., together with a unofficial summary thereof in English.*
4.1 Indenture, dated April 30, 1998, among CDRJ Acquisition Corporation,
Jafra Cosmetics International, S.A. de C.V., CDRJ Investments (Lux)
S.A., and State Street Bank and Trust Company.
4.2 First Supplemental Indenture, dated April 30, 1998, among Consultoria
Jafra, S.A. de C.V., Distribuidora Venus, S.A. de C.V., Dirsamex, S.A.
de C.V., Reday, S.A. de C.V., Qualifax S.A. de C.V., and Jafra
Cosmetics S.R.L., CDRJ Acquisition Corporation and Jafra Cosmetics
International, S.A. de C.V. and State Street Bank and Trust Company.
4.3 Purchase Agreement, dated April 28, 1998, between Credit Suisse First
Boston Corporation, Chase Securities Inc., CDRJ Acquisition
Corporation, Jafra Cosmetics International, S.A. de C.V., and CDRJ
Investments (Lux) S.A.
4.4 Purchase Agreement Amendment, dated April 30, 1998, executed on behalf
of each of Reday, S.A. de C.V., Distribuidora Venus, S.A. de C.V.,
Dirsamex, S.A. de C.V., Qualifax, S.A. de C.V., Jafra Cosmetics,
S.R.L., Consultoria Jafra, S.A. de C.V., Credit Suisse First Boston
Corporation, and Chase Securities Inc.
4.5 Registration Rights Agreement, dated April 30, 1998, among CDRJ
Acquisition Corporation, Jafra Cosmetics International, Inc., Jafra
Cosmetics International, S.A. de C.V., CDRJ Investments (Lux) S.A.,
Reday, S.A. de C.V., Distribuidora, S.A. de C.V., Dirsamex, S.A. de
C.V., Qualifax, S.A. de C.V., Jafra Cosmetics, S.A. de C.V.,
Consultoria Jafra, S.A. de C.V., and Credit Suisse First Boston
Corporation.
4.6 Credit Agreement, dated April 30, 1998, among CDRJ Acquisition
Corporation, Jafra Cosmetics International, S.A. de C.V., CDRJ
Investments (Lux) S.A., as Guarantor and Parent of the Borrowers, the
Lenders named therein and Credit Suisse First Boston, as
Administrative Agent.
4.7 Amendment No. 1 to the Credit Agreement, dated August 26, 1998.
4.8 Indemnity, Subrogation and Contribution Agreement, dated April 30,
1998, among Jafra Cosmetics International, S.A. de C.V. ("JCISA"),
each Subsidiary of JCSI listed on Schedule I thereto and Credit Suisse
First Boston.
4.9 JCI Guarantee Agreement, dated April 30, 1998, between CDRJ
Acquisition Corporation and Credit Suisse First Boston.
4.10 JCISA Guarantee Agreement, dated April 30, 1998, between Jafra
Cosmetics International, S.A. de C.V. and Credit Suisse First Boston.
4.11 JCISA Subsidiary Guarantee Agreement, dated April 30, 1998, among each
of the subsidiaries of Jafra Cosmetics International, S.A de C.V.
listed on Schedule I thereto, and Credit Suisse First Boston.
</TABLE>
- --------
* To be filed by amendment
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
4.12 Parent Guarantee Agreement, dated April 30, 1998, between CDRJ
Investments (Lux) S.A. and Credit Suisse First Boston.
4.13 Pledge Agreement, dated April 30, 1998 among CDRJ Investments (Lux)
S.A., CDRJ North Atlantic Sarl, CDRJ Latin America Holding Company
B.V., Latin Cosmetics Holdings B.V., Regional Cosmetics Holding B.V.,
Southern Cosmetics Holdings B.V., and CDRJ Mexico Holding Company
B.V., CDRJ Acquisition Corporation, Jafra Cosmetics International,
S.A. de C.V. and Credit Suisse First Boston.
4.14 Security Agreement, dated April 30, 1998, among CDRJ Acquisition
Corporation ("JCI"), each subsidiary of JCI listed on Schedule I
thereto and Credit Suisse First Boston.
4.15 Deed of Trust, with Assignment of Leases and Rents, Fixture Filing and
Security Agreement, dated April 30, 1998, by Jafra Cosmetics
International, Inc. to TitleServ Agency of New York City, Inc., as
trustee for the Benefit of Credit Suisse First Boston.
4.16 Acknowledgment of Obligations and Mortgage, dated April 30, 1998,
granted by Reday, S.A. de C.V. in favor of Credit Suisse First Boston,
together with an unofficial English translation thereof.
4.17 Notarial Deed of Pledge, dated April 30, 1998, with respect to the
pledge to Credit Suisse First Boston of (i) 24 ordinary shares of the
capital stock of CDRJ Europe Holding Company B.V. by Jafra Cosmetics
International, Inc., and (ii) 40 ordinary shares of the capital stock
of CDRJ Latin America Holding B.V. by CDRJ North Atlantic (Lux) Sarl.
5.1 Opinion of Debevoise & Plimpton.*
10.1 Indemnification Agreement, dated April 30, 1998, among CDRJ
Investments (Lux) S.A., CDRJ Acquisition Corporation, Jafra Cosmetics
International, S.A. de C.V., Clayton, Dubilier & Rice, Inc., Clayton,
Dubilier & Rice Fund V Limited Partnership.
10.2 Consulting Agreement, dated April 30, 1998, by and among CDRJ
Investments (Lux) S.A., Jafra Cosmetics International, Inc. and Jafra
Cosmetics, S.A. de C.V., and Clayton, Dubilier & Rice, Inc.
10.3 Form of Employment Agreement.
10.4 Amended and Restated Jafra Cosmetics International, Inc. Stock
Incentive Plan.
10.5 CDRJ Investments (Lux) S.A. Form of Management Stock Subscription
Agreement.*
10.6 Stock Purchase Warrant, dated April 30, 1998, by and between CDRJ
Investments (Lux) S.A. and CDRJ Acquisition Corporation.
10.7 Registration and Participation Agreement, dated April 30, 1998, among
CDRJ Investments (Lux) S.A. and Clayton, Dubilier & Rice Fund V
Limited Partnership and the other parties thereto.
12.1 Statements re: computation of ratios.
21.1 Subsidiaries of the registrant.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Debevoise & Plimpton (contained in Exhibit 5.1).*
25.1 Statement of Eligibility and Qualification Under the Trust Indenture
Act of 1939 (Form T-1) of State Street Bank and Trust Company.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Exchange Agreement among CDRJ Investments (Lux) S.A., Jafra
Cosmetics International, Inc., Jafra Cosmetics International, S.A. de
C.V. and State Street Bank and Trust Company.*
</TABLE>
- --------
* To be filed by amendment
II-8
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES.
Financial statement schedules of the Company for which provision is made in
the applicable accounting regulations of the Commissions are not required, are
inapplicable or have been disclosed in the notes to the financial statements
and therefore have been omitted.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant herby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY
OF WESTLAKE VILLAGE, STATE OF CALIFORNIA, ON SEPTEMBER 4, 1998.
CDRJ Investments (Lux) S.A.
/s/ Ronald B. Clark
By: _________________________________
Name: Ronald B. Clark
Title:Chief Executive Officer of
the Advisory Committee and
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ralph S. Mason, III his true and lawful
attorney-in-fact and agent, acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact full
power and authority to do and reform each and every act and thing requisite or
necessary to be done in and about the premises, as person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
/s/ Ronald B. Clark Chief Executive September 4,
- ------------------------------------- Officer of the 1998
RONALD B. CLARK Advisory Committee
and Director
(Principal
executive officer)
/s/ James Brill Chief Financial September 4,
- ------------------------------------- Officer of the 1998
JAMES BRILL Advisory Committee
(Principal
financial officer)
/s/ Carlos Matos Vice President, September 4,
- ------------------------------------- Finance of the 1998
CARLOS MATOS Advisory Committee
(Principal
accounting officer)
II-10
<PAGE>
SIGNATURES TITLE DATE
/s/ Ralph S. Mason, III Secretary and September 4,
- ------------------------------------- Executive Vice 1998
RALPH S. MASON, III President of the
Advisory Committee
(Representative in
the U.S.)
/s/ Donald J. Gogel Director September 4,
- ------------------------------------- 1998
DONALD J. GOGEL
/s/ Steven D. Goldstein Director September 4,
- ------------------------------------- 1998
STEVEN D. GOLDSTEIN
/s/ Thomas E. Ireland Director September 4,
- ------------------------------------- 1998
THOMAS E. IRELAND
/s/ David A. Novak Director September 4,
- ------------------------------------- 1998
DAVID A. NOVAK
/s/ Paul Orfalea Director September 4,
- ------------------------------------- 1998
PAUL ORFALEA
/s/ Ann Reese Director September 4,
- ------------------------------------- 1998
ANN REESE
/s/ Edward H. Rensi Director September 4,
- ------------------------------------- 1998
EDWARD H. RENSI
/s/ Gonzalo Rubio Director September 4,
- ------------------------------------- 1998
GONZALO RUBIO
/s/ Christopher Sinclair Director September 4,
- ------------------------------------- 1998
CHRISTOPHER SINCLAIR
/s/ Kenneth D. Taylor Director September 4,
- ------------------------------------- 1998
KENNETH D. TAYLOR
II-11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY
OF WESTLAKE VILLAGE, STATE OF CALIFORNIA, ON SEPTEMBER 4, 1998.
Jafra Cosmetics International, Inc.
/s/ Ronald B. Clark
By: _________________________________
Name: Ronald B. Clark
Title:Chief Executive Officer and
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ralph S. Mason, III his true and lawful
attorney-in-fact and agent, acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact full
power and authority to do and reform each and every act and thing requisite or
necessary to be done in and about the premises, as person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
/s/ Ronald B. Clark Chief Executive September 4,
- ------------------------------------- Officer and 1998
RONALD B. CLARK Director (Principal
executive officer)
/s/ James Brill Chief Financial September 4,
- ------------------------------------- Officer (Principal 1998
JAMES BRILL financial officer)
/s/ Carlos Matos Vice President, September 4,
- ------------------------------------- Finance (Principal 1998
CARLOS MATOS accounting officer)
II-12
<PAGE>
SIGNATURES TITLE DATE
/s/ Donald J. Gogel Director September 4,
- ------------------------------------- 1998
DONALD J. GOGEL
/s/ Steven D. Goldstein Director September 4,
- ------------------------------------- 1998
STEVEN D. GOLDSTEIN
/s/ Thomas E. Ireland Director September 4,
- ------------------------------------- 1998
THOMAS E. IRELAND
/s/ David A. Novak Director September 4,
- ------------------------------------- 1998
DAVID A. NOVAK
/s/ Paul Orfalea Director September 4,
- ------------------------------------- 1998
PAUL ORFALEA
/s/ Ann Reese Director September 4,
- ------------------------------------- 1998
ANN REESE
/s/ Edward H. Rensi Director September 4,
- ------------------------------------- 1998
EDWARD H. RENSI
/s/ Gonzalo Rubio Director September 4,
- ------------------------------------- 1998
GONZALO RUBIO
/s/ Christopher Sinclair Director September 4,
- ------------------------------------- 1998
CHRISTOPHER SINCLAIR
/s/ Kenneth D. Taylor Director September 4,
- ------------------------------------- 1998
KENNETH D. TAYLOR
II-13
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY
OF WESTLAKE VILLAGE, STATE OF CALIFORNIA, ON SEPTEMBER 4, 1998.
Jafra Cosmetics International, S.A.
de C.V.
/s/ Ronald B. Clark
By: _________________________________
Name: Ronald B. Clark
Title:Chief Executive Officer and
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ralph S. Mason, III his true and lawful
attorney-in-fact and agent, acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact full
power and authority to do and reform each and every act and thing requisite or
necessary to be done in and about the premises, as person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
/s/ Ronald B. Clark Chief Executive September 4,
- ------------------------------------- Officer and 1998
RONALD B. CLARK Director (Principal
executive officer)
/s/ James Brill Chief Financial September 4,
- ------------------------------------- Officer (Principal 1998
JAMES BRILL financial officer)
/s/ Carlos Matos Vice President, September 4,
- ------------------------------------- Finance (Principal 1998
CARLOS MATOS accounting officer)
II-14
<PAGE>
SIGNATURES TITLE DATE
/s/ Ralph S. Mason, III Executive Vice September 4,
- ------------------------------------- President 1998
RALPH S. MASON, III (Representative in
the U.S.)
/s/ Donald J. Gogel Director September 4,
- ------------------------------------- 1998
DONALD J. GOGEL
/s/ Steven D. Goldstein Director September 4,
- ------------------------------------- 1998
STEVEN D. GOLDSTEIN
/s/ Thomas E. Ireland Director September 4,
- ------------------------------------- 1998
THOMAS E. IRELAND
/s/ David A. Novak Director September 4,
- ------------------------------------- 1998
DAVID A. NOVAK
/s/ Paul Orfalea Director September 4,
- ------------------------------------- 1998
PAUL ORFALEA
/s/ Ann Reese Director September 4,
- ------------------------------------- 1998
ANN REESE
/s/ Edward H. Rensi Director September 4,
- ------------------------------------- 1998
EDWARD H. RENSI
/s/ Gonzalo Rubio Director September 4,
- ------------------------------------- 1998
GONZALO RUBIO
/s/ Christopher Sinclair Director September 4,
- ------------------------------------- 1998
CHRISTOPHER SINCLAIR
/s/ Kenneth D. Taylor Director September 4,
- ------------------------------------- 1998
KENNETH D. TAYLOR
II-15
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY
OF WESTLAKE VILLAGE, STATE OF CALIFORNIA, ON SEPTEMBER 4, 1998.
Consultoria Jafra, S.A. de C.V.
/s/ Ronald B. Clark
By: _________________________________
Name: Ronald B. Clark
Title:Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ralph S. Mason, III his true and lawful
attorney-in-fact and agent, acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact full
power and authority to do and reform each and every act and thing requisite or
necessary to be done in and about the premises, as person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
/s/ Ronald B. Clark Chief Executive September 4,
- ------------------------------------- Officer (Principal 1998
RONALD B. CLARK executive officer)
/s/ James Brill Chief Financial September 4,
- ------------------------------------- Officer (Principal 1998
JAMES BRILL financial officer)
/s/ Carlos Matos Vice President, September 4,
- ------------------------------------- Finance (Principal 1998
CARLOS MATOS accounting officer)
/s/ Ralph S. Mason, III Executive Vice September 4,
- ------------------------------------- President and 1998
RALPH S. MASON, III Director
(Representative in
the U.S.)
/s/ Alberto Mena Director September 4,
- ------------------------------------- 1998
ALBERTO MENA
/s/ Marta Cecilia Echeverri Correa Director September 4,
- ------------------------------------- 1998
MARTA CECILIA ECHEVERRI CORREA
II-16
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF
WESTLAKE VILLAGE, STATE OF CALIFORNIA, ON SEPTEMBER 4, 1998.
Dirsamex, S.A. de C.V.
/s/ Ronald B. Clark
By: __________________________________
Name: Ronald B. Clark
Title:Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ralph S. Mason, III his true and lawful
attorney-in-fact and agent, acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this registration statement, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact full power and
authority to do and reform each and every act and thing requisite or necessary
to be done in and about the premises, as person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
/s/ Ronald B. Clark Chief Executive September 4,
- ------------------------------------ Officer (Principal 1998
RONALD B. CLARK executive officer)
/s/ James Brill Chief Financial September 4,
- ------------------------------------ Officer (Principal 1998
JAMES BRILL financial officer)
/s/ Carlos Matos Vice President, September 4,
- ------------------------------------ Finance (Principal 1998
CARLOS MATOS accounting
officer)
/s/ Ralph S. Mason, III Executive Vice September 4,
- ------------------------------------ President and 1998
RALPH S. MASON, III Director
(Representative in
the U.S.)
/s/ Alberto Mena Director September 4,
- ------------------------------------ 1998
ALBERTO MENA
/s/ Marta Cecilia Echeverri Correa Director September 4,
- ------------------------------------ 1998
MARTA CECILIA ECHEVERRI CORREA
II-17
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY
OF WESTLAKE VILLAGE, STATE OF CALIFORNIA, ON SEPTEMBER 4, 1998.
Distribuidora Venus, S.A. de C.V.
/s/ Ronald B. Clark
By: _________________________________
Name: Ronald B. Clark
Title:Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ralph S. Mason, III his true and lawful
attorney-in-fact and agent, acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact full
power and authority to do and reform each and every act and thing requisite or
necessary to be done in and about the premises, as person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
/s/ Ronald B. Clark Chief Executive September 4,
- ------------------------------------- Officer (Principal 1998
RONALD B. CLARK executive officer)
/s/ James Brill Chief Financial September 4,
- ------------------------------------- Officer (Principal 1998
JAMES BRILL financial officer)
/s/ Carlos Matos Vice President, September 4,
- ------------------------------------- Finance (Principal 1998
CARLOS MATOS accounting officer)
/s/ Ralph S. Mason, III Executive Vice September 4,
- ------------------------------------- President and 1998
RALPH S. MASON, III Director
(Representative in
the U.S.)
/s/ Alberto Mena Director September 4,
- ------------------------------------- 1998
ALBERTO MENA
/s/ Marta Cecilia Echeverri Correa Director September 4,
- ------------------------------------- 1998
MARTA CECILIA ECHEVERRI CORREA
II-18
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY
OF WESTLAKE VILLAGE, STATE OF CALIFORNIA, ON SEPTEMBER 4, 1998.
JAFRA COSMETICS S. de R. L. de C.V.
/s/ Ronald B. Clark
By: _________________________________
Name: Ronald B. Clark
Title:Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ralph S. Mason, III his true and lawful
attorney-in-fact and agent, acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact full
power and authority to do and reform each and every act and thing requisite or
necessary to be done in and about the premises, as person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
/s/ Ronald B. Clark Chief Executive September 4,
- ------------------------------------- Officer (Principal 1998
RONALD B. CLARK executive officer)
/s/ James Brill Chief Financial September 4,
- ------------------------------------- Officer (Principal 1998
JAMES BRILL financial officer)
/s/ Carlos Matos Vice President, September 4,
- ------------------------------------- Finance (Principal 1998
CARLOS MATOS accounting officer)
/s/ Ralph S. Mason, III Executive Vice September 4,
- ------------------------------------- President and 1998
RALPH S. MASON, III Director
(Representative in
the U.S.)
/s/ Alberto Mena Director September 4,
- ------------------------------------- 1998
ALBERTO MENA
/s/ Marta Cecilia Echeverri Correa Director September 4,
- ------------------------------------- 1998
MARTA CECILIA ECHEVERRI CORREA
II-19
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY
OF WESTLAKE VILLAGE, STATE OF CALIFORNIA, ON SEPTEMBER 4, 1998.
Qualifax, S.A. de C.V.
/s/ Ronald B. Clark
By: _________________________________
Name: Ronald B. Clark
Title:Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ralph S. Mason, III his true and lawful
attorney-in-fact and agent, acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact full
power and authority to do and reform each and every act and thing requisite or
necessary to be done in and about the premises, as person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Ronald B. Clark Chief Executive September 4,
- ------------------------------------- Officer (Principal 1998
RONALD B. CLARK executive officer)
/s/ James Brill Chief Financial September 4,
- ------------------------------------- Officer (Principal 1998
JAMES BRILL financial officer)
/s/ Carlos Matos Vice President, September 4,
- ------------------------------------- Finance (Principal 1998
CARLOS MATOS accounting officer)
/s/ Ralph S. Mason, III Executive Vice September 4,
- ------------------------------------- President and 1998
RALPH S. MASON, III Director
(Representative in
the U.S.)
/s/ Alberto Mena Director September 4,
- ------------------------------------- 1998
ALBERTO MENA
/s/ Marta Cecilia Echeverri Correa Director September 4,
- ------------------------------------- 1998
MARTA CECILIA ECHEVERRI CORREA
II-20
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY
OF WESTLAKE VILLAGE, STATE OF CALIFORNIA, ON SEPTEMBER 4, 1998.
Reday, S.A. de C.V.
/s/ Ronald B. Clark
By: _________________________________
Name: Ronald B. Clark
Title:Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ralph S. Mason, III his true and lawful
attorney-in-fact and agent, acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact full
power and authority to do and reform each and every act and thing requisite or
necessary to be done in and about the premises, as person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Ronald B. Clark Chief Executive September 4,
- ------------------------------------- Officer (Principal 1998
RONALD B. CLARK executive officer)
/s/ James Brill Chief Financial September 4,
- ------------------------------------- Officer (Principal 1998
JAMES BRILL financial officer)
/s/ Carlos Matos Vice President, September 4,
- ------------------------------------- Finance (Principal 1998
CARLOS MATOS accounting officer)
/s/ Ralph S. Mason, III Executive Vice September 4,
- ------------------------------------- President and 1998
RALPH S. MASON, III Director
(Representative in
the U.S.)
/s/ Alberto Mena Director September 4,
- ------------------------------------- 1998
ALBERTO MENA
/s/ Marta Cecilia Echeverri Correa Director September 4,
- ------------------------------------- 1998
MARTA CECILIA ECHEVERRI CORREA
II-21
<PAGE>
EXHIBIT 3.1
CDRJ Investments (Lux) S.A.
Societe anonyme
Siege social: Luxembourg
R.C. Luxembourg B 63.119
----------------------------------------------------------
Statuts coordonnes deposes au greffe du tribunal d'arrondissement de et a
Luxembourg, le
Pour mention afin de publication au Memorial, Recueil Special des Societes
et Associations.
Hesperange, le 12 aout 1998.
<PAGE>
CDRJ Investments (Lux) S.A.
Societe anonyme
Siege social: Luxembourg
R.C. Luxembourg B 63.119
----------------------------------------------------------
constituee suivant acte recu par le notaire Gerard LECUIT, de residence a
Hesperange, en date du 22 janvier 1998, publie au Memorial, Recueil Special
C numero 346 du 14 mai 1998,
les statuts furent modifies:
a plusieurs reprises et en dernier lieu suivant actes dudit notaire Gerard
LECUIT, en date du 30 avril 1998, et en date du 21 juillet 1998,
<PAGE>
- 2 -
TITLE I.- DENOMINATION, REGISTERED OFFICE, OBJECT, DURATION
- -----------------------------------------------------------
ARTICLE 1
---------
There is established hereby a societe anonyme under the name of CDRJ
INVESTMENTS (LUX) S.A.
ARTICLE 2
---------
The registered office of the corporation is established in Luxembourg.
The registered office may be transferred to any other place in the
municipality by a decision of the board of directors.
If extraordinary political or economic events occur or are imminent, which
might interfere with the normal activity at the registered office, or with easy
communication between this office and abroad, the registered office may be
declared to have been transferred abroad provisionally until the complete
cessation of these abnormal circumstances.
Such decision, however, shall have no effect on the nationality of the
company. Such declaration of the transfer of the registered office shall be made
and brought to the attention of third parties by the organ of the corporation
which is best situated for this purpose under such circumstances.
ARTICLE 3
---------
The corporation is established for an unlimited period.
ARTICLE 4
---------
The corporation may carry out all transactions pertaining directly or
indirectly to the acquiring of participating interests in any enterprises in
whatever form and the administration, management, control and development of
those participating interests.
In particular, the corporation may use its funds for the establishment,
management, development and disposal of a
<PAGE>
- 3 -
portfolio consisting of any securities and patents of whatever origin, and
participate in the creation, development and control of any enterprise, the
acquisition, by way of investment, subscription, underwriting or option, of
securities and patents, to realize them by way of sale, transfer, exchange or
otherwise develop such securities and patents, grant to other companies or
enterprises any support, loans, advances or guarantees.
The corporation may also carry out any commercial, industrial or financial
operations, any transactions in respect of real estate or moveable property,
which the corporation may deem useful to the accomplishment of its purposes.
TITLE II.- CAPITAL, SHARES
--------------------------
ARTICLE 5
---------
The corporate capital is set at ONE MILLION FIVE HUNDRED SEVENTY-NINE
THOUSAND SIX US DOLLARS (1.579.006.-USD) represented by SEVEN HUNDRED EIGHTYNINE
THOUSAND FIVE HUNDRED AND THREE (789.503) class A shares with a par value of TWO
US DOLLARS (2.- USD) each.
The shares may be created at the owner's option in certificates
representing single shares or in certificates representing two or more shares.
The shares are in registered or bearer form.
The corporation may, to the extent and under the terms permitted by law,
purchase its own shares.
The corporate capital may be increased or reduced in compliance with the
legal requirements.
The authorized capital of the corporation is fixed at TWO MILLION FORTY
THOUSAND US DOLLARS (2.040.000.- USD) represented by one million twenty thousand
(1.020.000) Class A shares with a par value of TWO US DOLLARS (2.- USD) each.
<PAGE>
- 4 -
The authorized and subscribed capital of the corporation may be increased
or reduced by a decision of the general meeting of shareholders, voting with the
same quorum as for an amendment of the articles of association.
The board of directors may, during a period of five years from the date of
27.4.1998, increase the subscribed capital within the limits of the authorized
capital. Such increase may be subscribed for and issued in the form of shares
with or without an issue premium, as the board of directors shall determine. The
board of directors is specifically authorized to proceed to such issues without
reserving for the then existing shareholders a preferential right to subscribe
the shares to be issued.
The board of directors may delegate to any duly authorized person, the duty
of accepting subscriptions and receiving payment for shares representing part or
all of such increased amounts of capital.
After each increase in the subscribed capital performed in the legally
required form by the board of directors, the present article will be adapted to
this modification.
TITLE III.- MANAGEMENT
----------------------
ARTICLE 6
---------
The corporation is managed by a board of directors composed of at least
three members, either shareholders or not, who are appointed for a period not
exceeding six years by the general meeting of shareholders which may at any time
remove them.
The number of directors, their term and their remuneration are fixed by the
general meeting of the shareholders.
<PAGE>
- 5 -
ARTICLE 7
---------
The board of directors will elect from among its members a chairman.
The board of directors convenes upon call by the chairman, as often as the
interest of the corporation so requires. It must be convened each time two
directors so request.
The board can only validly debate and take decisions, if the majority of
its members is present or represented, proxies between directors being permitted
with the restriction that every director can represent only one of his
colleagues.
The directors may cast their vote on the points of the agenda by letter,
cable, telex or telefax, confirmed by letter.
Resolutions in writing approved and signed by all directors shall have the
same effect as resolutions voted at the director's meetings.
ARTICLE 8
---------
The board of directors is invested with the broadest powers to perform all
acts of administration and disposition in compliance with the corporate object.
All powers not expressly reserved by law or by the present articles of
association to the general meeting of shareholders fall within the competence of
the board of directors. The board of directors may pay interim dividends, in
compliance with the legal requirements.
ARTICLE 9
---------
The corporation will be bound in any circumstances by the single signature
of one director.
<PAGE>
- 6 -
ARTICLE 10
----------
The board of directors may designate an executive committee (comite
executif), an advisory committee (comite consultatif) and one or more other
committees, and in addition may give special powers relating to the daily
management of all or part of the business of the corporation to one or more
proxyholders (fondes de pouvoir). Any such proxyholder shall not be required to
be a director or a shareholder. The giving of such special powers to a member
of the board of directors is subject to the prior authorization of a general
meeting of the shareholders.
Each committee designated by the board of directors shall consist of such
number of directors as from time to time may be fixed by the board of
directors, and, for the committees other than the executive committee, may also
include individuals who are not directors. The board of directors may also
designate one or more directors as alternate members of any such committee, who
may replace any absent or disqualified member or members at any meeting of such
committee. Thereafter, members (and alternate members, if any) of each such
committee may be designated by the board of directors. Any such committee may
be abolished or re-designated from time to time by the board of directors. Each
member (and each alternate member) of any such committee shall hold office
until his or her successor shall have been designated or until his or her
earlier death, resignation or removal.
During the intervals between the meetings of the board of directors, the
executive committee, except as otherwise provided in this article, shall have
and may exercise all the powers and authority of the board of directors in the
management of the property, affairs and business of the corporation, with the
exception of the following actions which shall require a decision by the board
of directors itself: (i) the issuance to third parties of all or any part of
the authorized but unissued shares of the corporation, (ii) the payment of an
interim dividend (acompte sur dividendes) and the submission to the annual
shareholders meeting of a proposal regarding the payment of a dividend, (iii)
the finalization of the management report (rapport de gestion) to be submitted
by the board of directors to the annual shareholders meeting, (iv) the calling
of meetings of the shareholders and (v) the postponement of a shareholders
meeting (in the circumstances contemplated by article 67 (5) and (6) of the
Coordinated Law on Commercial Companies of the Grand Duchy of Luxembourg).
The advisory committee shall perform such duties as may be assigned to it
from time to time by the board of directors, and shall be composed of officers
holding the following titles:
(i) a "President" and "Chief Operating Officer";
(ii) a "Chief Executive Officer";
(iii) one or more "Executive Vice Presidents";
(iv) one or more "Vice Presidents";
(v) a "Secretary" and one or more "Assistant Secretaries";
(vi) a "Treasurer" and one or more "Assistant Treasurers".
Any other committee formed by the board of directors, except as otherwise
provided in this article, shall have and may exercise such powers of the board
of directors as may be provided by resolution or resolutions of the board of
directors. The executive committee, the advisory committee and any other
committee formed by the board of directors shall not have the power or
authority:
a) to approve or adopt any action or matter expressly required by the
applicable laws of the Grand Duchy of Luxembourg to be submitted to the
stockholders for approval; or
b) adopt, amend or repeal any provision of the articles of association of
the corporation.
Each such committee may fix its own rules of procedure and may meet at such
place (within or outside the Grand-Duchy of Luxembourg), at such time and upon
such notice, if any, as it shall determine from time to time. Each such
committee may keep minutes of its proceedings and shall report such proceedings
to the board of directors at the meeting of the board of directors next
following any such proceedings.
Except as may be otherwise provided in the resolution creating such
committee, at all meetings of any committee the presence of members (or
alternate members) constituting a majority of the total membership of such
committee shall constitute a quorum for the transaction of business. The act of
the majority of the members present at any meeting at which a quorum is present
shall be the act of such committee. Any action required or permitted to be
taken at any meeting of any such committee may be taken without a meeting, if
all members of such committee shall consent to such action in writing and such
writing or writings are filed with the minutes of the proceedings of the
committee. The members of any such committee shall act only as a committee, and
the individual members of such committee shall have no power as such.
Members of any committee designated by the board of directors may
participate in a meeting of such committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to
this provision shall constitute presence in person at such meeting.
In the event of the absence or disqualification of a member of any
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he, she or they constitute a quorum,
may unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member.
Any member (and any alternate member) of any committee may resign at any
time by delivering a written notice of resignation, signed by such member, to
the chairman of the board of directors. Unless otherwise specified therein, such
resignation shall take effect upon delivery.
Any member (and any alternate member) of any committee may be removed from
his or her position as a member (or alternate member, as the case may be) of
such committee at any time, either for or without cause, by resolution adopted
by a majority of the whole board of directors.
If any vacancy shall occur in any committee, by reason of disqualification,
death, resignation, removal or otherwise, the remaining members (and any
alternate members) shall continue to act, and any such vacancy may be filled by
the board of directors.
ARTICLE 11
----------
The corporation shall indemnify any director, any member of any committee
designated by the board of directors and any fonde de pouvoir and his or her
heirs, executors and administrators, against expenses reasonably incurred by him
or her in connection with any action, suit or proceeding to which he or she may
be made a party by reason of his being or having been a director or member of
any committee designated by the board of directors or fonde de pouvoir of the
corporation,
<PAGE>
- 7 -
or, at the request of the corporation, of any other corporation of which the
corporation is a direct or indirect shareholder or creditor and by which he or
she is not entitled to be indemnified, provided that he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding had no reasonable cause to believe his or her conduct was
unlawful; and in the event of a settlement, such indemnification shall be
provided in connection with matters covered by such settlement unless the
corporation is advised by its legal counsel that the person to be indemnified
did not meet the above-indicated standard of conduct.
ARTICLE 12
----------
The board of directors or the statutory auditor may convene other
shareholder meetings each time the interests of the company so request. Such
meetings must be convened each time shareholders representing at least one fifth
of the subscribed capital request it by writing with an indication of the
agenda.
ARTICLE 13
----------
Any litigations involving the corporation either as plaintiff or as
defendant, will be handled in the name of the corporation by the board of
directors, represented by its chairman or by the director delegated for its
purpose.
TITLE IV.- SUPERVISION
----------------------
ARTICLE 14
----------
The corporation is supervised by one or several statutory auditors,
appointed by the general meeting of shareholders which will fix their number and
their remuneration, as well as the term of their office, which must not exceed
six years.
<PAGE>
- 8 -
TITLE V.- GENERAL MEETING
-------------------------
ARTICLE 15
----------
The annual meeting will be held in the commune of the registered office at
the place specified in the convening notices on the second Tuesday of June at 11
a.m. and the first time in the year 1999.
If such day is a legal holiday, the general meeting will be held on the
next following business day.
TITLE VI.- ACOUNTING YEAR, ALLOCATION OF PROFITS
------------------------------------------------
ARTICLE 16
----------
The accounting year of the corporation shall begin on the lst of January
and shall terminate on the 31st of December of each year, with the exception of
the first accounting year, which shall begin on the date of the formation of the
corporation and shall terminate on December 31st, 1998.
ARTICLE 17
----------
After deduction of any and all of the expenses of the corporation and the
amortizations, the credit balance represents the net profits of the corporation.
Of the net profits, five percent (5%) shall be appropriated for the legal
reserve; this deduction ceases to be compulsory when the reserve amounts to ten
percent (10%) of the capital of corporation, but it must be resumed until the
reserve is entirely reconstituted if, at any time, for any reason whatsoever, it
has been touched.
The balance is at the disposal of the general meeting.
TITLE VII.- DISSOLUTION, LIQUIDATION
------------------------------------
ARTICLE 18
----------
The corporation may be dissolved by a resolution of the general meeting of
shareholders. The liquidation will be carried out by one or more liquidators,
physical or legal
<PAGE>
- 9 -
persons, appointed by the general meeting of shareholders which will specify
their powers and fix their remunerations.
TITLE VIII.- GENERAL PROVISIONS
-------------------------------
ARTICLE 19
----------
All matters not governed by these articles of association are to be
construed in accordance with the law of August 10th 1915 on commercial companies
and the amendments hereto.
FOLLOWS THE FRENCH TRANSLATION OF THE FOREGOING TEXT: IN CASE OF DISCREPANCIES
- ------------------------------------------------------------------------------
BETWEEN THE ENGLISH AND THE FRENCH TEXT, THE ENGLISH VERSION WILL BE BINDING
- ----------------------------------------------------------------------------
SUIT LA TRADUCTION FRANCAISE DU TEXTE QUI PRECEDE:
--------------------------------------------------
EN CAS DE DIVERGENCE ENTRE LE TEXTE ANGLAIS ET
----------------------------------------------
LE TEXTE FRANCAIS LE TEXTE ANGLAIS FERA FOI
-------------------------------------------
TITRE IER: DENOMINATION, SIEGE SOCIAL, OBJET, DUREE
---------------------------------------------------
ARTICLE 1er
-----------
Il est forme une societe anonyme sous la denomination de CDRJ INVESTMENTS
(LUX) S.A.
ARTICLE 2
---------
Le siege de la societe est etabli a Luxembourg.
Il pourra etre transfere dans tout autre lieu de la commune par simple
decision du conseil d'administration.
Au cas ou des evenements extraordinaires d'ordre politique ou economique,
de nature a compromettre l'activite normale au siege social ou la communication
aisee de ce siege avec l'etranger se produiront ou seront imminents, le siege
social pourra etre declare transfere provisoirement a l'etranger, jusqu'a
cessation complete de ces circonstances anormales.
<PAGE>
- 10 -
Une telle decision n'aura pas d'effet sur la nationalite de la societe. La
declaration de transfert du siege sera faite et portee a la connaissance des
tiers par l'organe de la societe qui se trouvera le mieux place a cet effet dans
les circonstances donnees.
ARTICLE 3
---------
La societe est constitutee pour une duree illimitee.
ARTICLE 4
---------
La societe a pour objet toutes les operations se rapportant directement ou
indirectement a la prise de participations sous quelque forme que ce soit, dans
toute entreprise, ainsi que l'administration, la gestion, le controle et le
developpement de ces participations.
Elle pourra notamment employer ses fonds a la creation, a la gestion, a la
mise en valeur et a la liquidation d'un portefeuille se composant de tous titres
et brevets de toute origine, participer a la creation, au developpement et au
controle de toute entreprise, acquerir par voie d'apport, de souscription, de
prise ferme ou d'option d'achat et de toute autre maniere, tous titres et
brevets, les realiser par voie de vente, de cession, d'echange ou autrement,
faire mettre en valeur ces titres et brevets, accorder a d'autres societes ou
entreprises tous concours, prets, avances ou garanties.
La societe pourra aussi accomplir toutes operations commerciales,
industrielles ou financieres, ainsi que tous transferts de propriete immobiliers
ou mobiliers.
TITRE II: CAPITAL, ACTIONS
--------------------------
ARTICLE 5
---------
Le capital social est fixe a UN MILLION CINQ CENT SOIXANTE-DIX-NEUF MILLE
SIX US DOLLARS (1.579.006.- USD) represente par SEPT CENT QUATRE-VINGT-NEUF
MILLE CINQ CENT
<PAGE>
- 11 -
TROIS (789.503) actions de categorie A d'une valeur nominale de DEUX US DOLLARS
(2.- USD) chacune.
Les actions de la societe peuvent etre creees au choix du proprietaire en
titres unitaires ou en certificats representatifs de plusieurs actions.
Les titres sont nominatifs ou au porteur.
La societe peut proceder au rachat de ses propres actions, sous les
conditions prevues par la loi.
Le capital souscrit pourra etre augmente ou reduit dans les conditions
1egales requises.
Le capital autorise est fixe a DEUX MILLIONS QUARANTE MILLE US DOLLARS
(2.040.000.- USD) represente par un million vingt mille (1.020.000) actions de
categorie A d'une valeur nominale de DEUX US DOLLARS (2.- USD) chacune.
Le capital autorise et le capital souscrit de la societe peuvent etre
augmentes ou reduits par decision de l'assemblee generale des actionnaires
statuant comme en matiere de modification des statuts.
En outre, le conseil d'administration est, pendant une periode de cinq ans
a partir du 27.4.1998, autorise a augmenter en une ou plusieurs fois le capital
souscrit a l'interieur des limites du capital autorise. Ces augmentations de
capital peuvent etre souscrites et emises sous forme d'actions avec ou sans
prime d'emission ainsi qu'il sera determine par le conseil d'administration. Le
conseil d'administration est specialement autorise a proceder a de telles
emissions sans reserver aux actionnaires anterieurs un droit preferentiel de
souscription des actions a emettre.
Le conseil d'administration peut deleguer toute autre personne dument
autorisee, pour recueillir les souscriptions
<PAGE>
- 12 -
et recevoir paiement du prix des actions representant tout ou partie de cette
augmentation de capital.
Apres chaque augmentation du capital souscrit realise par le conseil
d'administration conformement aux procedures legales, il fera adapter le present
article pour tenir compte de cette modification.
TITRE III: ADMINISTRATION
-------------------------
ARTICLE 6
---------
La societe est administree par un conseil compose de trois membres au
moins, associes ou non, nommes pour un terme qui ne peut exceder six annees, par
l'assemblee generale des actionnaires, et toujours revocables par elle.
Le nombre des administrateurs ainsi que leur remuneration et la duree de
leur mandat sont fixes par l'assemblee generale de la societe.
ARTICLE 7
---------
Le conseil d'administration choisit parmi ses membres un president.
Le conseil d'administration se reunit sur la convocation du president,
aussi souvent que l'interet de la societe l'exige. Il doit etre convoque chaque
fois que deux administrateurs le demandent.
Le conseil ne peut valablement deliberer et statuer que si la majorite de
ses membres est presente ou representee. le mandat entre administrateurs etant
admis sans qu'un administrateur ne puisse representer plus d'un de ses
collegues.
Les administrateurs peuvent emettre leur vote sur les questions a l'ordre
du jour par lettre, telegramme, telex ou telefax, ces trois derniers etant a
confirmer par ecrit.
Une decision prise par ecrit, approuvee et signee par tous les
administrateurs, produira effet au meme titre
<PAGE>
- 13 -
qu'une decision prise a une reunion du conseil d'administration.
ARTICLE 8
---------
Le conseil d'administration est investi des pouvoirs les plus etendus pour
faire tous actes d'administration et de disposition qui rentrent dans l'objet
social.
Il a dans sa competence tous les actes qui ne sont pas reserves
expressement par la loi et les statuts a l'assemblee generale. Il est autorise a
verser des acomptes sur dividendes, aux conditions prevues par la loi.
ARTICLE 9
---------
La societe sera engagee en toutes circonstances par la seule signature d'un
administrateur.
ARTICLE 10
----------
Le conseil d'administration pourra designer un comite executif, un comite
consultatif et un ou plusieurs autres comites, et egalement donner des pouvoirs
speciaux relatifs a la gestion journaliere de tout ou partie des affaires de la
societe a un ou plusieurs fondes de pouvoirs. Un fonde de pouvoirs ne doit pas
etre necessairement un administrateur ou un actionnaire. La delegation de ces
pouvoirs speciaux a un membre du conseil d'administration est subordonnee a
l'autorisation prealable d'une assemblee generale des actionnaires.
Chaque comite designe par le conseil d'administration comportera un nombre
de membres fixe de temps a autre par le conseil d'administration et, pour les
comites autres que le comite executif pourra comporter des personnes qui ne
seront pas des administrateurs. Le conseil d'administration pourra aussi
designer un ou plusieurs administrateurs comme membres suppleants de ces
comites, qui pourront remplacer un ou des membres absents ou dechus a toute
reunion de ces comites. Par la suite, les membres (et les membres suppleants le
cas echeant) de ces comites pourront etre designes par le conseil
d'administration. Chacun de ces comites pourra etre supprime ou re-designe de
temps a autre par le conseil d'administration. Chaque membre (titulaire et
suppleant) de ces comites devra rester en fonction jusqu'a ce que son
successeur soit designe ou jusqu'a la date de son deces, de sa demission ou de
son renvoi si elle est anterieure.
Entre les reunions du conseil d'administration, sauf lorsque le present
article stipule autrement, le comite executif detiendra et pourra exercer tous
les pouvoirs et l'autorite du conseil d'administration en ce qui concerne la
gestion des biens, des affaires et de l'activite de la societe, a l'exception
des decisions suivantes qui necessiteront une decision du conseil
d'administration lui-meme: (i) l'emission en faveur de tierces parties de tout
ou partie des actions autorisees mais non emises de la societe, (ii) le paiement
d'un acompte sur dividendes et la soumission a l'assemblee generale annuelle des
actionnaires d'une proposition concernant le versement d'un dividende, (iii) la
mise au point du rapport de gestion qui doit etre soumis par le conseil
d'administration a l'assemblee generale annuelle des actionnaires, (iv) la
convocation des assemblees d'actionnaires et (v) la remise d'une assemblee des
actionnaires (dans les cas prevus a l'article 67 (5) et (6) de la loi coordonnee
sur les societes commerciales du Grand-Duche de Luxembourg).
Le comite consultatif mettra en oeuvre les missions qui lui seront confiees
de temps a autre par le conseil d'administration, et comprendra des membres
ayant les titres suivants:
(i) un "President" et "Chief Operating Officer";
(ii) un "Chief Executive Officer";
(iii) un ou plusieurs "Executive Vice Presidents";
(iv) un ou plusieurs "Vice Presidents";
(v) un "Secretary" et un ou plusieurs "Assistant Secretaries";
(vi) un "Treasurer" et un ou plusieurs "Assistant Treasurers".
Tout autre comite forme par le conseil d'administration, sous reserve des
exceptions stipulees au present article, aura et pourra exercer les pouvoirs du
conseil d'administration conformement aux dispositions de la ou des resolutions
du conseil d'administration. Ni le comite executif, ni le comite consultatif,
ni un autre comite forme par le conseil d'administration n'aura le pouvoir ou
l'autorite:
a) d'approuver ou adopter une decision ou une action reservee par le droit
applicable au Grand-Duche de Luxembourg a l'approbation des actionnaires; ou
b) d'adopter, de modifier ou d'abroger une disposition des statuts de la
societe.
Chacun de ces comites pourra fixer ses propres reqles de procedure et
pourra se reunir en n'importe quel lieu (dans le Grand-Duche de Luxembourg ou
ailleurs), a l'heure et dans un delai, si delai il y a, qu'il pourra decider de
temps a autre. Chacun de ces comites pourra etablir des proces-verbaux de ses
deliberations et fera part de ses deliberations au conseil d'administration lors
de la premiere reunion du conseil d'administration qui suivra ces deliberations.
Sauf lorsque la resolution creant ce comite stipule autrement, le quorum
requis pour la prise de decision a toutes les reunions des comites sera de la
majorite de tous les membres de ces comites, que les personnes presentes soient
membres titulaires ou suppleants. Une decision sera valablement prise par un
tel comite lorsqu'elle est prise par une majorite des membres presents a une
reunion, lorsque le quorum est reuni. Toute decision qui doit etre ou pourra
etre prise a une reunion d'un tel comite pourra etre prise sans qu'une reunion
n'ait lieu, si tous les membres de ce comite consentent par ecrit a cette
decision, et si ces consentements ecrits sont attaches au proces-verbal des
reunions de ce comite. Les membres de ces comites devront agir seulement dans
le cadre du comite, et les personnes qui sont les membres de ces comites
n'auront aucun pouvoir individuel en tant que tels.
Les membres des comites designes par le conseil d'administration pourront
participer a des reunions de ces comites par le biais d'une conference
telephonique ou autre equipement de communication similaire au moyen duquel les
personnes participant a une reunion peuvent s'entendre les uns les autres, et
la participation a une reunion conformement a cette disposition sera comptee
comme l'equivalent d'une presence physique a la reunion.
En l'absence d'un des membres d'un comite, ou si ce membre est dechu, le ou
les membres de ce comite qui sont presents a une reunion et qui peuvent
valablement y prendre part au vote, que le quorum requis soit reuni ou non,
pourront par decision unanime nommer un autre membre du conseil d'administration
pour agir a la place du membre absent ou dechu lors de cette reunion.
Tout membre (titulaire ou suppleant) d'un comite pourra demissionner a
toute epoque en communiquant une declaration ecrite de demission, signee par ce
membre, au president du conseil d'administration. Sauf si cette declaration
stipule autrement, la demission prendra effet a compter de la reception de la
declaration.
Tout membre (titulaire ou suppleant) d'un comite peut etre renvoye de son
poste de membre (titulaire ou suppleant selon le cas) de ce comite a toute
epoque, que ce soit avec ou sans un motif particulier, par une resolution
adoptee par une majorite de tout le conseil d'administration.
Si un poste de membre d'un comite n'est plus pourvu, en raison d'une
decheance de membre, d'un deces, d'une demission, d'un renvoi ou autre, les
membres restants (et tous les membres suppleants) pourront continuer a remplir
leurs fonctions, et ce poste pourra etre pourvu par le conseil
d'administration.
<PAGE>
- 14 -
ARTICLE 11
----------
La societe indemnisera tout administrateur, tout membre du comite designe
par le conseil d'administration et tout fonde de pouvoirs et leurs heritiers,
executeurs testamentaires et administrateurs de biens pour tous frais
raisonnables qu'ils auront encourus par suite de leur comparution en tant que
personnes parties au litige dans des actions en justice, des proces ou des
poursuites judiciaires de par leurs fonctions actuelles ou anciennes
d'administrateur ou de membre du comite designe par le conseil d'administration
ou de fonde de pouvoirs de la societe, ou a la demande de la societe, de toute
autre societe dans laquelle la societe est actionnaire ou creancier directment
or indirectment et qui ne lui a pas octroye un droit a indemnisation, a
condition qu'il ait agi de bonne foi et de maniere telle qu'il pouvait
raisonnablement croire etre dans le meilleur interet de la societe ou non
opposee a celui-ci; et, par rapport a toute action ou procedure penale, qu'ils
n'aient pas eu de motif raisonnable de croire que sa conduite etait illegale;
et, en cas d'arrangement transactionnel, une telle indemnisation sera octroyee
pour des situations couvertes par un tel arrangement transactionnel a moins que
la societe ne soit informee par son conseiller juridique que la personne a
indemniser ne s'etait pas conformee aux principes de conduite ci-avant indiques.
ARTICLE 12
----------
Le conseil d'administration ou le commissaire aux comptes peut convoquer
d'autres assemblees chaque fois que l'interet de la societe le commande. De
telles assemblees
<PAGE>
- 15 -
doivent etre convoquees si des actionnaires representant au moins un cinquieme
du capital social les en requierent par une demande ecrite contenant l'ordre du
jour.
ARTICLE 13
----------
Les actions judiciaires, tant en demandant qu'en defendant, sont suivies au
nom de la societe par le conseil d'administration, poursuites et diligences de
son president ou d'un administrateur delegue a ces fins.
TITRE IV: SURVEILLANCE
----------------------
ARTICLE 14
----------
La societe est surveillee par un ou plusieurs commissaires nommes par
l'assemblee generale, qui fixe leur nombre et leur remuneration, ainsi que la
duree de leur mandat, qui ne peut exceder six annees.
TITRE V: ASSEMBLEE GENERALE
---------------------------
ARTICLE 15
----------
L'assemblee generale annuelle se reunit dans la commune du siege social, a
l'endroit indique dans les convocations, le deuxieme mardi du mois de juin a
11.00 heures et pour la premiere fois en 1999.
Si ce jour est un jour ferie 1egal, l'assemblee generale a lieu le premier
jour ouvrable suivant.
TITRE VI: ANNEE SOCIALE, REPARTITION DES BENEFICES
--------------------------------------------------
ARTICLE 16
----------
L'annee sociale commence le 1er janvier et finit le 31 decembre de chaque
annee. Exceptionnellement, le premier exercice social comprendra tout le temps a
courir de la constitution de la societe jusqu'au 31 decembre 1998.
ARTICLE 17
----------
L'excedent favorable du bilan, defalcation faite des charges sociales et
des amortissements, forme le benefice net de la societe. Sur ce benefice, il est
preleve cinq pour
<PAGE>
- 16 -
cent (5%) pour la formation du fonds de reserve 1egale; ce prelevement cesse
d'etre obligatoire lorsque la reserve aura atteint le dixieme du capital social,
mais devrait toutefois etre repris jusqu'a entiere reconstitution, si a un
moment donne et pour quelque cause que ce soit, le fonds de reserve avait ete
entame.
Le solde est a la disposition de l'assemblee generale.
TITRE VII: DISSOLUTION, LIQUIDATION
-----------------------------------
ARTICLE 18
----------
La societe peut etre dissoute par decision de l'assemblee generale. Lors de
la dissolution de la societe, la liquidation s'effectuera par les soins d'un ou
de plusieurs liquidateurs, personnes physiques ou morales, nommes par
l'assemblee generale qui determine leurs pouvoirs et leurs emoluments.
TITRE VIII: DISPOSITIONS GENERALES
----------------------------------
ARTICLE 19
----------
Pour tous les points non specifies dans les presents statuts, les parties
se referent et se soumettent aux dispositions de la loi luxembourgeoise du 10
aout 1915 sur les societes commerciales et de ses lois modificatives.
POUR COPIE CONFORME DES STATUTS COORDONNES
HESPERANGE, LE 12 AUOT 1998.
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF INCORPORATION
OF
CDRJ ACQUISITION CORPORATION
FIRST: The name of the Corporation is CDRJ Acquisition Corporation.
-----
SECOND: The Corporation's registered office in the State of Delaware
------
is at Corporation Trust Center, 1209 Orange Street in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business of the Corporation and its
-----
purpose is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation
------
shall have authority to issue is 1,000 shares of Common Stock, par value $.01
per share.
FIFTH: The name and mailing address of the incorporator is as
-----
follows:
Francis Oh
c/o Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
SIXTH: The following provisions are inserted for the management of
-----
the business and for the conduct of the affairs of the Corporation and for the
purpose of creating, defining, limiting and regulating the powers of the
Corporation and its directors and stockholders:
(a) The number of directors of the Corporation shall be fixed and may
be altered from time to time in the manner provided in the By-Laws, and
vacancies in the Board of Directors and newly created directorships
resulting from any increase in the authorized number of directors may be
filled, and directors may be removed, as provided in the By-Laws.
(b) The election of directors may be conducted in any manner approved
by the stockholders at the time when the election is held and need not be
by ballot.
(c) All corporate powers and authority of the Corporation (except as
at the time otherwise provided by law, by this Certificate of Incorporation
or by the By-Laws) shall be vested in and exercised by the Board of
Directors.
(d) The Board of Directors shall have the power without the assent or
vote of the stockholders to adopt, amend, alter or repeal the By-Laws of
the
<PAGE>
Corporation, except to the extent that the By-Laws or this Certificate of
Incorporation otherwise provide.
(e) No director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of his or her fiduciary
duty as a director, provided that nothing contained in this Certificate of
--------
Incorporation shall eliminate or limit the liability of a director (i) for
-
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
--
intentional misconduct or a knowing violation of the law, (iii) under
---
Section 174 of the General Corporation Law of the State of Delaware or (iv)
--
for any transaction from which the director derived an improper personal
benefit.
SEVENTH: The Corporation reserves the right to amend or repeal any
-------
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by the laws of the State of Delaware, and all rights herein
conferred upon stockholders or directors are granted subject to this
reservation.
IN WITNESS WHEREOF, I, the undersigned, being the incorporator
hereinabove named, for the purpose of forming a corporation pursuant to the
General Corporation Law of the State of Delaware, do make and file this
Certificate, hereby declaring and certifying that the facts herein stated are
true, and accordingly have here unto set my hand this 31st day of March, 1998.
/s/ Francis Oh
-----------------------------
Francis Oh
2
<PAGE>
EXHIBIT 3.3
CONFORMED COPY
--------- ----
CERTIFICATE OF MERGER
of
JAFRA COSMETICS INTERNATIONAL, INC.,
a California corporation
into
CDRJ ACQUISITION CORPORATION
a Delaware corporation
The undersigned corporation, organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the consti
tuent corporations of the merger are as follows:
State of
Name Incorporation
---- -------------
JAFRA COSMETICS INTERNATIONAL, INC. California
CDRJ ACQUISITION CORPORATION Delaware
SECOND: That an agreement of merger between the parties to the merger
has been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of Section
(S)(S)252(c) of the General Corporation Law of the State of Delaware.
<PAGE>
THIRD: That the surviving corporation of the merger is CDRJ
ACQUISITION CORPORATION, and the Certificate of Incorporation of CDRJ
ACQUISITION CORPORATION shall be the Certificate of Incorporation of the
surviving corporation, provided that the Article FIRST thereof shall be amended
as follows:
The name of the Corporation is Jafra Cosmetics International, Inc.
FOURTH: That in accordance with the agreement of merger, the merger
shall become effective upon the filing of this certificate with the Delaware
Secretary of State.
FIFTH: That the executed agreement of merger is on file at the
California office of the surviving corporation. The address of such office of
the surviving corporation is 2451 Townsgate Road, Westlake Village, California
91361.
SIXTH: That a copy of the agreement of merger will be furnished by
the surviving corporation, on request and without cost, to any stockholder of
any constituent corporation.
SEVENTH: That the authorized capital stock of JAFRA COSMETICS
INTERNATIONAL, INC. is 2,500 shares of common stock with a par value of $10.00
per share.
2
<PAGE>
IN WITNESS WHEREOF, this Certificate has been subscribed this 30th day
of April, 1998, by the undersigned who affirms that the statements made herein
are true under the penalties of perjury.
CDRJ ACQUISITION CORPORATION
By /s/ Donald J. Gogel
---------------------------------------------
Name: Donald J. Gogel
Title: Vice President
<PAGE>
EXHIBIT 3.4
==========================================================
JAFRA COSMETICS INTERNATIONAL, INC.
(formerly named CDRJ Acquisition Corporation)
BY-LAWS
-------
As Amended and Restated on July 21, 1998
==========================================================
1
<PAGE>
JAFRA COSMETICS INTERNATIONAL, INC.
(formerly CDRJ Acquisition Corporation)
BY-LAWS
---------------------
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
ARTICLE I STOCKHOLDERS .................................... 1
Section 1.01. Annual Meetings .............................. 1
Section 1.02. Special Meetings ............................. 1
Section 1.03. Notice of Meetings; Waiver ................... 2
Section 1.04. Quorum ....................................... 2
Section 1.05. Voting ....................................... 2
Section 1.06. Voting by Ballot ............................. 3
Section 1.07. Adjournment .................................. 3
Section 1.08. Proxies ...................................... 3
Section 1.09. Organization; Procedure ...................... 4
Section 1.10. Consent of Stockholders in
Lieu of Meeting .............................. 4
ARTICLE II BOARD OF DIRECTORS .............................. 5
Section 2.01. General Powers ............................... 5
Section 2.02. Number and Term of Office .................... 5
Section 2.03. Election of Directors ........................ 5
Section 2.04. Annual and Regular Meetings .................. 6
Section 2.05. Special Meetings; Notice ..................... 6
Section 2.06. Quorum; Voting ............................... 7
Section 2.07. Adjournment .................................. 7
Section 2.08. Action Without a Meeting ..................... 7
Section 2.09. Regulations; Manner of Acting ................ 7
Section 2.10. Action by Telephonic Communications .......... 7
Section 2.11. Resignations ................................. 8
Section 2.12. Removal of Directors ......................... 8
Section 2.13. Vacancies and Newly Created Directorships .... 8
Section 2.14. Compensation ................................. 8
Section 2.15. Reliance on Accounts and Reports, etc. ....... 9
ARTICLE III EXECUTIVE COMMITTEE AND OTHER COMMITTEES ....... 9
Section 3.01. How Constituted .............................. 9
Section 3.02. Powers ....................................... 9
Section 3.03. Proceedings .................................. 10
Section 3.04. Quorum and Manner of Acting .................. 10
Section 3.05. Action by Telephonic Communications .......... 10
i
<PAGE>
Section 3.06. Absent or Disqualified Members ............... 11
Section 3.07. Resignations ................................. 11
Section 3.08. Removal ...................................... 11
Section 3.09. Vacancies ......................... .......... 11
ARTICLE IV OFFICERS ......................................... 11
Section 4.01. Number ....................................... 11
Section 4.02. Election ..................................... 12
Section 4.03. Salaries ..................................... 12
Section 4.04. Removal and Resignation; Vacancies ........... 12
Section 4.05. Authority and Duties of Officers . ........... 12
Section 4.06. The Chief Executive Officer .................. 12
Section 4.07. The President and Chief Operating Officer..... 13
Section 4.08. The Vice President............................ 13
Section 4.09. The Secretary................................. 14
Section 4.10. The Chief Financial Officer................... 15
Section 4.11. The Treasurer................................. 16
Section 4.12. Additional Officers........................... 17
Section 4.13. Security...................................... 17
ARTICLE V CAPITAL STOCK...................................... 17
Section 5.01. Certificates of Stock, Uncertificated Shares.. 17
Section 5.02. Signatures; Facsimile......................... 17
Section 5.03. Lost, Stolen or Destroyed Certificates........ 18
Section 5.04. Transfer of Stock............................. 18
Section 5.05. Record Date................................... 18
Section 5.06. Registered Stockholders....................... 20
Section 5.07. Transfer Agent and Registrar.................. 20
ARTICLE VI INDEMNIFICATION................................... 20
Section 6.01. Nature of Indemnity........................... 20
Section 6.02. Successful Defense............................ 21
Section 6.03. Determination That Indemnification
Is Proper..................................... 22
Section 6.04. Advance Payment of Expenses................... 22
Section 6.05. Procedure for Indemnification................. 22
Section 6.06. Survival; Preservation of Other Rights........ 23
Section 6.07. Insurance..................................... 24
Section 6.08. Severability.................................. 24
ARTICLE VII OFFICES.......................................... 25
Section 7.01. Registered Office............................. 25
Section 7.02. Other Offices................................. 25
ii
<PAGE>
ARTICLE VIII GENERAL PROVISIONS.............................. 25
Section 8.01. Dividends..................................... 25
Section 8.02. Reserves...................................... 25
Section 8.03. Execution of Instruments...................... 26
Section 8.04. Corporate Indebtedness........................ 26
Section 8.05. Deposits...................................... 26
Section 8.06. Checks........................................ 27
Section 8.07. Sale, Transfer, etc. of Securities............ 27
Section 8.08. Voting as Stockholder......................... 27
Section 8.09. Fiscal Year................................... 27
Section 8.10. Seal.......................................... 27
Section 8.11. Books and Records; Inspection................. 28
ARTICLE IX AMENDMENT OF BY-LAWS.............................. 28
Section 9.01. Amendment..................................... 28
ARTICLE X CONSTRUCTION....................................... 28
Section 10.01. Construction................................. 28
iii
<PAGE>
JAFRA COSMETICS INTERNATIONAL, INC.
(formerly named CDRJ Acquisition Corporation)
BY-LAWS
-------
As amended and restated on July 21, 1998
ARTICLE I
---------
STOCKHOLDERS
------------
Section 1.01. Annual Meetings. The annual meeting of the stockholders
---------------
of the Corporation for the election of directors and for the transaction of such
other business as properly may come before such meeting shall be held at such
place, either within or without the State of Delaware, and at 10:00 A.M. local
time on the first Tuesday in July (or, if such day is a legal holiday, then on
the next succeeding business day), or at such other date and hour, as may be
fixed from time to time by resolution of the Board of Directors and set forth in
the notice or waiver of notice of the meeting. [Section 211(a), (b).]/1/
Section 1.02. Special Meetings. Special meetings of the stockholders
----------------
may be called at any time by the Chief Executive Officer (or, in the event of
his or her absence or disability, by the President or any Vice President), or by
the Board of Directors. A special meeting shall be called by the Chief Executive
Officer (or, in the event of his or her absence or disability, by the President
or any Vice President), or by the Secretary, immediately upon receipt of a
written request therefor by stockholders holding in the aggregate not less than
a majority of the outstanding shares of the Corporation at the time entitled to
vote at any meeting of the stockholders. If such officers or the Board of
Directors shall fail to call such meeting within twenty days after receipt of
such request, any stockholder executing such request may call such meeting. Such
special meetings of the stockholders shall be held at such places, within or
without the State of Delaware, as shall be specified in the respective notices
or waivers of notice thereof. [Section 211(d).]
Section 1.03. Notice of Meetings; Waiver. The Secretary or any
--------------------------
Assistant Secretary shall cause written notice of the place, date and hour of
each meeting of the stockholders, and, in the case of a special meeting, the
purpose or purposes for which such meeting is called, to be given personally or
by mail, not less than ten nor more than
- ---------------
/1/ Citations are to the General Corporation Law of the State of Delaware as in
effect on December 31, 1997, (the "DGCL"), and are inserted for reference
only, and do not constitute a part of the By-Laws.
<PAGE>
sixty days prior to the meeting, to each stockholder of record entitled to vote
at such meeting. If such notice is mailed, it shall be deemed to have been
given to a stockholder when deposited in the United States mail, postage
prepaid, directed to the stockholder at his or her address as it appears on the
record of stockholders of the Corporation, or, if he or she shall have filed
with the Secretary of the Corporation a written request that notices to him or
her be mailed to some other address, then directed to him or her at such other
address. Such further notice shall be given as may be required by law.
No notice of any meeting of stockholders need be given to any
stockholder who submits a signed waiver of notice, whether before or after the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in a written
waiver of notice. The attendance of any stockholder at a meeting of stockholders
shall constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting is
not lawfully called or convened. [Sections 222, 229.]
Section 1.04. Quorum. Except as otherwise required by law or by the
------
Certificate of Incorporation, the presence in person or by proxy of the holders
of record of a majority of the shares entitled to vote at a meeting of
stockholders shall constitute a quorum for the transaction of business at such
meeting. [Section 216.]
Section 1.05. Voting. If, pursuant to Section 5.05 of these By-Laws, a
------
record date has been fixed, every holder of record of shares entitled to vote at
a meeting of stockholders shall be entitled to one vote for each share
outstanding in his or her name on the books of the Corporation at the close of
business on such record date. If no record date has been fixed, then every
holder of record of shares entitled to vote at a meeting of stockholders shall
be entitled to one vote for each share of stock standing in his or her name on
the books of the Corporation at the close of business on the day next preceding
the day on which notice of the meeting is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. Except as otherwise required by law or by the Certificate of Incorporation
or by these By-Laws, the vote of a majority of the shares represented in person
or by proxy at any meeting at which a quorum is
2
<PAGE>
present shall be sufficient for the transaction of any business at such meeting.
[Sections 212(a), 216.]
Section 1.06. Voting by Ballot. No vote of the stockholders need be
----------------
taken by written ballot unless otherwise required by law. Any vote which need
not be taken by ballot may be conducted in any manner approved by the meeting.
Section 1.07. Adjournment. If a quorum is not present at any meeting
-----------
of the stockholders, the stockholders present in person or by proxy shall have
the power to adjourn any such meeting from time to time until a quorum is
present. Notice of any adjourned meeting of the stockholders of the Corporation
need not be given if the place, date and hour thereof are announced at the
meeting at which the adjournment is taken, provided, however, that if the
adjournment is for more than thirty days, or if after the adjournment a new
record date for the adjourned meeting is fixed pursuant to Section 5.05 of these
By-Laws, a notice of the adjourned meeting, conforming to the requirements of
Section 1.03 of these By-Laws, shall be given to each stockholder of record
entitled to vote at such meeting. At any adjourned meeting at which a quorum is
present, any business may be transacted that might have been transacted on the
original date of the meeting. [Section 222(c).]
Section 1.08. Proxies. Any stockholder entitled to vote at any meeting
-------
of the stockholders or to express consent to or dissent from corporate action in
writing without a meeting may authorize another person or persons to vote at any
such meeting and express such consent or dissent for him or her by proxy. A
stockholder may authorize a valid proxy by executing a written instrument signed
by such stockholder, or by causing his or her signature to be affixed to such
writing by any reasonable means including, but not limited to, by facsimile
signature, or by transmitting or authorizing the transmission of a telegram,
cablegram or other means of electronic transmission to the person designated as
the holder of the proxy, a proxy solicitation firm or a like authorized agent.
No such proxy shall be voted or acted upon after the expiration of three years
from the date of such proxy, unless such proxy provides for a longer period.
Every proxy shall be revocable at the pleasure of the stockholder executing it,
except in those cases where applicable law provides that a proxy shall be
irrevocable. A stockholder may revoke any proxy which is not irrevocable by
attending the meeting and voting in person or by filing an instrument in writing
3
<PAGE>
revoking the proxy or by filing another duly executed proxy bearing a later date
with the Secretary. Proxies by telegram, cablegram or other electronic
transmission must either set forth or be submitted with information from which
it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the stockholder. Any copy, facsimile
telecommunication or other reliable reproduction of a writing or transmission
created pursuant to this section may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission. [Section 212(b), (c), (d), (e).]
Section 1.09. Organization; Procedure. At every meeting of
-----------------------
stockholders the presiding officer shall be the Chief Executive Officer
or, in the event of his or her absence or disability, a presiding officer chosen
by a majority of the stockholders present in person or by proxy. The Secretary,
or in the event of his or her absence or disability, the Assistant Secretary, if
any, or if there be no Assistant Secretary, in the absence of the Secretary, an
appointee of the presiding officer, shall act as Secretary of the meeting. The
order of business and all other matters of procedure at every meeting of
stockholders may be determined by such presiding officer.
Section 1.10. Consent of Stockholders in Lieu of Meeting. To the
------------------------------------------
fullest extent permitted by law, whenever the vote of stockholders at a meeting
thereof is required or permitted to be taken for or in connection with any
corporate action, such action may be taken without a meeting, without prior
notice and without a vote of stockholders, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the Corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
4
<PAGE>
Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
earliest dated consent delivered in the manner required by law to the
Corporation, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Delivery made to the Corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. [Section 228(a)(c).]
ARTICLE II
----------
BOARD OF DIRECTORS
------------------
Section 2.01. General Powers. Except as may otherwise be provided by
--------------
law, by the Certificate of Incorporation or by these By-Laws, the property,
affairs and business of the Corporation shall be managed by or under the
direction of the Board of Directors and the Board of Directors may exercise all
the powers of the Corporation. [Section 141(a).]
Section 2.02. Number and Term of Office. The number of Directors
-------------------------
constituting the entire Board of Directors shall be eleven, which number may be
modified from time to time by resolution of the Board of Directors, but in no
event shall the number of Directors be less than one. Each Director (whenever
elected) shall hold office until his or her successor has been duly elected and
qualified, or until his or her earlier death, resignation or removal. [Section
141(b).]
Section 2.03. Election of Directors. Except as otherwise provided in
---------------------
Sections 2.12 and 2.13 of these By-Laws, the Directors shall be elected at each
annual meeting of the stockholders. If the annual meeting for the election of
Directors is not held on the date designated therefor, the Directors shall cause
the meeting to be held as soon thereafter as convenient. At each meeting of the
stockholders for the election of Directors, provided a quorum is present, the
Directors shall be elected by a plurality of the votes validly cast in such
election. [Sections 211(b), (c), 216.]
Section 2.04. Annual and Regular Meetings. The annual meeting of the
---------------------------
Board of Directors for the purpose of
5
<PAGE>
electing officers and for the transaction of such other business as may come
before the meeting shall be held as soon as possible following adjournment of
the annual meeting of the stockholders at the place of such annual meeting of
the stockholders. Notice of such annual meeting of the Board of Directors need
not be given. The Board of Directors from time to time may by resolution
provide for the holding of regular meetings and fix the place (which may be
within or without the State of Delaware) and the date and hour of such meetings.
Notice of regular meetings need not be given, provided, however, that if the
Board of Directors shall fix or change the time or place of any regular meeting,
notice of such action shall be mailed promptly, or sent by telegram, radio or
cable, to each Director who shall not have been present at the meeting at which
such action was taken, addressed to him or her at his or her usual place of
business, or shall be delivered to him or her personally. Notice of such action
need not be given to any Director who attends the first regular meeting after
such action is taken without protesting the lack of notice to him or her, prior
to or at the commencement of such meeting, or to any Director who submits a
signed waiver of notice, whether before or after such meeting. [Sections 141(g),
229.]
Section 2.05. Special Meetings; Notice. Special meetings of the Board
------------------------
of Directors shall be held whenever called by the Chief Executive Officer or, in
the event of his or her absence or disability, by the President and Chief
Operating Officer, or in the event of the simultaneous absence of the Chief
Executive Officer and the President and Chief Operating Officer, by any Vice
President, at such place (within or without the State of Delaware), date and
hour as may be specified in the respective notices or waivers of notice of such
meetings. Special meetings of the Board of Directors may be called on twenty-
four hours' notice, if notice is given to each Director personally or by
telephone or telegram, or on five days' notice, if notice is mailed to each
Director, addressed to him or her at his or her usual place of business. Notice
of any special meeting need not be given to any Director who attends such
meeting without protesting the lack of notice to him or her, prior to or at the
commencement of such meeting, or to any Director who submits a signed waiver of
notice, whether before or after such meeting, and any business may be transacted
thereat. [Sections 141(g), 229.]
Section 2.06. Quorum; Voting. At all meetings of the Board of
--------------
Directors, the presence of a majority of the total authorized number of
Directors shall constitute a quorum for the transaction of business. Except as
otherwise required by law, the vote of a majority of the Directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors. [Section 141(b).]
6
<PAGE>
Section 2.07. Adjournment. A majority of the Directors present,
-----------
whether or not a quorum is present, may adjourn any meeting of the Board of
Directors to another time or place. No notice need be given of any adjourned
meeting unless the time and place of the adjourned meeting are not announced at
the time of adjournment, in which case notice conforming to the requirements of
Section 2.05 of these By-Laws shall be given to each Director.
Section 2.08. Action Without a Meeting. Any action required or
------------------------
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board of Directors consent thereto in
writing, and such writing or writings are filed with the minutes of proceedings
of the Board of Directors. [Section 141(f).]
Section 2.09. Regulations; Manner of Acting. To the extent consistent
-----------------------------
with applicable law, the Certificate of Incorporation and these By-Laws, the
Board of Directors may adopt such rules and regulations for the conduct of
meetings of the Board of Directors and for the management of the property,
affairs and business of the Corporation as the Board of Directors may deem
appropriate. The Directors shall act only as a Board, and the individual
Directors shall have no power as such.
Section 2.10. Action by Telephonic Communications. Members of the
-----------------------------------
Board of Directors may participate in a meeting of the Board of Directors by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this provision shall constitute presence
in person at such meeting. [Section 141(i).]
Section 2.11. Resignations. Any Director may resign at any time by
------------
delivering a written notice of resignation, signed by such Director, to the
Chief Executive Officer or the Secretary. Unless otherwise specified therein,
such resignation shall take effect upon delivery. [Section 141(b).]
Section 2.12. Removal of Directors. Any Director may be removed at any
--------------------
time, either for or without cause, upon the affirmative vote of the holders of a
majority of the outstanding shares of stock of the Corporation entitled to vote
for the election of such Director cast at a special meeting called for the
purpose. Any vacancy in the Board of Directors caused by any such removal may be
filled at such meeting by the stockholders entitled to vote for the election of
the Director so removed. If such
7
<PAGE>
stockholders do not fill such vacancy at such meeting (or in the written
instrument effecting such removal, if such removal was effected by consent
without a meeting), such vacancy may be filled in the manner provided in Section
2.13 of these By-Laws. [Section 141(k).]
Section 2.13. Vacancies and Newly Created Directorships. If any
-----------------------------------------
vacancies shall occur in the Board of Directors, by reason of death,
resignation, removal or otherwise, or if the authorized number of Directors
shall be increased, the Directors then in office shall continue to act, and such
vacancies and newly created directorships may be filled by a majority of the
Directors then in office, although less than a quorum. A Director elected to
fill a vacancy or a newly created directorship shall hold office until his or
her successor has been elected and qualified or until his or her earlier death,
resignation or removal. Any such vacancy or newly created directorship may also
be filled at any time by vote of the stockholders. [Section 141(b), 223.]
Section 2.14. Compensation. The amount, if any, which each Director
------------
shall be entitled to receive as compensation for his or her services as such
shall be fixed from time to time by resolution of the Board of Directors,
provided that (a) no director who is an officer or employee of Clayton,
- --------
Dubilier & Rice, Inc., a Delaware corporation ("CD&R"), at any time that CD&R is
providing consulting services to the Corporation or one or more of its
subsidiaries and (b) no director who is an officer or employee of the
Corporation shall be entitled to receive any compensation for his or her
services as a Director (although such Director shall be entitled to be
reimbursed for any reasonable out-of-pocket expenses incurred in connection with
his or her services as a Director). [Section 141(h).]
Section 2.15. Reliance on Accounts and Reports, etc. A Director, or a
-------------------------------------
member of any Committee designated by the Board of Directors shall, in the
performance of his or her duties, be fully protected in relying in good faith
upon the records of the Corporation and upon information, opinions, reports or
statements presented to the Corporation by any of the Corporation's officers or
employees, or Committees designated by the Board of Directors, or by any other
person as to the matters the member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation. [Section 141(e).]
ARTICLE III
-----------
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
----------------------------------------
Section 3.01. How Constituted. The Board of Directors may designate
---------------
one or more Committees, including an Executive Committee, each such Committee to
consist of such number of Directors as from time to time may be fixed by the
Board of Directors. The Board of Directors may designate one or more Directors
as alternate members of any such
8
<PAGE>
Committee, who may replace any absent or disqualified member or members at any
meeting of such Committee. Thereafter, members (and alternate members, if any)
of each such Committee may be designated at the annual meeting of the Board of
Directors. Any such Committee may be abolished or re-designated from time to
time by the Board of Directors. Each member (and each alternate member) of any
such Committee (whether designated at an annual meeting of the Board of
Directors or to fill a vacancy or otherwise) shall hold office until his or her
successor shall have been designated or until he or she shall cease to be a
Director, or until his or her earlier death, resignation or removal. [Section
141(b), (c).]
Section 3.02. Powers. During the intervals between the meetings of the
------
Board of Directors, the Executive Committee, except as otherwise provided in
this section, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the property, affairs and business of
the Corporation, including the power to declare dividends and to authorize the
issuance of stock. Each such other Committee, except as otherwise provided in
this section, shall have and may exercise such powers of the Board of Directors
as may be provided by resolution or resolutions of the Board of Directors.
Neither the Executive Committee nor any such other Committee shall have the
power or authority:
(a) to approve or adopt, or to recommend to the stockholders, any
action or matter expressly required by the General Corporation Law of the
State of Delaware to be submitted to the stockholders for approval; or
(b) adopt, amend or repeal any bylaw of the corporation.
The Executive Committee shall have, and any such other Committee may be granted
by the Board of Directors, power to authorize the seal of the Corporation to be
affixed to any or all papers which may require it. [Section 141(c).]
Section 3.03. Proceedings. Each such Committee may fix its own rules
-----------
of procedure and may meet at such place (within or without the State of
Delaware), at such time and upon such notice, if any, as it shall determine from
time to time. Each such Committee shall keep minutes of its proceedings and
shall report such proceedings to the Board of Directors at the meeting of the
Board of Directors next following any such proceedings.
9
<PAGE>
Section 3.04. Quorum and Manner of Acting. Except as may be otherwise
---------------------------
provided in the resolution creating such Committee, at all meetings of any
Committee the presence of members (or alternate members) constituting a majority
of the total authorized membership of such Committee shall constitute a quorum
for the transaction of business. The act of the majority of the members present
at any meeting at which a quorum is present shall be the act of such Committee.
Any action required or permitted to be taken at any meeting of any such
Committee may be taken without a meeting, if all members of such Committee shall
consent to such action in writing and such writing or writings are filed with
the minutes of the proceedings of the Committee. The members of any such
Committee shall act only as a Committee, and the individual members of such
Committee shall have no power as such. [Section 141(b), (c), (f).]
Section 3.05. Action by Telephonic Communications. Members of any
-----------------------------------
Committee designated by the Board of Directors may participate in a meeting of
such Committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting. [Section 141(i).]
Section 3.06. Absent or Disqualified Members. In the absence or
------------------------------
disqualification of a member of any Committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he, she
or they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member. [Section 141(c).]
Section 3.07. Resignations. Any member (and any alternate member) of
------------
any Committee may resign at any time by delivering a written notice of
resignation, signed by such member, to the Chairman or the Chief Executive
Officer. Unless otherwise specified therein, such resignation shall take effect
upon delivery. [Section 141(b).]
Section 3.08. Removal. Any member (and any alternate member) of any
-------
Committee may be removed from his or her position as a member (or alternate
member, as the case may be) of such Committee at any time, either for or without
cause, by resolution adopted by a majority of the whole Board of Directors.
10
<PAGE>
Section 3.09. Vacancies. If any vacancy shall occur in any
---------
Committee, by reason of disqualification, death, resignation, removal or
otherwise, the remaining members (and any alternate members) shall continue to
act, and any such vacancy may be filled by the Board of Directors.
ARTICLE IV
----------
OFFICERS
--------
Section 4.01. Number. The officers of the Corporation shall be
------
chosen by the Board of Directors and shall be a Chief Executive Officer, a
President and Chief Operating Officer, one or more Vice Presidents, a Secretary
and a Treasurer. The Board of Directors also may elect one or more Assistant
Secretaries and Assistant Treasurers in such numbers as the Board of Directors
may determine. Any number of offices may be held by the same person. No officer
need be a Director of the Corporation. [Section 142(a), (b).]
Section 4.02. Election. Unless otherwise determined by the Board of
--------
Directors, the officers of the Corporation shall be elected by the Board of
Directors at the annual meeting of the Board of Directors, and shall be elected
to hold office until the next succeeding annual meeting of the Board of
Directors. In the event of the failure to elect officers at such annual
meeting, officers may be elected at any regular or special meeting of the Board
of Directors. Each officer shall hold office until his or her successor has
been elected and qualified, or until his or her earlier death, resignation or
removal. In the event of a vacancy in the office of a Vice President, Secretary,
Assistant Secretary, Treasurer or Assistant Treasurer, the Chief Executive
Officer may appoint a replacement to serve until the next meeting of the Board
of Directors where a successor is elected and qualified. [Section 142(b).]
Section 4.03. Salaries. The salaries of all officers and agents of
--------
the Corporation shall be fixed by the Board of Directors.
Section 4.04. Removal and Resignation; Vacancies. Any officer may be
----------------------------------
removed for or without cause at any time by the Board of Directors. Any officer
may resign at any time by delivering a written notice of resignation, signed by
such officer, to the Board of Directors or the Chief Executive Officer. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Any vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise, shall be filled by the Board of Directors. [Section
142(b), (e).]
Section 4.05. Authority and Duties of Officers. The officers of the
--------------------------------
Corporation shall have such authority
11
<PAGE>
and shall exercise such powers and perform such duties as may be specified in
these By-Laws, except that in any event each officer shall exercise such powers
and perform such duties as may be required by law. [Section 142(a), (b).]
Section 4.06. The President. The President shall preside at all
-------------
meetings of the stockholders and directors at which he or she is present, shall
be the chief executive officer and the chief operating officer of the
Corporation, shall have general control and supervision of the policies and
operations of the Corporation, shall see that all orders and resolutions of the
Board of Directors are carried into effect and shall report to the Board of
Directors. He shall manage and administer the Corporation's business and affairs
and shall also perform all duties and exercise all powers usually pertaining to
the office of a chief executive officer of a corporation. He or she shall have
the authority to sign, subject to general or specific resolutions approved by
the Board of Directors, in the name and on behalf of the Corporation, checks,
orders, contracts, leases, notes, drafts and other documents and instruments in
connection with the business of the Corporation, and together with the Secretary
or an Assistant Secretary, conveyances of real estate and other documents and
instruments to which the seal of the Corporation is affixed. He shall have the
authority to cause the employment or appointment of such employees and agents of
the Corporation as the conduct of the business of the Corporation may require,
to fix their compensation, and to remove or suspend any employee or agent
elected or appointed by the Chief Executive Officer or the Board of Directors.
The Chief Executive Officer shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
Section 4.08. The Vice President. Each Vice President shall perform
------------------
such duties and exercise such powers as may be assigned to him or her from time
to time by the Chief Executive Officer or by the President and Chief Operating
Officer. In the absence of the President and Chief Operating Officer, the duties
of the President and Chief Operating Officer shall be performed and his or her
powers may be exercised by such Vice President as shall be designated by the
President and Chief Operating Officer, or failing such designation, such duties
shall be performed and such powers may be exercised by each Vice President in
the order of their earliest election to that office; subject in any case to
review and superseding action by the President and Chief Operating Officer. In
the simultaneous absence of both the Chief Executive Officer and the President
and Chief Operating Officer, the duties of the Chief Executive Officer and the
President and Chief Operating Officer shall be performed and his or her powers
may be exercised by such Vice Presidents as shall be designated by the Chief
Executive Officer, or failing such designation, such duties shall be performed
and such powers may be exercised by Vice Presidents in the order of their
earliest election to that office; subject in any case to review and superseding
action by the Chief Executive Officer.
Section 4.09. The Secretary. The Secretary shall have the following
-------------
powers and duties:
12
<PAGE>
(a) He or she shall keep or cause to be kept a record of all the
proceedings of the meetings of the stockholders and of the Board of
Directors in books provided for that purpose. [Section 142(a).]
(b) He or she shall cause all notices to be duly given in accordance
with the provisions of these By-Laws and as required by law.
(c) Whenever any Committee shall be appointed pursuant to a
resolution of the Board of Directors, he or she shall furnish a copy of
such resolution to the members of such Committee.
(d) He or she shall be the custodian of the records and of the seal
of the Corporation and cause such seal (or a facsimile thereof) to be
affixed to all certificates representing shares of the Corporation prior to
the issuance thereof and to all instruments the execution of which on
behalf of the Corporation under its seal shall have been duly authorized in
accordance with these By-Laws, and when so affixed he or she may attest the
same.
(e) He or she shall properly maintain and file all books, reports,
statements, certificates and all other documents and records required by
law, the Certificate of Incorporation or these By-Laws.
(f) He or she shall have charge of the stock books and ledgers of the
Corporation and shall cause the stock and transfer books to be kept in such
manner as to show at any time the number of shares of stock of the
Corporation of each class issued and outstanding, the names (alphabetically
arranged) and the addresses of the holders of record of such shares, the
number of shares held by each holder and the date as of which each became
such holder of record.
(g) He or she shall sign (unless the Treasurer, an Assistant
Treasurer or an Assistant Secretary shall have signed) certificates
representing shares of the Corporation the issuance of which shall have
been authorized by the Board of Directors.
(h) He or she shall perform, in general, all duties incident to the
office of secretary and such other duties as may be specified in these By-
Laws or as
13
<PAGE>
may be assigned to him or her from time to time by the Board of Directors,
or the President and Chief Operating Officer.
Section 4.10. The Chief Financial Officer. The Chief Financial Officer
---------------------------
shall be the chief financial officer of the Corporation and shall have the
following powers and duties:
(a) He shall have charge and supervision over and be responsible for
the moneys, securities, receipts and disbursements of the Corporation, and
shall keep or cause to be kept full and accurate records of all receipts of
the Corporation.
(b) He shall render to the Board of Directors whenever requested, a
statement of the financial condition of the Corporation and of all his
transactions as Chief Financial Officer, and render a full financial report
at the annual meeting of the stockholders, if called upon to do so.
(c) He shall be empowered from time to time to require from all
officers or agents of the Corporation reports or statements giving such
information as he may desire with respect to any and all financial
transactions of the Corporation.
(d) He shall perform, in general, all duties incident to the office of
chief financial officer and such other duties as may be specified in these
By-Laws or as
14
<PAGE>
may be assigned to him from time to time by the Board of Directors
or the President and Chief Operating Officer.
(e) The Chief Financial Officer shall report to the Chief Executive
Officer.
(f) The Chief Executive Officer shall carry out all of the duties and
responsibilities under this Section 4.10 if the Corporation has no Chief
Financial Officer.
Section 4.11. The Treasurer. The Treasurer shall be the treasurer
-------------
of the Corporation and shall have the following powers and duties:
(a) He shall cause the moneys and other valuable effects of the
Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or other
depositories as shall be selected in accordance with Section 8.05 of these
By-Laws.
(b) He shall cause the moneys of the Corporation to be disbursed by
checks or drafts (signed as provided in Section 8.06 of these By-Laws) upon
the authorized depositories of the Corporation and cause to be taken and
preserved proper vouchers for all moneys disbursed.
(c) He may sign (unless an Assistant Treasurer or the Secretary or an
Assistant Secretary shall have signed) certificates representing stock of
the Corporation the issuance of which shall have been authorized by the
Board of Directors.
(d) He shall perform, in general, all duties incident to the office of
treasurer and such other duties as may be specified in these By-Laws or as
may be assigned to him from time to time by the Board of Directors or the
Chief Financial Officer, to whom he shall report.
Section 4.12. Additional Officers. The Board of Directors may
-------------------
appoint such other officers and agents as it may deem appropriate, and such
other officers and agents shall hold their offices for such terms and shall
exercise such powers and perform such duties as may be determined from time to
time by the Board of Directors. The Board of Directors from time to time may
delegate to any officer or agent the power to appoint subordinate officers or
agents and to prescribe their respective rights, terms of office, authorities
and duties. Any such officer or agent may remove any such subordinate officer
or agent appointed by him or her, for or without cause. [Section 142(a),(b).]
Section 4.13. Security. The Board of Directors may require any
--------
officer, agent or employee of the Corporation to provide security for the
faithful performance of his or her duties, in such amount and of such character
as may be determined from time to time by the Board of Directors.[Section
142(c).]
ARTICLE V
---------
CAPITAL STOCK
-------------
Section 5.01. Certificates of Stock, Uncertificated Shares. The
---------------------------------------------
shares of the Corporation shall be represented by certificates, provided that
the Board of Directors may provide by resolution or resolutions that some or all
of any or all classes or series of the stock of the Corporation shall be
uncertificated shares. Any such resolution shall not apply to shares represented
by a certificate until each certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock in the Corporation represented by certificates and upon
request every holder of uncertificated shares shall be entitled to have a
certificate signed by, or in the name of the Corporation, by the President and
Chief Operating Officer or a Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary, representing
the number of shares registered in certificate form. Such certificate shall be
in such form as the Board of Directors may determine, to the extent consistent
with applicable law, the Certificate of Incorporation and these By-Laws.
[Section 158.]
15
<PAGE>
Section 5.02. Signatures; Facsimile. Any or all of such signatures on
---------------------
the certificate referred to in Section 5.01 of these By-Laws may be a facsimile,
engraved or printed, to the extent permitted by law. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or she were such officer, transfer
agent or registrar at the date of issue. [Section 158.]
Section 5.03. Lost, Stolen or Destroyed Certificates. The Board of
--------------------------------------
Directors may direct that a new certificate be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon delivery to the Board of Directors of an affidavit of
the owner or owners of such certificate, setting forth such allegation. The
Board of Directors may require the owner of such lost, stolen or destroyed
certificate, or his or her legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of any such new certificate. [Section 167.]
Section 5.04. Transfer of Stock. Upon surrender to the Corporation
-----------------
or the transfer agent of the Corporation of a certificate for shares, duly
endorsed or accompanied by appropriate evidence of succession, assignment or
authority to transfer, the Corporation shall issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
upon its books. Within a reasonable time after the transfer of uncertificated
stock, the Corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the General
Corporation Law of the State of Delaware. Subject to the provisions of the
Certificate of Incorporation and these By-Laws, the Board of Directors may
prescribe such additional rules and regulations as it may deem appropriate
relating to the issue, transfer and registration of shares of the Corporation.
[Section 151(r).]
Section 5.05. Record Date. In order that the Corporation may determine
-----------
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date on which the
16
<PAGE>
resolution fixing the record date is adopted by the Board of Directors, and
which shall not be more than sixty nor less than ten days before the date of
such meeting. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting, provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the board of directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights of the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such
17
<PAGE>
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. [Section 213.]
Section 5.06. Registered Stockholders. Prior to due surrender of a
-----------------------
certificate for registration of transfer, the Corporation may treat the
registered owner as the person exclusively entitled to receive dividends and
other distributions, to vote, to receive notice and otherwise to exercise all
the rights and powers of the owner of the shares represented by such
certificate, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in such shares on the part of any other person,
whether or not the Corporation shall have notice of such claim or interests.
Whenever any transfer of shares shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer if, when the
certificates are presented to the Corporation for transfer or uncertificated
shares are requested to be transferred, both the transferor and transferee
request the Corporation to do so. [Section 159.]
Section 5.07. Transfer Agent and Registrar. The Board of Directors
----------------------------
may appoint one or more transfer agents and one or more registrars, and may
require all certificates representing shares to bear the signature of any such
transfer agents or registrars.
ARTICLE VI
----------
INDEMNIFICATION
---------------
Section 6.01. Nature of Indemnity. The Corporation shall indemnify
-------------------
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was or has agreed to become a director or officer of the Corporation, or
is or was serving or has agreed to serve at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a party or
is threatened to be made a party to such an action, suit or proceeding by reason
of the fact that he or she is or was or has agreed to become an employee or
agent of the Corporation, or is or was serving or has agreed to serve at
18
<PAGE>
the request of the Corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her or on his or her behalf in
connection with such action, suit or proceeding and any appeal therefrom, if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding had no reasonable cause to believe his or her
conduct was unlawful; except that in the case of an action or suit by or in the
right of the Corporation to procure a judgment in its favor (1) such
-
indemnification shall be limited to expenses (including attorneys' fees)
actually and reasonably incurred by such person in the defense or settlement of
such action or suit, and (2) no indemnification shall be made in respect of any
-
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
---- ----------
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful. [Sections 145(a),(b).]
Section 6.02. Successful Defense. To the extent that a director,
------------------
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in Section
6.01 of these By-Laws or in defense of any claim, issue or matter therein, he or
she shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith. [Section 145
(c).]
Section 6.03. Determination That Indemnification Is Proper. Any
--------------------------------------------
indemnification of a director or officer of
19
<PAGE>
the Corporation under Section 6.01 of these By-Laws (unless ordered by a court)
shall be made by the Corporation unless a determination is made that
indemnification of the director or officer is not proper in the circumstances
because he or she has not met the applicable standard of conduct set forth in
Section 6.01 of these By-Laws. Any indemnification of an employee or agent of
the Corporation under Section 6.01 of these By-Laws (unless ordered by a court)
may be made by the Corporation upon a determination that indemnification of the
employee or agent is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Section 6.01 of these By-Laws. Any
such determination shall be made (1) by a majority vote of the directors who are
-
not parties to such action, suit or proceeding, even though less than a quorum,
or (2) by a committee of such directors designated by a majority vote of such
-
directors, even though less than a quorum, or (3) if there are no such
-
directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (4) by the stockholders. [Section 145(d).]
-
Section 6.04. Advance Payment of Expenses. Expenses (including
---------------------------
attorneys' fees) incurred by a director or officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation as authorized in this
Article. Such expenses (including attorneys' fees) incurred by other employees
and agents may be so paid upon such terms and conditions, if any, as the Board
of Directors deems appropriate. The Board of Directors may authorize the
Corporation's counsel to represent such director, officer, employee or agent in
any action, suit or proceeding, whether or not the Corporation is a party to
such action, suit or proceeding. [Section 145 (e).]
Section 6.05. Procedure for Indemnification. Any indemnification of
-----------------------------
a person seeking indemnification of the Corporation under Sections 6.01 and 6.02
of these By-Laws, or advance of costs, charges and expenses to such person under
Section 6.04 of these By-Laws, shall be made promptly, and in any event within
thirty days, upon the written request of such person. If a determination by the
Corporation that such person is entitled to indemnification pursuant to this
Article is required, and the Corporation fails to respond within sixty days to a
written request for indemnity, the Corporation shall be deemed to have approved
such request.
20
<PAGE>
If the Corporation denies a written request for indemnity or advancement of
expenses, in whole or in part, or if payment in full pursuant to such request is
not made within thirty days, the right to indemnification or advances as granted
by this Article shall be enforceable by the indemnified person in any court of
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his or her right to indemnification, in whole or
in part, in any such action shall also be indemnified by the Corporation. It
shall be a defense to any such action (other than an action brought to enforce a
claim for the advance of costs, charges and expenses under Section 6.04 of these
By-Laws where the required undertaking, if any, has been received by or tendered
to the Corporation) that the claimant has not met the standard of conduct set
forth in Section 6.01 of these By-Laws, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the Corporation (including
its Board of Directors, its independent legal counsel, and its stockholders) to
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in Section 6.01 of these
By-Laws, nor the fact that there has been an actual determination by the
Corporation (including its Board of Directors, its independent legal counsel,
and its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
Section 6.06. Survival; Preservation of Other Rights. The foregoing
--------------------------------------
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing with
respect to any state of facts then or previously existing or any action, suit or
proceeding previously or thereafter brought or threatened based in whole or in
part upon any such state of facts. Such a "contract right" may not be modified
retroactively without the consent of such director, officer, employee or agent.
The indemnification and advancement of expenses provided by this
Article VI shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any by-law, agree-
21
<PAGE>
ment, vote of stockholders or disinterested directors or otherwise, both as to
action in his or her official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person. [Section 145(f), (j).]
Section 6.07. Insurance. The Corporation shall purchase and maintain
---------
insurance on behalf of any person who is or was or has agreed to become a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him or her and incurred by him or her or on his or her behalf in any such
capacity, or arising out of his or her status as such, whether or not the
Corporation would have the power to indemnify him or her against such liability
under the provisions of this Article, provided that such insurance is available
--------
on acceptable terms, which determination shall be made by a vote of a majority
of the entire Board of Directors. [Section 145(g).]
Section 6.08. Severability. If this Article or any portion hereof
------------
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the fullest
extent permitted by applicable law.
ARTICLE VII
-----------
OFFICES
-------
Section 7.01. Registered Office. The registered office of the
-----------------
Corporation in the State of Delaware shall be located at Corporation Trust
Center, 1209 Orange Street in the City of Wilmington, County of New Castle.
22
<PAGE>
Section 7.02. Other Offices. The Corporation may maintain offices or
-------------
places of business at such other locations within or without the State of
Delaware as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE VIII
------------
GENERAL PROVISIONS
------------------
Section 8.01. Dividends. Subject to any applicable provisions of law
---------
and the Certificate of Incorporation, dividends upon the shares of the
Corporation may be declared by the Board of Directors at any regular or special
meeting of the Board of Directors and any such dividend may be paid in cash,
property, or shares of the Corporation's Capital Stock.
A member of the Board of Directors, or a member of any Committee
designated by the Board of Directors shall be fully protected in relying in good
faith upon the records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or Committees of the Board of Directors, or by any other person as to
matters the Director reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Corporation, as to the value and amount of the assets,
liabilities and/or net profits of the Corporation, or any other facts pertinent
to the existence and amount of surplus or other funds from which dividends might
properly be declared and paid. [Sections 170, 172, 173.]
Section 8.02. Reserves. There may be set aside out of any funds of
--------
the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, thinks proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may similarly modify or abolish any such
reserve. [Section 171.]
Section 8.03. Execution of Instruments. The Chief Executive Officer,
------------------------
the President and Chief Operating Officer, any Vice President, the Secretary,
the Chief Financial Officer or the Treasurer may enter into any contract or
execute and deliver any instrument in the name and on behalf of the Corporation.
23
<PAGE>
The Board of Directors or the Chief Executive Officer may authorize any other
officer or agent to enter into any contract or execute and deliver any
instrument in the name and on behalf of the Corporation. Any such authorization
may be general or limited to specific contracts or instruments.
Section 8.04. Corporate Indebtedness. No loan shall be contracted on
----------------------
behalf of the Corporation, and no evidence of indebtedness shall be issued in
its name, unless authorized by the Board of Directors or the Executive
Committee. Such authorization may be general or confined to specific instances.
Loans so authorized may be effected at any time for the Corporation from any
bank, trust company or other institution, or from any firm, corporation or
individual. All bonds, debentures, notes and other obligations or evidences of
indebtedness of the Corporation issued for such loans shall be made, executed
and delivered as the Board of Directors or the Chief Executive Officer shall
authorize. When so authorized by the Board of Directors or the Chief Executive
Officer any part of or all the properties, including contract rights, assets,
business or good will of the Corporation, whether then owned or thereafter
acquired, may be mortgaged, pledged, hypothecated or conveyed or assigned in
trust as security for the payment of such bonds, debentures, notes and other
obligations or evidences of indebtedness of the Corporation, and of the interest
thereon, by instruments executed and delivered in the name of the Corporation.
Section 8.05. Deposits. Any funds of the Corporation may be
--------
deposited from time to time in such banks, trust companies or other depositaries
as may be determined by the Board of Directors or the Chief Executive Officer or
by such officers or agents as may be authorized by the Board of Directors or the
Chief Executive Officer to make such determination.
Section 8.06. Checks. All checks or demands for money and notes of
------
the Corporation shall be signed by such officer or officers or such agent or
agents of the Corporation, and in such manner, as the Board of Directors or the
Chief Executive Officer from time to time may determine.
Section 8.07. Sale, Transfer, etc. of Securities. To the extent
----------------------------------
authorized by the Board of Directors or by the Chief Executive Officer, the
President and Chief Operating Officer, any Vice President, the Secretary, the
Chief Financial Officer or the Treasurer or any other officers designated by the
Board of Directors may sell, transfer, endorse, and assign any shares of stock,
bonds or other securities owned by or held in the name of the Corporation, and
may make, execute and deliver in the name of the Corporation, under
24
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its corporate seal, any instruments that may be appropriate to effect any such
sale, transfer, endorsement or assignment.
Section 8.08. Voting as Stockholder. Unless otherwise determined by
---------------------
resolution of the Board of Directors, the Chief Executive Officer, the President
and Chief Operating Officer or any Vice President shall have full power and
authority on behalf of the Corporation to attend any meeting of stockholders of
any corporation in which the Corporation may hold stock, and to act, vote (or
execute proxies to vote) and exercise in person or by proxy all other rights,
powers and privileges incident to the ownership of such stock. Such officers
acting on behalf of the Corporation shall have full power and authority to
execute any instrument expressing consent to or dissent from any action of any
such corporation without a meeting. The Board of Directors may by resolution
from time to time confer such power and authority upon any other person or
persons.
Section 8.09. Fiscal Year. The fiscal year of the Corporation shall
-----------
commence on the first day of January of each year (except for the Corporation's
first fiscal year which shall commence on the date of incorporation) and shall
terminate in each case on December 31.
Section 8.10. Seal. The seal of the Corporation shall be circular in
----
form and shall contain the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware". The form of such
seal shall be subject to alteration by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed, affixed or
reproduced, or may be used in any other lawful manner.
Section 8.11. Books and Records; Inspection. Except to the extent
-----------------------------
otherwise required by law, the books and records of the Corporation shall be
kept at such place or places within or without the State of Delaware as may be
determined from time to time by the Board of Directors.
ARTICLE IX
----------
AMENDMENT OF BY-LAWS
--------------------
Section 9.01. Amendment. These By-Laws may be amended, altered or
---------
repealed
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(a) by resolution adopted by a majority of the Board of Directors at
any special or regular meeting of the Board if, in the case of such special
meeting only, notice of such amendment, alteration or repeal is contained
in the notice or waiver of notice of such meeting; or
(b) at any regular or special meeting of the stockholders if, in the
case of such special meeting only, notice of such amendment, alteration or
repeal is contained in the notice or waiver of notice of such meeting.
[Section 109(a).]
ARTICLE X
---------
CONSTRUCTION
------------
Section 10.01. Construction. In the event of any conflict between
------------
the provisions of these By-Laws as in effect from time to time and the
provisions of the Certificate of Incorporation of the Corporation as in effect
from time to time, the provisions of such Certificate of Incorporation shall be
controlling.
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Exhibit 3.5
LIBRO MIL SETENTA Y DOS.
ESCRITURA CINCUENTA Y DOS MIL OCHOCIENTOS NOVENTA Y OCHO.
EN LA CIUDAD DE MEXICO, a veinticinco de febrero de mil novecientos noventa
y ocho, MIGUEL ALESSIO ROBLES, notario diecinueve, hago constar EL CONTRATO DE
SOCIEDAD que celebran "CDRJ HOLDING COMPANY" y "WOLFGANG T. HOHENSEE" ambas
representadas por la senorita MONICA ROSADO REYGADAS, en los terminos de los
siguientes:
C L A U S U L A S :
NOMBRE, OBJETO, DOMICILIO, DURACION Y NACIONALIDAD
PRIMERA. La denominacion de la Sociedad es JAFRA COSMETICS INTERNATIONAL,
la cual ira seguida por las palabras Sociedad Anonima de Capital Variable o por
su abreviatura, "S.A. de C.V."
SEGUNDA. El objeto de la Sociedad es:
1. La compra, venta, manufactura, distribucion, comercializacion,
importacion, exportacion y almacenamiento de productos para el cuidado de la
piel, cosmeticos de color, fragancias y cualesquier otros productos para el
cuidado personal y cualquier otro producto que la administracion de la Sociedad
considere necesario o conveniente, asi como todas las actividades relacionadas
de manera directa o indirecta con dicho objeto.
<PAGE>
2. Adquirir y disponer por cualquier medio legal de cualquier tipo de
acciones, intereses o participaciones en otras sociedades, fideicomisos,
negocios o asociaciones, tanto de naturaleza civil como mercantil.
3. Comprar, vender, arrendar, hipotecar o gravar de cualquier forma
legalmente permitida, los bienes muebles o inmuebles que se requieran o que sean
convenientes para la consecucion de objeto social.
4. Prestar y pedir prestado dinero con o sin garantiia y garantizar las
obligaciones de terceros por cualquier medio (incluyendo los medios de garantiia
personal, fianza, prenda, hipoteca, aval o de otra cualquier forma).
5. Adquirir, transferir o disponer por cualquier medio legal de patentes,
derechos de patente, invenciones, marcas, nombres comerciales, derechos de autor
o de cualquier otro tipo de propiedad intelectual que pueda ser necesaria o
conveniente para la consecucion del objeto social.
6. Actuar como agente, comisionista, representante, apoderado o de
cualquier otra manera representar a todo tipo de sociedades y personas fisicas,
tanto dentro como fuera del territorio nacional.
7. Recibir y prestar cualquier tipo de servicios relacionados con el
objeto social.
8. En general, realizar todo tipo de negocios y actividades que se
relacionen de manera directa o indirecta con el objeto social.
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TERCERA. El domicilio de la Sociedad es la ciudad de Meexico, Distrito
Federal, mismo que no se considerara modificado aun cuando la Sociedad
establezca agencias o sucursales en cualquier otro lugar en Mexico o en el
extranjero, o designe domicilios convencionales para la celebracion de actos y
contratos especiificos.
CUARTA. La duracion de la Sociedad sera indefinida.
QUINTA. La Sociedad es de nacionalidad Mexicana. Todo extranjero que al
momento de la constitucion o en cualquier momento posterior, adquiera un
interes o participacion en la Sociedad se considerara por ese solo hecho como
Mexicano con respecto a dicho interes o participacion y se entendera que
conviene en no invocar la proteccion de su Gobierno, bajo la pena, en caso
contrario, de perder las participaciones o intereses que hubiese adquirido en
favor de la Nacion Mexicana.
CAPITAL SOCIAL Y ACCIONES
SEXTA. El capital social sera variable. La parte minima fija sin
derecho al retiro del capital social sera la cantidad de $50,000.00 Pesos
(Cincuenta Mil Pesos) integramente suscrita y pagada, representada por 50
(cincuenta) acciones ordinarias Serie "B", sin expresion de valor nominal.
El capital variable sera ilimitado y estaraa representado por acciones
ordinarias nominativas sin expresion de valor nominal.
Todas las acciones conferiran los mismos derechos y obligaciones a sus
tenedores. El capital social estaraa representado tanto en su parte minima
fija como en su
3
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parte variable, por acciones serie "B" o de libre suscripcion, las cuales
podraan ser adquiridas tanto por inversionistas mexicanos como extranjeros.
SEPTIMA. Los aumentos o las reducciones del capital variable podran
realizarse en base a una resolucion de la Asamblea General Ordinaria de
Accionistas, cuya resolucion no requerira ser protocolizada ni inscrita en el
Registro Publico de Comercio, misma que debera determinar las condiciones en
las que deba realizarse dicho aumento o reduccion, tales como los terminos de
suscripcion y pago de las mismas, las caracteristicas de las acciones que se
emitan y cualquier otro asunto relacionado. Dichos aumentos de capital podraan
pagarse en dinero o en especie por los accionistas de la sociedad, tal como haya
sido acordado por los accionistas de la compania y resuelto por la asamblea de
accionistas que resuelva dicho aumento de capital.
Por otro lado, los futuros aumentos o reducciones del capital fijo deberan
ser acordados por una Asamblea Extraordinaria de Accionistas.
OCTAVA. Los titulos de acciones y, en su caso, los certificados
provisionales, contendran las menciones a que se refiere el articulo ciento
veinticinco de la Ley General de Sociedades Mercantiles. La clausula quinta de
estos estatutos sera de igual forma transcrita.
NOVENA. Cada accion representara un voto en las Asambleas de Accionistas;
el tenedor de las acciones de la Sociedad tendra derecho a votar en todos los
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asuntos sometidos en la asamblea cuando por ley o por estos estatutos tengan
derecho a votar; todas las acciones conferiran iguales derechos y obligaciones
a sus tenedores.
DECIMA. Los tiitulos de las acciones contendran la firma del
Administrador Unico o de los miembros del Consejo de Administracion, segun el
caso. La firma de los Consejeros, si fuese autorizado por el Consejo de
Administracion, podra ser facsimilar, sujeto a la condicion de que en tal caso
los originales de las firmas respectivas seran depositadas en el Registro
Publico de Comercio correspondiente.
A solicitud de cualquier accionista, a cuyo cargo correran los gastos que
deriven de ello, los titulos de las acciones podran ser intercambiados por
diferentes titulos que representen un numero diferente de acciones.
DECIMO PRIMERA. La Sociedad debera llevar un libro de registro de
acciones en el que se inscribiran todas las operaciones de suscripcion,
adquisicion o transferencia, asi como cualquier gravamen de que sean objeto las
acciones representativas del capital social.
La Sociedad considerara como propietario de las acciones nominativas a la
persona registrada como tal en el libro de registro de acciones. Para tal
efecto, dicho libro se cerrara tres dias antes de la fecha asignada para una
Asamblea de Accionistas y se abrira de nuevo el dia siguiente en el cual la
Asamblea se celebro, o bien, el dia que tuvo que haber sido celebrada.
5
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DECIMO SEGUNDA. Los aumentos del capital social podraan efectuarse por
medio de aportaciones en efectivo o en especie, o por medio de la capitalizacion
de reservas, o cualquier otro excedente. En los casos de aumento de capital
social por medio de una nueva aportacion de efectivo o en especie, los
accionistas tendran el derecho de preferencia para suscribir y pagar las
acciones que seran emitidas, en proporcion con su tenencia accionaria al
momento de ejercitar dicho derecho de preferencia, dentro de los quince dias
siguientes a la fecha de publicacion del aviso correspondiente en el Diario
Oficial de las Federacion o calculados a partir de la fecha en que se celebro la
asamblea, en el caso de que todas las acciones representativas del capital
social de la sociedad hayan estado presentes o representadas en dicha asamblea.
En el caso en que despuees de las terminacion del plazo durante el cual los
accionistas hayan tenido el derecho de ejercitar su derecho de preferencia,
algunas acciones no hayan sido suscritas, el Administrador Unico o el Consejo de
Administracion ofreceraa dichas acciones a terceros o las guardara en la
tesoreria de la Sociedad, en su caso, de conformidad con el acuerdo tomado por
la asamblea de accionistas en el que se haya aprobado el aumento de capital.
No se podran emitir nuevas acciones hasta que las acciones previamente
emitidas hayan sido integramente suscritas y pagadas.
La Sociedad llevaraa un libro de registro de variaciones de capital.
6
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ADMINISTRACION
DECIMO TERCERA. La administracion de la Sociedad seraa confiada a un
Administrador Unico o a un Consejo de Administracion integrado por el numero de
Consejeros que determine la Asamblea Ordinaria de Accionistas. La Asamblea
Ordinaria de Accionistas tambien podra designar a Consejeros Suplentes para
actuar en el caso de ausencia de los Consejeros Propietarios.
DECIMO CUARTA. El Administrador Unico o los miembros del Consejo de
Administracion en su caso, no necesitan ser accionistas de la Sociedad y, por
regla general, duraraan en su cargo un anno contado a partir de la fecha de su
designacion pudiendo ser reelectos. En todo caso, permaneceran en su encargo
hasta que sus sucesores tomen posesion de sus cargos.
DECIMO QUINTA. La Asamblea de Accionistas o el Consejo de Administracion
en Sesion designaran de entre sus miembros a una persona que actue como
Presidente del Consejo de Administracion. Tambien podra designar un
Secretario quien no necesariamente debera ser Consejero.
DECIMO SEXTA. Las sesiones del Consejo de Administracion seraan celebradas
en el domicilio social o en cualquier otro lugar segun se determine previamente
en la convocatoria respectiva. Las sesiones de Consejo podran ser llevadas a
cabo en cualquier momento, pero al menos una vez al anno y seraan convocadas por
el Presidente o el Secretario del Consejo o por cualesquiera dos Consejeros o
por los
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<PAGE>
Comisarios de la Sociedad. La persona o personas que deseen convocar la
sesion lo informaran al Secretario del Consejo quien inmediatamente emitira la
convocatoria respectiva.
Las convocatorias seran hechas por escrito y enviadas al domicilio de cada
miembro del Consejo de Administracion o al lugar que designen para tales efectos
por telex contrasenno o telegrama o telecopia confirmados, con por lo menos
quince dias naturales de anticipacion a la fecha de la sesion. Las
convocatorias especificaraan el objeto, la hora, fecha y lugar para la sesion y
seran firmadas por el Secretario del Consejo. Sin perjuicio de lo anterior, el
requisito de la convocatoria podra renunciarse por cualquier consejero en
relacion a cualquier sesion.
DECIMO SEPTIMA. Para que las sesiones del Consejo de Administracion puedan
celebrarse validamente, se requerira la asistencia de por lo menos la mayoria
de los Consejeros o sus respectivos suplentes. Las resoluciones del Consejo de
Administracion seran validas unicamente si fueron aprobadas por el voto
favorable de las mayoria de los miembros del Consejo de Administracion
presentes.
Las resoluciones aprobadas unaanimemente por todos los Consejeros fuera de
sesion tendraan, para todos los efectos legales, la misma validez que si
hubieran sido adoptadas en sesion de consejo, ___________ que sean confirmadas
por escrito en cualquier despue__________ hayan sido tomadas.
8
<PAGE>
DECIMO OCTAVA. El Consejo de Administracion podra designar de entre sus
miembros, uno o mas delegados para la realizacion de tareas especificas, con la
facultades que le sean expresamente conferidas en cada caso.
DECIMO NOVENA. El Administrador Unico o el Consejo de Administracion,
seguun sea el caso, tendran las siguientes facultades:
a) Poder general para pleitos y cobranzas, con las facultades mas amplias
permitidas por la ley, en terminos del primer parrafo del articulo dos mil
quinientos cincuenta y cuatro del Codigo Civil para el Distrito Federal y los
articulos correlativos de cualquier otro codigo civil de la Repuublica Mexicana
(el "Codigo Civil"), con todas las facultades generales y especiales que
requieran Clausula especial, incluyendo aquellas previstas en el articulo
2587 del Codigo Civil, por lo que estaran facultados de una manera enunciativa
pero no limitativa para: representar a la Sociedad ante autoridades federales,
estatales, municipales, administrativas y judiciales, ante la Secretaria del
Trabajo y ante las Juntas de Conciliacion y Arbitraje y para firmar los
documentos que sean necesarios en el ejercicio de sus facultades; para ejercitar
toda clase de derechos y acciones ante cualquier autoridad y Juntas de
Conciliacion y Arbitraje; para someterse a cualquier jurisdiccion; para promover
y desistirse auun del juicio de amparo; para presentar cargos y querellas
penales y para comparecer como parte ofendida y coadyuvar con el Ministerio
Puublico y otorgar perdones; para transigir; para comprometer en aarbitros; para
articular y absolver posiciones; para aceptar y liberar toda clase de
9
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garantiias; para hacer cesion de bienes y para llevar a cabo los demas actos
que esten expresamente determinadas por la ley.
b) Poder general para actos de administracion en terminos del segundo
parrafo del artiiculo dos mil quinientos cincuenta y cuatro del Codigo Civil
entre las que se incluyen las facultades de celebrar, modificar, cumplir y
rescindir toda clase de contratos y convenios, obtener prestamos y en general
llevar a cabo todos los actos que esten directa o indirectamente relacionados
con los objetos sociales.
c) Poder general para actos de dominio en terminos del tercer parrafo
del articulo dos mil quinientos cincuenta y cuatro del Codigo Civil incluyendo
facultades para adquirir, transferir la titularidad de, asi como gravar
mediante prenda, hipoteca o de cualquier otra forma, derechos personales y
reales.
d) Poder para emitir, aceptar, endorsar y de cualquier otra manera
suscribir titulos de credito de conformidad con el articulo noveno de la Ley
General de Titulos y Operaciones de Credito.
e) Poder para conferir y revocar poderes generales y especiales dentro de
la ambito de las facultades anteriormente mencionadas.
f) Establecer sucursales y agencias en cualquier parte ya sea dentro o
fuera de los Estados Unidos Mexicanos y cerrar dichas sucursales o agencias.
g) Establecer subsidiarias en cualquier parte ya sea dentro o fuera de los
Estados Unidos Mexicanos y para liquidar y disolver dichas subsidiarias.
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h) Designar y remover gerentes, funcionarios y empleados de la Sociedad y
determinar sus facultades, deberes y remuneraciones.
ASAMBLEAS DE ACCIONISTAS
VIGESIMA. La autoridad suprema de la sociedad es la Asamblea General
Ordinaria de Accionistas, la cual podra por lo tanto adoptar toda clase de
acuerdos y ratificar todos los actos y transacciones realizadas por la sociedad.
Los acuerdos adoptados por la Asamblea de Accionistas seran implementados por el
Administrador Unico o el Consejo de Administracion, segun sea el caso, o por la
persona expresamente designada para tales efectos por la Asamblea de
Accionistas. Toda Asamblea de Accionistas se celebrara en el domicilio social,
salvo caso fortuito o fuerza mayor.
VIGESIMA PRIMERA. Las Asambleas de Accionistas seran Ordinarias o
Extraordinarias. Las Asambleas Ordinarias de Accionistas se celebraran por lo
menos una vez al ano dentro de los primeros cuatro meses posteriores al cierre
del ejercicio fiscal. Las Asambleas Extraordinarias de Accionistas tendran lugar
cuando sea necesario resolver cualquiera de los asuntos contenidos en el
articulo ciento ochenta y dos de la Ley General de Sociedades Mercantiles.
VIGESIMA SEGUNDA. Las Asambleas de Accionistas, ya sean ordinarias o
extraordinarias, se celebraran previa convocatoria del Administrador Unico o el
Consejo de Administracion, o por cualquiera de los Comisarios en caso de
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incumplimiento del Administrador Unico o del Consejo de Administracion de
conformidad con lo establecido en el articulo ciento sesenta y seis, fraccion
sexta de la Ley General de Sociedades Mercantiles. Las Asambleas se celebraran
tambien a solicitud los accionistas en los terminos de los articulos ciento
ochenta y cuatro y ciento ochenta y cinco de la Ley General de Sociedades
Mercantiles.
Las convocatorias para las asambleas de accionistas contendran el lugar,
fecha y hora en la cual se celebrara la asamblea, asi como la mencion de ser la
primera o subsecuente convocatoria. Las convocatorias se publicaran en uno de
los periodicos de mayor circulacion en el domicilio social con por lo menos
quince (15) dias naturales anteriores a la fecha fijada para la asamblea. En
caso de una segunda convocatoria, se publicara dicha convocatoria por lo menos
tres (3) dias anteriores a la fecha fijada para la asamblea. Las convocatorias
para cualquier Asamblea de Accionistas tambien deberan ser enviadas por
telecopia a cualquier accionista extranjero para asegurar su recepcion con por
lo menos quince (15) dias de anticipacion a la fecha de la asambleas.
Los acuerdos unanimemente aprobados por todos los accionistas que no se
hayan reunido en una asamblea, tendran, para todos los efectos legales, los
mismos efectos juridicos que si se hubieran tomado en una asamblea, siempre y
cuando sean confirmados por escrito en cualquier momento posterior al cual en
que fueron tomados.
VIGESIMA TERCERA. Las Asambleas Ordinarias de Accionistas quedaran
legalmente instaladas en la primera convocatoria si los accionistas tenedores de
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por lo menos el 50% (cincuenta por ciento) del capital social con derecho a voto
de la sociedad se encuentran presentes o debidamente representados en dicha
asamblea y, los acuerdos ahi tomados seran validos unicamente si son aprobados
por el voto de la mayoria de los accionistas presentes en dicha asamblea. En el
caso de que una Asamblea Ordinaria no se celebre en la fecha programada por la
falta de quorum, una segunda convocatoria o una subsecuente convocatoria se
realizara con la mencion de dicha circunstancia y, en dicho caso, las Asambleas
Ordinarias de Accionistas seraan consideradas como legalmente instaladas
independientemente del numero de las acciones presentes o representadas en la
asamblea y los acuerdos adoptados seraan vaalidos si son aprobados por el voto
favorable de los presentes o representados.
VIGESIMA CUARTA. Las Asambleas Extraordinarias de Accionistas quedaran
legalmente instaladas en la primera convocatoria si los accionistas tenedores de
por lo menos el setenta y cinco pro ciento del capital social con derecho a voto
de la sociedad estan presentes o debidamente representados en dicha asamblea; y
en el caso de una segunda o subsecuente convocatoria, las Asamblea
Extraordinaria de Accionistas quedara legalmente instalada si por lo menos el
50% (cincuenta por ciento) de los accionistas tenedores de las acciones
representativas del capital social con direcho a voto se encuentran presentes o
debidamente representados en cualquier asamblea. Los acuerdos tomados en
Asamblea Extraordinaria de Accionistas, ya sea en primera o subsecuentes
convocatorias, seran validas si son aprobadas por el voto favorable de los
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accionistas que representen, por lo menos, la mitad del capital social con
derecho a voto de la sociedad.
VIGESIMA QUINTA. Para poder asistir a las asambleas, los accionistas
deberan de acreditar su capacidad como tales por medio de su registro en el
libro de registro de acciones. Los Accionistas podran ser representados en las
asambleas por un apoderado que cuente con un poder general o especial o por un
apoderado designado por medio de carta poder.
Las asambleas de accionistas seran presididas por el Administrador Unico o
por el Presidente del Consejo de Administracion, segun sea el caso. En su
ausencia, dichas asambleas seran presididas por la persona que designe para
tales efectos la mayoria de los asistentes de la asamblea correspondiente. El
Secretario del Consejo de Administracion actuaraa como Secretario de la Asamblea
de Accionistas y, en su ausencia, la persona designada para tales efectos por
los accionistas en la asamblea correspondiente. El Presidente nombrara a uno o
dos de los asistentes como escrutadores, los cuales podran ser o no miembros del
Consejo de Administracion o accionistas, para que puedan determinar si se ha
reunido el quorum legal y para contar los votos emitidos si fuera necesario o
solicitado por el Presidente de la asamblea.
VIGESIMA SEXTA. Una vez legalmente instalada la asamblea, si alguno de los
puntos del orden del dia no ha sido resuelto, dicha asamblea podra ser pospuesta
y continuara el siguiente dia haabil, sin necesidad de una nueva convocatoria.
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Las actas de las Asambleas de accionistas seran registradas en el libro de
actas que conservara el Secretario, junto con un juego duplicado de las actas,
una lista de los accionistas que asistieron a la asamblea, firmada por el
escrutador, los poderes, copias de las publicacion en la cual se publico la
convocatoria, copias de cualquier reporte, cuentas de las sociedad y cualesquier
otro documento que haya sido presentado en la asamblea. Cuando las actas de una
asamblea no puedan ser registradas en el libro de actas, deberan protocolizarse
ante notario puublico. Las actas de las Asambleas Extraordinarias de
Accionistas deberan protocolizarse e inscribirse en el Registro Puublico de
Comercio del domicilio social. Todas las actas de asambleas de accionistas,
asi como el registro de aquellas no celebradas por falta de quorum, deberan
firmarse por el Presidente y el Secretario de la Asamblea, asii como por los
Comisarios que deberaan haber asistido a cualquier asamblea.
VIGESIMA SEPTIMA. Cualquier Asamblea Ordinaria o Extraordinaria de
accionistas estara legalmente celebrada sin necesidad de convocatoria previa si
todas las acciones representativas del capital social se encuentran presentes al
momento de la emision de los votos.
Las Asamblea de Accionistas determinara la remuneracion, si tal es el
caso, a los miembros del Consejo de Administracion y a los Comisarios de la
sociedad.
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VIGILANCIA
VIGESIMA OCTAVA. La vigilancia de la Sociedad quedara confiada a uno o
mas Comisarios, tal como sea determinado por los Accionistas en una Asamblea
Ordinaria. Un Comisario Suplente podra ser designado por cada Comisario
Propietario.
Los Comisarios, por regla general, ocuparan su cargo durante su ano,
contado a partir de la fecha de su designacion, debiendo continuar en su encargo
hasta que sus sucesores tomen posesion de sus cargos.
La remuneracion que perciban los Comisarios sera determinada por los
Accionistas en una Asamblea General.
VIGESIMA NOVENA. Los Comisarios tendran las facultades y obligaciones
contenidas en el articulo ciento sesenta y seis de la Ley General de Sociedades
Mercantiles.
EJERCICIO FISCAL Y UTILIDADES
TRIGESIMA. El ejercicio fiscal de la sociedad no excedera de un ano
calendario e iniciara y terminara en las fechas determinadas por los
Accionistas en una Asamblea ordinaria o por el Administrador Unico o el Consejo
de Administracion.
TRIGESIMA PRIMERA. Las utilidades netas obtenidas en cada ejercicio
fiscal, se aplicaran conforme a lo siguiente:
a) Dicha cantidad que podra ser determinada por los accionistas deberaa
primeramente apartarse para la creacion o restablecimiento de la reserva legal,
segun el
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caso; dicha suma no sera menor al cinco por ciento de las utilidades
netax hasta que sea equivalente a una quinta parte del capital social.
b) La cantidad necesaria para pagar a los trabajadores y empleados, el
reparto de utilidades correspondiente conforme a la ley; y,
c) El remanente sera distribuido conforme a lo dispuesto por los
Accionistas en una asamblea especial.
DISOLUCION Y LIQUIDACION
TRIGESIMA SEGUNDA. La sociedad sera disuelta anticipadamente en caso de:
I. Si la realizacion del objeto social se volviese imposible;
II. Por resolucion de los accionistas tomada en una Asamblea
Extraordinaria de Accionistas;
III. Si el numero de accionistas se reduzca a un numero menor del
minimo legal;
IV. En caso de perdida de dos terceras partes del capital de la sociedad,
salvo que los accionistas restablezcan o reduzcan el mismo; y
V. En cualquier otro caso previsto en la ley.
En caso de disolucion, la sociedad se colocara en liquidacion, la cual
sera confiada a un liquidador designado por la misma Asamblea Extraordinaria
que resuelva de la disolucion. El liquidador podra o no ser accionista de las
sociedad y tendra la
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facultad y recibir la remuneracion a probada por la Asamblea de Accionistas. La
Asamblea de Accionistas establecera un termino para la consecucion de los
encargos del liquidador, asi como las reglas generales para la realizacion de
dichas tareas.
TRIGESIMA TERCERA. Durante el proceso de liquidacion, las Asambleas de
Accionistas se celebraran de conformidad con los terminos establecidos en este
instrumento. Los Liquidadores tendran las facultades conferidas al
Administrador Unico o al Consejo de Administracion, con las limitaciones
impuestas por el proceso de liquidacion. Los Comisarios deberan realizar las
mismas funciones durante el proceso de liquidacion que en funcionamiento normal
de la sociedad y mantendran la misma relacion con los liquidadores que la que
mantenida con los Consejeros.
TRIGESIMA CUARTA. En todos los asntos que no esten especificamente
mencionados en este instrumento, aplicaran las disposiciones de la Ley General
de Sociedades Mercantiles.
ARTICULOS TRANSITORIOS
Los accionistas de la sociedad celebran en este acto la primera Asamblea
General Ordinaria de Accionistas a fin de adoptar, por unaminidad de votos, las
siguientes:
1. La parte fija del capital social sera de $50,000.00 (cincuenta mil
pesos) mismo que ha sido totalmente suscrito y pagado representado por cincuenta
acciones
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ordinarias sin expresion de valor nominal, mismo que quedo suscrito de
la siguiente forma:
"CDRJ HOLDING COMPANY", cuarenta y nueve
acciones de la Serie "B", con valor de cuarenta y nueve
mil pesos............................................... $49,000.00
EL SENOR WOLFGANG T. HOHENSEE, una accion
de la Serie "B", con valor de mil pesos................. $ 1,000.00
TOTAL: CINCUENTA ACCIONES, CON VALOR
DE CINCUENTA MIL PESOS.................................. $50,000.00
2. La administraction de la sociedad estara encargada a un Adminstrador
Unico.
El senor David A. Novak es designado Administrador Unico, sujeto a la
aprobacion correspondiente por parte de la Secretaria de Gobernacion, para
efectos de que el senor David A. Novak pueda ejercitar en Meexico sus funciones
como Administrador Unico.
3. Se designa al senor Sergio Quezada como Comisario de la sociedad
y al senor Ernesto Valenzuela como Comisario Suplente.
4. El primer ejercicio social comenzara en la fecha de celebracion
de la presente asamblea y terminara el treinta y uno de diciembre de mil
novecientos noventa y ocho y los subsecuentes ejercicios fiscales comenzaran el
treinta y uno de enero y concluiran el treinta y uno de diciembre de cada ano.
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5. Se otorga a los senores David A. Novak, Donald L. Gogel, James E.
Ritch Grande Ampudia, y las Sritas. Monica Rosado Reygadas y Amada Bracho
Zertuche los siguientes poderes de la sociedad a ser ejercitados en forma
manconunada o individualmente:
a. Poder general para pleitos y cobranzas, con las facultades mas
amplias permitadas por la ley, en terminos del primer parrafo del articulo
dos mil quinientos cincuenta y cuatro del Codigo Civil para el Distrito Federal
y los articulos correlativos de cualquier otro codigo civil de la Republica
Mexicana (el "Codigo Civil"), con todas las facultades generales y especiales
que requieran Clausula especial, incluyendo aquellas previstas en el articulo
dos mil quinientos del Codigo Civil, por lo que estaran facultados de una
manera enunciativa pero no limitativa para: representar a la Sociedad ante
autoridades federales, estatales, municipales, administrativas y judiciales,
ante la Secretaria del Trabajo y ante las Juntas de Conciliacion y Arbitraje y
para firmar los documentos que sean necesarios en el ejercicio de sus
facultades; para ejercitar toda clase de derechos y acciones ante cualquier
autoridad y Juntas de Conciliacion y Arbitraje; para someterse a cualquier
jurisdiccion; para promover y desistirse auun del juicio de amparo; para
presentar cargos y querellas penales y para comparecer como parte ofendida y
coadyuvar con el Ministerio Publico y otorgar perdones; para transigir; para
comprometer en arbitros; para articular y absolver posiciones; y para llevar a
cabo los demas actos que esten expresamente determinadas por la ley.
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b. Poder especial, pero con las mas amplias facultades permitidas
por ley para actos de administracion en asuntos laborales, incluyendo, pero sin
limitarse a la contratacion y administracion de personal, asii como para
representar a la Sociedad ante cualquier Junta de Conciliacion y Arbitraje, ya
sea Estatal o Federal o ante cualquier autoridad municipal en asuntos laborales,
y en general para efectos de los artiiculos seiscientos noventa y dos, inciso
dos, setecientos ochenta y seis, ochientos setenta y ocho, ochoientos setenta y
nueve y otros artiiculos relacionados de la Ley Federal del Trabajo, asi como
para celebrar convenio para remediar cualesquier controversia laboral.
c. Poder general para actos de administracion en terminos del
segundo parrafo del articulo dos mil quinientos cincuenta y cuatro del Codigo
Civil entre las que se incluyen las facultades de celebrar contratos de
arrendamiento o cualesquier otro instrumento requerido para establecer las
oficinas de la Sociedad y para adquirir los bienes muebles e inmuebles
requeridos para la operacion de la Sociedad.
d. Poder para abrir cuentas bancarias y de inversion con cualqier
institucion financiera (ya sea en Meexico o en el extranjero) y para disponer de
cualesquiera de dichas cuentas en teerminos del articulo noveno de la Ley de
Titulos y Operaciones de Credito.
e. Poder para conferir y revocar poderes generales y especiales
dentro de la aambito de las facultades anteriormente mencionadas.
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AUTORIZACION DE LA SECRETARIA DE RELACIONES EXTERIORES.
Contenida en el permiso nuumero "09008091", expediente --
"9809007946", folio "8304", de fecha veintitres de febrero de mil novecientos
noventa y ocho, expedido por la Secretaria de Relaciones Exteriores, por
conducto de la Direccion General de Asuntos Juridicos, Direccion de Permisos
Articulo Veintisiete Constitucional, que el suscrito notario agrega al legajo
de esta escritura con la letra "A".
PERSONALIDAD
La sennorita MONICA ROSADO REYGADAS, manifiesta que sus representadas
estan legalmente capacitadas para la celebracion de este acto, que las
personalidades que ostenta no le han sido revocadas ni en forma alguna
modificadas y las acredita como sigue:
1. Por "CDRJ HOLDING COMPANY," con poder otorgado en Westlake
Village, California, Estados Unidos de America, el diecinueve de febrero de mil
novecientos noventa y ocho, por David A. Novak, en su caracter de
vicepresidente, secretario y pesorero de "CDRJ HOLDING COMPANY," ante Francis
Oh, notario puublico para el Estado de Nueva York; dicho poder se encuentra
acompanado de una certificacion expedida por David A. Novak, en su caracter de
vicepresidente, secretario y tesorero de "CDRJ HOLDING COMPANY," ante Francis
Oh, notario puublico para el Estado de Nueva York, cuyas firmas en ambos
documentos fueron certificadas por Norman Goodman, Secretario del condado y
Secretario del Tribunal Supremo del Estado
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de Nueva York, cuya firma a su vez fue certificada mediante apostilla expedida
por Joseph T. Amello, Secretario Adjunto Especial de Estado del Estado de Nueva
York.
2. Por WOLFGANG T. HOHENSEE, con poder otorgado en Nueva York, Estado
de Nueva York, Estados Unidos de America, el veinte de febrero de mi
novecientos noventa y ocho, por Wolfgang T. Hohense, ante Francis Oh, notario
puublico para el Estado de Nueva York, cuya firma fue certificada por Norman
Goodman, Secretario del condado y Secretario del Tribunal Supremo del Estado de
Nueva York, cuya firma a su vez fue certificada mediante apostilla expedida por
Joseph T. Amello, Secretario Adjunto Especial de Estado del Estado de Nueva
York.
El suscrito notario protocoliza dichos poderes y la certificacion
antes relacionadas, en los terminos del articulo noventa y dos de la Ley del
Notariado para el Distrito Federal, agregandolos al legajo de esta escritura
con las letras "B" y "C", en union de sus traducciones al castellano, realizadas
por Michele Pagano, perito traductor autorizado por el Tribunal superior de
Justicia del Distrito Federal.
YO, EL NOTARIO, CERTIFICO Y DOY FE:
A. De que lo antes relacionado concuerda con sus originales a
que me remito y tuva a la vista.
B. De que conozco personalmente a la compareciente quien a mi
juicio tiene la capacidad legal necesario para este acto, pues nada me consta en
contrario.
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C. De que adverti a la compareciente de las penas en que
incurren quienes declaran con falsedad ante notario.
D. De que por sus generales dijo ser: de nacionalided mexicana por
nacimiento, originaria de esta ciudad, donde nacio el nueve de febrero de mil
novecientos setenta y dos, soltera, estudiante y con domicilio en Amberes cinco,
Colonia Juaarez, en esta ciudad.
E. De que leida que le fue la presente escritura a la compareciente
habiendole explicado el valor y consecuencias legales de su contenido,
manifesto su conformidad con la misma y la firmo hoy dia veintisiete del mismo
mes de su fecha, quedando AUTORIZADA.
FIRMA: De Monica Rosado Reygadas.
MIGUEL ALESSIO ROBLES. El sello de autorizar.
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ARTICULO
DOS MIL QUINIENTAS CINCUENTA Y CUATRO
DEL CODIGO CIVIL.
En todos los poderes generales para pleitos y cobranzas, bastara que
se diga que se otorgan con todas las facultades generales y las especiales que
requieran clausula especial conforme a la ley, para que se entiendan conferidos
sin limitacion alguna.
En los poderes generales para administrar bienes, bastara expresar
que se den con ese caracter para que el apoderado tenga toda clase de
facultades administrativas.
En los poderes generales para ejercer actos de dominio, bastara que
se den con ese caracter para que el apoderado tenga todas las facultades de
dueno, tanto en lo relativo a los bienes, como para hacer toda clase de
gestiones, a fin de defenderlos.
Cuando se quisieren limitar, en los tres casos antes mencionados, las
facultades de los apoderados, se consignaran las limitaciones, o los poderes
seran especiales.
Los notarios insertaran este articulo en los testimonions de los
poderes que otorguen.
ES PRIMER TESTIMONIO SACADO DE SU ORIGINAL Y PRIMERO QUE SE EXPIDE PARA "JAFRA
COSMETICS INTERNATIONAL," SOCIEDAD ANONIMA DE CAPITAL VARIABLE, A FIN DE QUE LE
SIRVA DE CONSTANCIA. VA EN
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NUEVE HOJAS COTEJADAS Y CORREGIDAS. MEXICO, DISTRITO FEDERAL, A VEINTISIETE DE
FEBRERO DE MIL NOVECIENTOS NOVENTA Y OCHO.
LIBRO MIL SETENTA Y DOS
ESCRITURA CINCUENTA Y DOS MIL OCHOCIENTOS NOVENTA Y OCHO.
EN LA CIUDAD DE MEXICO, e veinticinco de febrero de mil novecientos
noventa y ocho, MIGUEL ALESSIO ROBLES, notario diecinueve, hago constar EL
CONTRATO DE SOCIEDAD que celebran "CDRJ HOLDING COMPANY" y "WOLFGANG T.
HOHENSEE", ambas representadas por la senorita MONICA ROSADO REYGADAS, en los
terminos de los siguientes:
C L A U S U L A S:
NOMBRE, OBJETO, DOMICILIO, DURACION Y NACIONALIDAD
PRIMERA. La denominacion de la Sociedad es JAFRA COSMETICS
INTERNATIONAL, la cual ira seguida por las palabras Sociedad Anonima de Capital
Variable o por su abreviatura, "S.A. de C.V."
SEGUNDA. El objeto de la Sociedad es:
1. La compra, venta, manufactura, distribucion, comercializacion,
importacion, exportacion y almacenamiento de productors para el cuidado de la
piel, cosmeticos de color, fragancias y cualesquier otros productos para el
cuidado personal y cualquier otro producto que la administracion de la Sociedad
consider necesario o
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conveniente, asi como todas las actividades relacionadas de manera directa o
indirecta con dicho objeto.
2. Adquirir y disponer por cualquier medio legal de cualquier tipo de
acciones, intereses o participaciones en otras sociedades, fideicomisos,
negocios o asociaciones, tanto de naturaleza civil como mercantil.
3. Comprar, vender, arrendar, hipotecar o gravar de cualquier forma
legalmente permitida, los bienes muebles o inmuebles que se requieran o que sean
convenientes para la consecucion del objeto social.
4. Prestar y pedir prestado dinero con o sin garantia y garantizar
las obligaciones de terceros por cualquier medio (incluyendo los medios de
garantia personal, fianza, prenda, hipoteca, aval o de otra cualquier forma).
5. Adquirir, transferir o disponer por cualquier medio legal de
patentes, derechos de patente, invenciones, marcas, nombres comerciales,
derechos de autor o de cualquier otro tipo de propiedad intelectual que pueda
ser necesaria o conveniente para la consecucion del objeto social.
6. Actuar como agente, comisionista, representante, apoderado o de
cualquier otra manera representar a todo tipo de sociedades y personas fisicas,
tanto dentro como fuera del territorio nacional.
7. Recibir y prestar cualquier tipo de servicios relacionados con el
objeto social.
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8. En general, realizar todo tipo de negocios y actividades que se
relacionen de manera directa o indirecta con el objeto social.
TERCERA. El domicilio de la Sociedad es la ciudad de Mexico, Distrito
Federal, mismo que no se considerara modificado aun cuando la Sociedad
establezca agencias o sucursales en cualquier otro lugar en Mexico o en el
extranjero, o designe domicilios convencionales para la celebracion de actos y
contratos especificos.
CUARTA. La duracion de la Sociedad sera indefinida.
QUINTA. La Sociedad es de nacionalidad Mexicana. Todo extranjero que
al momento de la constitucion o en cualquier momento posterior, adquiera un
interes o participacion en la Sociedad se considerara por ese solo hecho como
Mexicano con respecto a dicho interes o participacion y se entendera que
conviene en no invocar la proteccion de su Gobierno, bajo la pena, en caso
contrario, de perder las participaciones o intereses que hubiese adquirido en
favor de la Nacion Mexicana.
CAPITAL SOCIAL Y ACCIONES
SEXTA. El capital social sera variable. La parte minima fija sin
derecho a retiro del capital social sera la cantidad de $50,000.00 Pesos
(Cincuenta Mil Pesos) integramente suscrita y pagada, representada por 50
(cincuenta) acciones ordinaries Serie "B", sin expresion de valor nominal.
El capital variable sera ilimitado y estara representado por acciones
ordinarias nominativas sin expresion de valor nominal.
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Todas las acciones conferiran los mismos derechos y obligaciones a sus
tenedores. El capital social estara representado tanto en su parte minima fija
como en su parte variable, por acciones serie "B" o de libre suscripcion, las
cuales podran ser adquiridas tanto por inversionistas mexicanos como
extranjeros.
SEPTIMA. Los aumentos o las reducciones del capital variable podran
realizarse en base a una resolucion de la Asamblea General Ordinaria de
Accionistas, cuya resolucion no requerira ser protocolizada ni inscrita en el
Registro Publico de Comercio, misma que debera determinar las condiciones en
las que deba realizarse dicho aumento o reduccion, tales como los terminos de
suscripcion y pago de las mismas, las caracteristicas de las acciones que se
emitan y cualquier otro asunto relacionado. Dichos aumentos de capital podran
pagarse en dinero o en especie por los accionistas de la sociedad, tal como haya
sido acordado por los accionistas de la compania y resuelto por la asamblea de
accionistas que resuelva dicho aumento de capital.
Por otro lado, los futuros aumentos o reducciones del capital fijo
deberan ser acordados por una Asamblea Extraordinaria de Accionistas;
OCTAVA. Los titulos de acciones y, en su caso, los certificados
provisionales, contendran las menciones a que se refiere el articulo ciento
veinticinco de la Ley General de Sociedades Mercantiles. La clausula quinta de
estos estatutos sera de igual forma transcrita.
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NOVENA. Cada accion representara un voto en las Asambleas de
Accionistas; el tenedor de las acciones de la Sociedad tendra derecho a votar en
todos los asuntos sometidos en la asamblea cuando por ley o por estos estatutos
tengan derecho a votar; todas las acciones conferiran iguales derechos y
oblgaciones a sus tenedores.
DECIMA. Los titulos de las acciones contendran la firma del
Administrador Unico o de dos miembros del Consejo de Administracion, segun el
caso. La firma de los Consejeros, si fuese autorizado por el Consejo de
Administracion, podra ser facsimilar, sujeto a la condicion de que en tal caso
los originales de las firmas respectivas seran depositadas en el Registro
Publico de Comercio correspondiente.
A solicitud e caulquier accionista, a cuyo cargo correran los gastos
que derivan de ello, los titulos de las acciones podran ser intercambiados por
diferentes titulos que representen un numero diferente de acciones.
DECIMO PRIMERA. La Sociedad debera llevar un libro de registro de
acciones en el que se inscribiran todas las operaciones de suscripcion,
adquisicion o transferencia, asi como cualquier gravamen de que sean objeto las
acciones representativas del capital social.
La Sociedad considerara como propietario de las acciones nominativas a
la persona registrada como tal en al libro de registro de acciones. Para tal
efecto, dicho libro se cerrara tres dias antes de la fecha asignada para una
Asamble de Accionistas y se
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abrira de nuevo el dia siguiente en el cual la Asamblea se celebro, o bien, el
dia que tuvo que haber sido celebrada.
DECIMO SEGUNDA. Los aumentos del capital social podran efectuarse por
medio de aportaciones an efectivo o en especie, o por medio de la capitalizacion
de reservas, o cualquier otro excedente. En los casos de aumento de capital
social por medio de una nueva aportacion de efectivo o en especie, los
accionistas tendran el derecho de preferencia para suscribir y pagar las
acciones que seran emitidas, en proporcion con su tenecia accionaria al momento
de ejercitar dicho derecho de preferencia, dentro de los quince dias siguientes
a la fecha de publicacion del aviso correspondiente en el Diario Oficial de la
Federacion o calculados a partir de la fecha en que se celabro la asamblea, en
el caso de que todas las acciones representativas del capital social de la
sociedad hayan estado presentes o represntadas en dicha asamblea.
En el caso en que despues de la terminacion del plazo durante el cual
los accionistas hayan tenido el derecho de ejercitar su derecho de preferencia,
algunas acciones no hayan sido suscritas, el Administrador Unico o el Consejo de
Administracion ofrecera dichas acciones a terceros o las guardara en la
tesoreria de la Sociedad, en su caso, de confirmidad con el acuerdo tomado por
la asamblea de accionistas en el que se haya aprobado el aumento de capital.
No se podran emitir nuevas acciones hasta que las acciones previamente
emitidas hayan sido integramente suscritas y pagadas.
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La Sociedad llevara un libro de registro de variaciones de capital.
ADMINISTRACION
DECIMO TERCERA. La administracion de la Sociedad sera confiada a un
Administrador Unico o a un Consejo de Administracion integrado por el numero de
Consejeros que dtermine la Asamblea Ordinaria de Accionistas. La Asamblea
Ordinaria de Accionistas tambien podra designar a Consejeros Suplentes para
actuar en el caso de ausencia de los Consejeros Propietarios.
DECIMO CUARTA. El Administrador Unico o los miembros del Consejo de
Administracion en su caso, no necesitan ser accionistas de la Sociedad y, por
regla general, duraran en su cargo un ano contado a partir de la fecha de su
designacion pudiendo ser reelectos. En todo caso, permaneceran en su encargo
hasta que sus sucesores tomen posesion de sus cargos.
DECIMO QUINTA. La Asamblea de Accionistas o el Consejo de
Administracion en Sesion designaran de entre sus miembros a una persona que
actue como Presidente del Consejo de Administracion. Tambien podra designar un
Secretario quien no necesariamente debera ser Consejero.
DECIMO SEXTA. Las sesiones del Consejo de Administracion seran
celebradas en el domicilio social o en cualquier otro lugar segun se determine
previamente en la convocatoria respectiva. Las sesiones de Consejo podran ser
llevadas a cabo en cualquier momento, pero al menos na vez al ano y seran
convocadas por el
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Presidente o el Secretario del Consejo o por cualesquiera dos Consejeros o por
los Comisarios de la Sociedad. La persona o personas que deseen convocar la
sesion lo informaran al Secretario del Consejo quien inmediatamente emitira la
convocatoria respectiva.
Las convocatorias seran hechas por escrito y enviadas al domicilio de
cada miembro del Consejo de Administracion o al lugar que designen para tales
efectos por telex contrasenado o telegrama o telecopia confirmados, con por lo
menos quince dias naturales de anticipacion a la fecha de la sesion. La
convocatorias especificaran elobjeto, la hora, fecha y lugar para la sesion y
seran firmadas por el Secretario del Consejo. Sin perjuicio de lo anterior, el
requisito de la convocatoria podra renunciarse por cualquier consejero en
relacion a cualquier sesion.
DECIMO SEPTIMA. Para que las sesiones del Consejo de Administracion
puedan celebrarse validamente, so requierira la asistencia de por lo menos la
majoria de los Consejeros o sus respectivos suplentes. Las resoluciones del
Consejo de Administracion seran validas unicamente si fueron aprobadas por el
voto favorable de la majoria de los miemros del Consejo de Administracion
presentes.
Las resoluciones aprobadas unanimemente por todos los Consejeros fuera
de session tendran, para todos los efectos legales, la misma validez que si
hubieran sido adoptadas en sesion de consejo, siempre que sean confirmadas por
escrito en cualquier despues de que hayan sido tomadas.
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DECIMO OCTAVA. El Consejo de Administracion podra designar de entre
sus miembros, uno o mas delegados para la realizacion de tareas especificas, con
la facultades que le sean expresamente conferidas en cada caso.
DECIMO NOVENA. El Administrador enico o el Consejo de Administracion,
segun sea el caso, tendran las siguientes facultades:
a) Poder general para pleitos y cobranzas, con las facultades mas
amplias permitidas por la ley, en terminos del primer parrafo del articulo dos
mil quinientos cincuenta y cuatro del Codigo Civil para el Distrito Federal y
los articulos correlativos de cualquier otro codigo civil de la Republica
Mexicana (el "Codigo Civil"), con todas las facultades generales y especiales
que requieran Clausula especial, incluyendo aquellas previstas en el articulo
2587 del Codigo Civil, por lo que estaran facultados de una manera enunciativa
pero no limitativa para: representar a la Sociedad ante autoridades federales,
estatales, municipales, administrativas y judiciales, ante la Secretaria del
Trabajo y ante las Juntas de Conciliacion y Arbitraje y para firmar los
documentos que sean necesarios en el ejercicio de sus facultades; para ejercitar
toda clase de derechos y acciones ante cualquier autoridad y Juntas de
Conciliacion y Arbitraje; para someterse a cualquier jurisdiccion; para promover
y desistirse aun del juicio de amparo; para presentar cargos y querellas penales
y para comparecer como parte ofendida y coadyuvar con el Ministerio Publico y
otorgar perdones; para transigir; para comprometer en arbitros; para articular y
absolver posiciones; para aceptar y liberar toda clase de
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garantias; para hacer cesion de bienes y para llevar a cabo los demas actos que
esten expresamente determinadas por la ley.
b) Poder general para actos de administracion en terminos del segundo
parrafo del articulo dos mil quinientos cincuenta y cuatro del Codigo Civil
entre las que se incluyen las facultades de celebrar, modificar, cumplir y
rescindir toda clase de contratos y convenios, obtener prestamos y en general
llevar a cabo todos los actos que esten directa o indirectamente relacionados
con los objetos sociales.
c) Poder general para actos de dominio en terminos del tercer parrafo
del articulo dos mil quinientos cincuenta y cuatro del Codigo Civil incluyendo
facultades para adquirir, transferir la titularidad de, asi como gravar mediante
prenda, hipoteca o de cualquier otra forma, derechos personales y reales.
d) Poder para emitir, aceptar, endosar y de cualquier otra manera
suscribir titulos de credito de confirmidad con el articulo noveno de la Ley
General de Titulos y Operaciones de Credito.
e) Poder para conferir y revocar poderas generales y especiales
dentro de la ambito de las facultades anteriormente mencionadas.
f) Establecer sucursales y agencias en cualquier parte ya sea dentro
o fuera de los Estados Unidos Mexicanos y cerrar dichas sucursales o agencias.
g) Establecer subsidiarias en cualquier parte ya sea dentro o fuera
de los Estados Unidos Mexicanos y para liquidar y disolver dichas subsidiarias.
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h) Designar y remover gerentes, funcinarios y empleados de la
Sociedad y determinar sus facultades, deberes y remuneraciones.
ASAMBLEAS DE ACCIONISTAS
VIGESIMA. La autoridad suprema de la sociedad es la Asamblea General
Ordinaria de Accionistas, la cual podra por lo tanto adoptar toda clase de
acuerdos y ratificar todos los actos y transacciones realizadas por la sociedad.
Los acuerdos adoptados por la Asamblea de Accionistas seran implementados por el
Administrador Unico o el Consejo de Administracion, segun sea el caso, o por la
persona expresamente designada para tales efectos por la Asamblea de
Accionistas. Toda Asamblea de Accionistas se celebrara en el domicilio social,
salvo caso fortuito o fuerza mayor.
VIGESIMA PRIMERA. Las Asambleas de Accionistas seran Ordinarias o
Extraordinarias. Las Asambleas Ordinarias de Accionistas se celebraran por lo
menos una vez al ano dentro de los primeros cuatro meses posteriores al cierre
del ejercicio fiscal. Las Asambleas Extraordinarias de Accionistas tendran
lugar cuando sea necesario resolver cualquiera de los asuntos contenidos en el
articulo ciento ochenta y dos de la Ley General de Sociedades Mercantiles.
VIGESIMA SEGUNDA. Las Asambleas de Accionistas, ya sean ordinarias o
extraordinarias, se celebraran previa convocatoria del Administrador Unico o el
Consejo de Administracion, o por cualquiera de los Comisarios en caso de
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incumplimiento del Administrador Unico o del Consejo de Administracion de
conformidad con lo establecido en el articulo ciento sesenta y seis, fraccion
sexta de la Ley General de Sociedades Mercantiles. Las Asambleas se celebraran
tambien a solicitud los accionistas en los terminos de los articulos ciento
ochenta y cuatro y ciento ochenta y cinco de la Ley General de Sociedades
Mercantiles.
Las convocatorias para las asambleas de accionistas contendran el
lugar, fecha y hora en la cual se celebrara la asamblea, asi como la mencion de
ser la primera o subsecuente convocatoria. Las convocatorias se publicaran en
uno de los perodicos de mayor circulacion enel domicilio social, con por lo
menos quince (15) dias naturales anteriores a la fecha fijada para la asamblea.
En caso de una segunda convocatoria, se publicara dicha convocatoria por lo
menos tres (3) dias anteroires a la fecha fijada para la asamblea. Las
convocatorias para cualquier Asamblea de Accionistas tambien deberan
ser enviadas por telecopia a cualquier accionista extranjero para asegurar su
recepcion con pro lo menos quince (15) dias de anticipacion a la fecha de la
asambleas.
Los acuerdos unanimemente aprobados por todos los accionistas que no
se hayan reunido en una asamblea, tendran, para todos los efectos legales, los
mismos efectos juridicos que si se hubieran tomado en una asamblea, siempre y
cuando sean confirmados por escrito en cualquier momento posterior al cual en
que fueron tomados.
VIGESIMA TERCERA. Las Asambleas Ordinarias de Accionistas quedaran
legalmente instaladas en la primera convocatoria si los accionistas tenedores de
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por lo menos el 50% (cincuenta por ciento) del capital social con derecho at
voto de la sociedad se encuentran presentes o debidamente representados en dicha
asamblea y, los acuerdos ahi tomados seran validos unicamente si son aprobados
por el voto de la mayoria de los accionistas presentes en dicha asamblea. En el
caso de que una Asamblea Ordinaria no se celebre en la fecha programada por la
falta de quorum, una segunda convocatoria o una subsecuente convocatoria se
realizara con la mencion de dicha circunstancia y, en dicho caso, las Asambleas
Ordinarias de Accionistas seran consideradas como legalmente instaladas
independientemente del numero de las acciones presentes o representadas en la
asamblea y los acuerdos adoptados seran validos si son aprobados por el voto
favorable de los presentes o representados.
VIGESTIMA CUARTA. Las Asambleas Extraordinarias de Accionistas
quedaran legalmente instaladas en la primera convocatoria si los accionistas
tenedores de por lo menos el setenta y cinco pro ciento del capital social con
derecho a voto de la sociedad estan presentes debidamente representados en dicha
asamblea; y en el caso de una segunda o subsecuente convocatoria, las Asamblea
Extraordinaria de Accionistas quedara legalmente instalada si por lo menos el
50% (cincuenta por ciento) de los accionistas tenedores de las acciones
representativas del capital social con derecho a voto se encuentran presentes o
debidamente representados en cualquier asamblea. Los acuerdos tomados en
Asamblea Extraordinaria de Accionistas, ya sea en primera o subsecuentes
convocatorias, seran validas si son aprobadas por el voto favorable de los
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accionistas que representen, por lo menos, la mitad del capital social con
derecho a voto de la sociedad.
VIGESIMA QUINTA. Para poder asistir a las asambleas, los accionistas
deberan de acreditar su capacidad come tales per medio de su registro en el
libro de registro de acciones. Los Accionistas podran ser representados en las
asambleas por un apoderado que cuente con un poder general o especial o por un
apoderado designado por medio de carta poder.
Las asambleas de accionistas seran presididas per el Administrador
Unico o por el Presidente del Consejo de Administracion, segun sea el caso. En
su ausencia, dichas asambleas seran presididas por la persona que designe para
tales efectos la mayoria de los asistentes de la asamblea correspondiente. El
Secretario del Consejo de Administracion actuara como Secretario de la Asamblea
de Accionistas y, on su ausencia, la persona designada para tales efectos per
los accionistas en la asamblea correspondiente. El Presidente nombrara a uno o
dos de los asistentes come escrutadores, los cuales podran ser o no miembros del
Consejo de Administracion o accionistas, para que puedan determinar si se ha
reunido el quorum legal y para contar los votos emitidos si fuera necesario o
solicitado por el Presidents de la asamblea.
VIGESIMA SEXTA. Una vez legalmente instalada la asamblea, si alguno
de los puntos del orden del dia no ha side resuelto, dicha asamblea podra ser
pospuesta y continuara el siguiente dia habil, sin necesidad de una nueva
convocatoria.
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Las actas de las Asambleas de accionistas seran registradas en el
libro de actas qua conservara el Secretario, junto con un juego duplicado de las
actas, una lista de los accionistas que asistieron a la asamblea, firmada per el
escrutador, los poderes, copias de la publicacion en la cual se publico la
convocatoria, copias de cualquier reporte, cuentas de la sociedad y cualesquier
otro documento que haya sido presentado en la asamblea. Cuando las actas de una
asamblea no puedan ser registradas en el libro de actas, deberin protocolizarse
ante notario publico. Las actas de las Asambleas Extraordinarias de Accionistas
deberan protocolizarse a inscribirse en el Registro Publico de Comercio del
domicilio social. Todas las actas de asambleas de accionistas, asi como el
registro de aquellas no celebradas por falta de quorum, deberan firmarase por el
Presidente y el Secretario de la Asamblea, asi como por los Comisarios quo
deberan haber asistido a cualquier asamblea.
VIGESIMA SEPTIMA. Cualquier Asamblea Ordinaria o Extraordinaria de
accionistas estara legalmente celebrada sin necesidad de convocatoria previa si
todas las acciones representativas del capital social se encuentran presentes al
momento de la emision de los votos.
Las Asamblea de Accionistas determinara la remuneracion, si tal es el
caso, a los miembros del Consejo de Administracion y a los Comisarios de la
sociedad.
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VIGILANCIA
VIGESIMA OCTAVA. La vigilancia de la Sociedad quedara confiada a uno
o mas Comisarios, tal como sea determinado por los Accionistas en una Asamblea
Ordinaria. Un Comisario Suplente podra ser designado por cada Comisario
Propietario. Los Comisarios, por regla general, ocuparan su cargo durante un
ano, contado a partir de la fecha de su designacion, debiendo continuar en su
encargo hasta que sus sucesores tomen posesion de sus cargos.
La remuneracion que perciban los Comisarios sera determinada por los
Accionistas en una Asamblea General.
VIGESIMA NOVENA. Los Comisarios tendran las facultades y obligaciones
contenidas en el articulo ciento sesenta y seis de la Ley General de Sociedades
Mercantiles.
EJERCICIO FISCAL Y UTILIDADES
TRIGESIMA. El ejercicio fiscal de la sociedad no excedera de un ano
calendario e iniciara y terminara en las fechas determinadas por los Accionistas
en una Asamblea ordinaria o por el Administrador Unico o el Consejo de
Administracion.
TRIGESIMA PRIMERA. Las utilidades netas obtenidas en cada ejercicio
fiscal, se aplicaran conforme a lo siguiente:
a) Dicha cantidad que podra ser determinada por los accionistas
debera primeramente apartarse para la creacion o restablecimiento de la reserva
legal, segun el
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caso, dicha suma no sera menor al cinco por ciento de las utilidades netas hasta
que sea equivalente a una quinta parte del capital social.
b) La cantidad necesaria para pagar a los trabajadores y empleados,
el reparto de utilidades correspondiente conforme a la ley, y;
c) El remanente sera distribuido conforme a lo dispuesto por los
Accionistas en una asamblea especial.
DISOLUCION Y LIQUIDACION.
TRIGESIMA SEGUNDA. La sociedad sera disuelta anticipadamente en caso
de:
I. Si la realizacion del objeto social se volviese imposible;
II. Por resolucion de los accionistas tomada en una Asamblea
Extraordinaria de Accionistas;
III. Si el numero de accionistas se reduzca a un numero menor del
minimo legal;
IV. En caso de perdida de dos terceras partes del capital de la
sociedad, salvo que los accionistas restablezcan o reduzcan el mismo; y
V. En cualquier otro caso previsto en la ley.
En caso de disolucion, la sociedad se colocara en liquidacion, la cual
sera confiada a un liquidador designado por la misma Asamblea Extraordinaria que
resuelva de la disolucion. El liquidador podra o no ser accionista de la
sociedad y tendra la
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facultad y recibir la remuneracion aprobada por la Asamblea de Accionistas. La
Asamblea de Accionistas establecera un termino para la consecucion de los
encargos del liquidador, asi como las reglas generales para la realizacion de
dichas tareas.
TRIGESIMA TERCERA. Durante el proceso de liquidacion, las Asambleas
de Accionistas se celebraran de conformidad con los terminos establecidos en
este instrumento. Los Liquidadores tendran las facultades conferidas al
Administrador Unico o al Consejo de Administracion, con las limitaciones
impuestas por el proceso de liquidacion. Los Comisarios debercan realizar las
mismas funciones durante el proceso de liquidacion que en funcionamiento normal
de la sociedad y mantendran la misma relacion con los liquidadores que la que
mantenida con los Consejeros.
TRIGESIMA CUARTA. En todos los asuntos que no esten especificamente
mencionados en este instrumento, aplicaran las disposiciones de la Ley General
de Sociedades Mercantiles.
ARTICULOS TRANSITORIOS
Los accionistas de la sociedad celebran en este acto la primera
Asamblea General ordinaria de Accionistas a fin de adoptar, por unanimidad de
votos, las siguientes:
1. La parte fija del capital social seria de $50,000.00 (cincuenta
mil pesos) mismo que ha sido totalmente suscrito y pagado representado por
cincuenta
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acciones ordinarias sin expresion de valor nominal, mismo que quedo suscrito de
la siguiente forma:
"CDRJ HOLDING COMPANY", cuarenta y nueve acciones de la Serie "B", con
valor de cuarenta y nueve mil pesos. $49,000.00.
EL SENOR, WOLFGANG T. HOHENSEE, una accion do la Serie "B", con valor
de mil pesos. $1,000.00.
TOTAL: CINCUENTA ACCIONES, CON VALOR DE CINCUENTA NIL PESOS.
$50,000.00.
2. La administracion de la sociedad estara encargada a un
Administrador Unico.
E1 senior David A. Novak es designado Administrador Unico, sujeto a la
aprobacion correspondiente por parte de la Secretaria de Gobernacion, para
efectos de que el senor David A. Novak pueda ejercitar en Mexico sus funciones
como Administrador Unico.
3. Se designa al senor Sergio Quezada como Comisario de la sociedad y
al senor Ernesto Valenzuela como Comisario Suplente.
4. El primer ejercicio social comenzara en la fecha de celebracion de
la presente asamblea y terminara el treinta y uno de diciembre de mil
novecientos noventa y ocho y los subsecuentes ejercicios fiscales comenzaran el
treinta y uno de enero y concluiran el treinta y uno de diciembre de cada ano.
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5. Se otorga a los sefiores David A. Novak, Donald L. Gogel, James E.
Ritch Grande Ampudia, y a las Sritas. Monica Rosado Reygadas y Amada Bracho
Zertuche los siguientes poderes de la sociedad a ser ejercitados en forma
mancomunada o individualmente:
a) Poder general para pleitos y cobranzas, con las facultades mas
amplias permitidas por la ley, en terminos del primer parrafo del articulo dos
mil quinientos cincuenta y cuatro del Codigo Civil para el Distrito Federal y
los articulos correlativos de cualquier otro codigo civil de la Republica
Mexicana (el "Codigo Civil"), con todas las facultades generales y especiales
que requieran Clausula especial, incluyendo aquellas previstas en el articulo
dos mil quinientos del Codigo Civil, por lo que estaran facultados de una manera
enunciativa pero no limitativa para: representar a la Sociedad ante autoridades
federales, estatales, municipales, administrativas y judiciales, ante la
Secretaria del Trabajo y ante las Juntas de Conciliacion y Arbitraje y para
firmar los documentos que sean necesarios an el ejercicio de sus facultades,
para ejercitar toda clase de derechos y acciones ante cualquier autoridad y
Juntas de Conciliacion y Arbitraje, para someterse a cualquier jurisdicion, para
promover y desistirse aun del juicio de amparo, para presentar cargos y
querellas penales y para comparecer como parte ofendida y coadyuvar con el
Ministerio Publico y otorgar perdones, para transigir, para comprometer en
arbitros, para articular y absolver
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posiciones, y para llevar a cabo los demas actos que esten expresamente
determinadas por la ley.
b) Poder especial, pero con las mis amplias facultades permitidas por
ley para actos de administracion en asuntos laborales, incluyendo, pero sin
limitarse a la contratacion y administracion de personal, asi como para
representar a la Sociedad ante cualquier Junta de Conciliacion y Arbitraje, ya
sea Estatal o Federal o ante cualquier autoridad municipal en asuntos laborales,
y en general para efectos de los articulos seiscientos noventa y dos, inciso
dos, setecientos ochenta y seis, ochocientos setenta y ocho, ochocientos setenta
y nueve y otros articulos relacionados de la Ley Federal del Trabajo, asi como
para celebrar convenio para remediar cualesquier controversia laboral.
c) Poder general para actos de administracion en terminos del
segundo parrafo del articulo dos mil quinientos cincuenta y cuatro del Codigo
Civil entre las que se incluyen las facultades de celbrar contratos de
arrendamiento o cualesquier otro instrumento requerido para establecer las
oficinas de la Sociedad y para adquirir los bienes muebles e inmuebles
requeridos para la operacion de la Sociedad.
d) Poder para abrir cuentas bancarias y de inversion con cualquier
institucion financiera (ya sea en Mexico o en el extranjero) y para disponer de
cualesquiera de dichas cuentas en terminos del articulo noveno de la Ley de
Titulos y Operaciones de Credito.
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e) Poder para conferir y revocar poderes generales y especiales
dentro de la ambito de las facultades anteriormente mencionadas.
AUTORIZACION DE LA SECRETARIA DE RELACIONES EXTERIORES
Contenida en el permiso numero "0900809l", expediente "9809007946",
folio "8304", de fecha veintitres de febrero de mil novecientos noventa y ocho,
expedido por la Secretaria de Relaciones Exteriores, por conducto de la
Direccion General de Asuntos Juridicos, Direccion de Permisos Articulo
Veintisiete Constitucional, que el suscrito notario agrega al legajo de esta
escritura con la letra "A".
P E R S 0 N A L I D A D :
La senorita MONICA ROSADO REYGADAS, manifiesta que sus representadas
estan legalmente capacitadas para la celebracion de este acto, que las
personalidades qua ostenta no le han sido revocadas ni en forma alguna
modificadas y las acredita como sigue:
1. Por "CDRJ HOLDING COMPANY", con poder otorgado en Westlake,
Village, California, Estados Unidos de America, el diecinueve de febrero de mi
novecientos noventa y ocho, por David A. Novak, en su caracter de
vicepresidente, secretario y tesorero de "CDRJ HOLDING COMPANY", ante Francis
Oh, notario publico para el Estado de Nueva York; dicho poder se encuentra
acompanado de una certificacion expedida por David A. Novak, en su caracter de
vicepresidente, secretario y tesorero de "CDRJ HOLDING COMPANY", ante Francis
Oh, notario publico para el
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Estado de Nueva York, cuyas firmas en ambos documentos fueron certificadas por
Norman Goodman, Secretario del condado y Secretario del Tribunal Supremo del
Estado de Nueva York, cuya firma a su vez fue certificada mediante apostilla
expedida por Joseph T. Amello, Secretario Adjunto Especial de Estado del Estado
de Nueva York.
2. Por WOLFGANG T. HOHENSEE, con poder otorgado en Nueva York, Estado
de Nueva York, Estados Unidos de America, el veinte de febrero de mi novecientos
noventa y ocho, por Wolfgang T. Hohensee ante Francis Oh, notario publico para
el Estado de Nueva York, cuya firma fue certificada por Norman Goodman,
Secretario del condado y Secretario del Tribunal Supremo del Estado de Nueva
York, cuya firma a su vez fue certificada mediante apostilla expedida por Joseph
T. Amello, Secretario Adjunto Especial de Estado del Estado de Nueva York.
El suscrito notario protocoliza dichos poderes y la certificacion
antes relacionadas, en los terminos del articulo noventa y dos de la Ley del
Notariado para el Distrito Federal, agregandolos al legajo de esta escritura con
las letras "B" y "C", en union de sus traducciones al castellano, realizadas por
Michele Pagano, perito traductor autorizado por el Tribunal Superior de Justicia
del Distrito Federal.
YO, EL NOTARIO, CERTIFICO Y DOY FE:
A. De que lo antes relacionado concuerda con sus originates a que me
remito y tuve a la vista.
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B. De que conozco personalmente a la compareciente quien a mi juicio
tiene la capacidad legal necesaria para este acto, pues nada me consta en
contrario.
C. De que adverti a la compareciente de las penas en que incurren
quienes declaran con falsedad ante notario.
D. De que por sus generales dijo ser: de nacionalidad mexicana por
nacimiento, originaria de esta ciudad, donde nacio el nueve de febrero de mil
novecientos setenta y dos, soltera, estudiante y con domicilio en Amberes cinco,
Colonia Juarez, en esta ciudad.
E. De que leida que le fue la presente escritura a la compareciente
habiendole explicado el valor y consecuencias legales de su contenido, manifesto
su conformidad con la misma y la firmo hoy dia veintisiete del mismo mes de su
fecha, quedando AUTORIZADA.
FIRMA: De Monica Rosado Reygadas
MIGUEL ALESSIO ROBLES. El sello de autorizar.
NOTAS COMPLEMENTARIAS
NOTA PRIMERA. Mexico, a veintisiete de febrero de mil novecientos
noventa y ocho. En esta fecha expedi lo. y 2o. testimonio en orden y lo. y 2o.
para "Jafra Cosmetics International" S. A. de C. V., en nueve hojas. ALESSIO
ROBLES. Rubrica.
NOTA SEGUNDA. Mexico, a veintitres de marzo de mil novecientos
noventa y ocho. El testimonio a qua se refiere la note primera fue inscrito en
el Registro
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Publico de Comercio del Distrito Federal, el 20 de marzo 1998, en el Polio
Mercantil numero 233944. Conste. ALESSIO ROBLES. Rubrica .
A R T I C U L O
DOS NIL QUINIENTOS CINCUENTA Y CUATRO
DEL CODIGO CIVIL
En todos los poderes generales para pleitos y cobranzas, bastara que
se diga que se otorgan con todas las facultades generales y las especiales que
requieran clausula especial conforme a la ley, para que se entiendan conferidos
sin limitacion alguna.
En los poderes generales para administrar bienes, bastara expresar que
se dan con ese caracter para que el apoderado tenga toda clase de facultades
administrativas.
En los poderes generales para ejercer actos de dominio, bastara que se
den con ese caracter para que el apoderado tenga todas las facultades de dueno,
tanto en lo relativo a los bienes, como para hacer toda clase de gestiones, a
fin de defenderlos.
Cuando se quisieren limitar, en los tres casos antes mencionados, las
facultades de los apoderados, se consignaran las limitaciones, o los poderes
seran especiales.
Los notarios insertaran este articulo en los testimonios de los
poderes que otorguen .
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ES COPIA CERTIFICADA SACADA DE SU ORIGINAL QUE SE EXPIDE PARA "JAFRA COSMETICS
INTERNATIONAL", SOCIEDAD ANONIMA DE CAPITAL VARIABLE, A FIN DE QUE LE SIRVA DE
CONSTANCIA. VA EN NUEVE HOJAS COTEJADAS Y CORREGIDAS. MEXICO, DISTRITO FEDERAL,
A VEINTISIETE DE ABRIL DE NIL NOVECIENTOS NOVENTA Y OCHO.
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EXHIBIT 3.5
ESTATUTOS SOCIALES DE
JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V.
CLAUSULAS
NOMBRE, OBJETO, DOMICILIO, DURACION Y NACIONALIDAD
PRIMERA. La denominacion de la Sociedad es JAFRA COSMETICS INTERNACIONAL, la
cual ira seguida por las palabras Sociedad Anonima de Capital Variable o por su
abreviatura, "S.A. de C.V."
SEGUNDA. El objeto de la Sociedad es:
1. La compra, venta, manufactura, distribucion, comercializacion,
importacion, exportacion y almacenamiento de productos para el cuidado
de la piel, cosmeticos de color, fragancias y cualesquier otros
productos para el cuidado personal y cualquier otro producto que la
administracion de la Sociedad considere necesario o conveniente, asi
como todas las actividades relacionadas de manera directa o indirecta
con dicho objeto.
2. Adquirir y disponer por cualquier medio legal de cualquier tipo de
acciones, intereses o participaciones en otras sociedades,
fideicomisos, negocios o asociaciones, tanto de naturaleza civil como
mercantil.
3. Comprar, vender, arrendar, hipotecar o gravar de cualquier forma
legalmente permitida, los bienes muebles o inmuebles que se requieran
o que sean convenientes para la consecucion del objeto social.
4. Prestar y pedir prestado dinero con o sin garantia y garantizar las
obligaciones de terceros por cualquier medio(incluyendo los medios de
garantia personal, fianza, prenda, hipoteca, aval o de otra cualquier
forma.)
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2
5. Adquirir, transferir o disponer por cualquier medio legal de patentes,
derechos de patente, invenciones, marcas, nombres comerciales,
derechos de autor o de cualquier otro tipo de propiedad intelectual
que pueda ser necesaria o conveniente para la consecucion del objeto
social.
6. Actuar como agente, comisionista, representante, apoderado o de
cualquier otra manera representar a todo tipo de sociedades y personas
fisicas, tanto dentro como fuera del territorio nacional.
7. Recibir y prestar cualquier tipo de servicios relacionados con el
objeto social.
8. En general, realizar todo tipo de negocios y actividades que se
relacionen de manera directa o indirecta con el objeto social.
TERCERA. El domicilio de la Sociedad es la Ciudad de Mexico, Distrito Federal,
mismo que no se considerara modificado aun cuando la Sociedad establezca
agencias o sucursales en cualquier otro lugar en Mexico o en el extranjero, o
designe domicilios convencionales para la celebracion de actos y contratos
especificos.
CUARTA. La duracion de la Sociedad sera indefinida.
QUINTA. La Sociedad es de nacionalidad Mexicana. Todo extranjero que al
momento de la constitucion o en cualquier momento posterior, adquiera un interes
o participacion en la Sociedad se considerara por ese solo hecho como Mexicano
con respecto a dicho interes o participacion y se entendera que conviene en no
invocar la proteccion de su Gobierno, bajo la pena, en caso contrario, de perder
las participaciones o intereses que hubiese adquirido en favor de la Nacion
Mexicana.
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CAPITAL SOCIAL Y ACCIONES
SEXTA. El capital social sera variable. La parte minima fija sin derecho a
retiro del capital social sera la cantidad de $50,000.00 Pesos (Cincuenta Mil
Pesos 00/100 M.N.) integramente suscrita y pagada, representada por 50
(cincuenta) acciones ordinarias Serie "B", sin expresion de valor nominal.
El capital variable sera ilimitado y estara representado por acciones ordinarias
nominativas sin expresion de valor nominal.
Todas las acciones conferiran los mismos derechos y obligaciones a sus
tenedores. El capital social estara representado tanto en su parte minima fija
como en su parte variable, por acciones serie "B" o de libre suscripcion, las
cuales podran ser adquiridas tanto por inversionistas mexicanos como
extranjeros.
SEPTIMA. Los aumentos o las reducciones del capital variable podran realizarse
en base a una resolucion de la Asamblea General Ordinaria de Accionistas, cuya
resolucion no requerira ser protocolizada ni inscrita en el Registro Publico de
Comercio, misma que debera determinar las condiciones en las que deba realizarse
dicho aumento o reduccion, tales como los terminos de suscripcion y pago de las
mismas, las caracteristicas de las acciones que se emitan y cualquier otro
asunto relacionado. Dichos aumentos de capital podran pagarse en dinero o en
especie por los accionistas de la sociedad, tal como haya sido acordado por los
accionistas de la compania y resuelto por la asamblea de accionistas que
resuelva dicho aumento de capital.
Por otro lado, los futuros aumentos o reducciones del capital fijo deberan ser
acordados por una Asamblea Extraordinaria de Accionistas;
OCTAVA. Los titulos de acciones y, en su caso, los certificados provisionales,
contendran las menciones a que se refiere el articulo 125 de la Ley General de
Sociedades Mercantiles. La Clausula Quinta de estos estatutos sera de igual
forma transcrita.
NOVENA. Cada accion representara un voto en las Asambleas de
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Accionistas; el tenedor de las acciones de la Sociedad tendra derecho a votar en
todos los asuntos sometidos en la asamblea cuando por ley o por estos Estatutos
tengan derecho a votar; todas las acciones conferiran iguales derechos y
obligaciones a sus tenedores.
DECIMA. Los titulos de las acciones contendran la firma del Administrador
Unico o de dos miembros del Consejo de Administracion, segun el caso. La firma
de los Consejeros, si fuese autorizado por el Consejo de Administracion, podra
ser facsimilar, sujeto a la condicion de que en tal caso los originales de las
firmas respectivas seran depositadas en el Registro Publico de Comercio
correspondiente.
A solicitud de cualquier accionista, a cuyo cargo correran los gastos que
deriven de ello, los titulos de las acciones podran ser intercambiados por
diferentes titulos que representen un numero diferente de acciones.
DECIMA PRIMERA. La Sociedad debera llevar un Libro de Registro de Accionistas
en el que se inscribiran todas las operaciones de suscripcion, adquisicion o
transferencia, asi como cualquier gravamen de que sean objeto las acciones
representativas del capital social.
La Sociedad considerara como propietario de las acciones nominativas a la
persona registrada como tal en el Libro de Registro de Accionistas. Para tal
efecto, dicho libro se cerrara tres dias antes de la fecha asignada para una
Asamblea de Accionistas y se abrira de nuevo el dia siguiente en el cual la
Asamblea se celebro, o bien, el dia que tuvo que haber sido celebrada.
DECIMA SEGUNDA. Los aumentos del capital social podran efectuarse por medio de
aportaciones en efectivo o en especie, o por medio de la capitalizacion de
reservas, o cualquier otro excedente. En los casos de aumento de capital social
por medio de una nueva aportacion de efectivo, los accionistas tendran el
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derecho de preferencia para suscribir y pagar las acciones que seran emitidas,
en proporcion con su tenencia accionaria al momento de ejercitar dicho derecho
de preferencia, dentro de los quince dias siguientes a la fecha de publicacion
del aviso correspondiente en el Diario Oficial de la Federacion o calculados a
partir de la fecha en que se celebro la asamblea, en el caso de que todas las
acciones representativas del capital social de la sociedad hayan estado
presentes o representadas en dicha asamblea.
En el caso en que despues de la terminacion del plazo durante el cual los
accionistas hayan tenido el derecho de ejercitar su derecho de preferencia,
algunas acciones no hayan sido suscritas, el Administrador Unico o el Consejo de
Administracion ofrecera dichas acciones a terceros o las guardara en la
tesoreria de la Sociedad, de conformidad con el acuerdo tomado por la asamblea
de accionistas en el que se haya aprobado el aumento de capital.
No se podran emitir nuevas acciones hasta que las acciones previamente emitidas
hayan sido integramente suscritas y pagadas.
La Sociedad llevara un Libro de Registro de Variaciones de Capital.
ADMINISTRACION
DECIMA TERCERA. La administracion de la Sociedad sera confiada a un
Administrador Unico o a un Consejo de Administracion integrado por el numero de
Consejeros que determine la Asamblea Ordinaria de Accionistas. La Asamblea
Ordinaria de Accionistas tambien podra designar a Consejeros Suplentes para
actuar en el caso de ausencia de los Consejeros Propietarios.
DECIMA CUARTA. El Administrador Unico o los miembros del Consejo de
Administracion en su caso, no necesitan ser accionistas de la Sociedad y, por
regla general, duraran en su cargo un ano contado a partir de la fecha de su
designacion pudiendo ser reelectos. En todo caso, permaneceran en su encargo
hasta que sus sucesores tomen posesion de sus cargos.
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DECIMA QUINTA. La Asamblea de Accionistas o el Consejo de Administracion en
Sesion designaran de entre sus miembros a una persona que actue como Presidente
del Consejo de Administracion. Tambien podra designar un Secretario quien no
necesariamente debera ser Consejero.
DECIMA SEXTA. Las sesiones del Consejo de Administracion seran celebradas en el
domicilio social o en cualquier otro lugar segun se determine previamente en la
convocatoria respectiva. Las sesiones de Consejo podran ser llevadas a cabo en
cualquier momento, pero al menos una vez al ano y seran convocadas por el
Presidente o el Secretario del Consejo o por cualesquiera dos Consejeros o por
los Comisarios de la Sociedad. La persona o personas que deseen convocar la
sesion lo informaran al Secretario del Consejo quien inmediatamente emitira la
convocatoria respectiva.
Las convocatorias seran hechas por escrito y enviadas al domicilio de cada
miembro del Consejo de Administracion o al lugar que designen para tales efectos
por telex contrasenado o telegrama o telecopia confirmados, con por lo menos 15
dias naturales de anticipacion a la fecha de la sesion. Las convocatorias
especificaran el objeto, la hora, fecha y lugar para la sesion y seran firmadas
por el Secretario del Consejo. Sin perjuicio de lo anterior, el requisito de la
convocatoria podra renunciarse por cualquier consejero en relacion a cualquier
sesion.
DECIMA SEPTIMA. Para que las sesiones del Consejo de Administracion puedan
celebrarse validamente, se requerira la asistencia de por lo menos la mayoria de
los Consejeros o sus respectivos suplentes. Las resoluciones del Consejo de
Administracion seran validas unicamente si fueron aprobadas por el voto
favorable de la mayoria de los miembros del Consejo de Administracion presentes.
Las resoluciones aprobadas unanimemente por todos los Consejeros fuera de sesion
tendran, para todos los efectos legales, la misma validez que si hubieran sido
adoptadas en sesion de consejo, siempre que sean confirmadas por escrito en
cualquier despues de que hayan sido tomadas.
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DECIMA OCTAVA. El Consejo de Administracion podra designar de entre sus
miembros, uno o mas delegados para la realizacion de tareas especificas, con la
facultades que le sean expresamente conferidas en cada caso.
DECIMA NOVENA. El Administrador Unico o el Consejo de Administracion, segun sea
el caso, tendran las siguientes facultades:
A) Poder general para pleitos y cobranzas, con las facultades mas amplias
permitidas por la ley, en terminos del primer parrafo del articulo 2554
del Codigo Civil para el Distrito Federal y los articulos correlativos
de cualquier otro codigo civil de la Republica Mexicana (el "Codigo
------
Civil"), con todas las facultades generales y especiales que requieran
-----
Clausula especial, incluyendo aquellas previstas en el articulo 2587 del
Codigo Civil, por lo que estaran facultados de una manera enunciativa
pero no limitativa para: representar a la Sociedad ante autoridades
federales, estatales, municipales, administrativas y judiciales, ante la
Secretaria del Trabajo y ante las Juntas de Conciliacion y Arbitraje y
para firmar los documentos que sean necesarios en el ejercicio de sus
facultades; para ejercitar toda clase de derechos y acciones ante
cualquier autoridad y Juntas de Conciliacion y Arbitraje; para someterse
a cualquier jurisdiccion; para promover y desistirse aun del juicio de
amparo; para presentar cargos y querellas penales y para comparecer como
parte ofendida y coadyuvar con el Ministerio Publico y otorgar perdones;
para transigir; para comprometer en arbitros; para articular y absolver
posiciones; para aceptar y liberar toda clase de garantias; para hacer
cesion de bienes y para llevar a cabo los demas actos que esten
expresamente determinadas por la ley.
B) Poder general para actos de administracion en terminos del segundo
parrafo del articulo 2554 del Codigo Civil entre las que se incluyen las
facultades de celebrar, modificar, cumplir y rescindir toda clase de
contratos y convenios,
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obtener prestamos y en general llevar a cabo todos los actos que esten
directa o indirectamente relacionados con los objetos sociales.
C) Poder general para actos de dominio en terminos del tercer parrafo del
articulo 2554 del Codigo Civil incluyendo facultades para adquirir,
transferir la titularidad de, asi como gravar mediante prenda, hipoteca
o de cualquier otra forma, derechos personales y reales.
D) Poder para emitir, aceptar, endosar y de cualquier otra manera suscribir
titulos de credito de conformidad con el articulo Noveno de la Ley
General de Titulos y Operaciones de Credito.
E) Poder para conferir y revocar poderes generales y especiales dentro de
la ambito de las facultades anteriormente mencionadas.
F) Establecer sucursales y agencias en cualquier parte ya sea dentro o
fuera de los Estados Unidos Mexicanos y cerrar dichas sucursales o
agencias.
G) Establecer subsidiarias en cualquier parte ya sea dentro o fuera de
los Estados Unidos Mexicanos y para liquidar y disolver dichas
subsidiarias.
H) Designar y remover gerentes, funcionarios y empleados de la Sociedad y
determinar sus facultades, deberes y remuneraciones.
DECIMA NOVENA-"A". La Sociedad tendra un comite de auditoria el cual estara
integrado por cuatro (4) miembros que seran designados y removidos por el
Consejo de Administracion de la Sociedad. Los miembros del Comite de Auditoria
desempenaran su cargo hasta que sus sucesores sean designados y asuman su cargo.
El Consejo de Administracion de la Sociedad unicamente podra designar como
miembros del Comite de Auditoria a personas que formen parte del Consejo de
Administracion de la Sociedad. El Comite de Auditoria adoptara sus resoluciones
por mayoria de votos de los miembros
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presentes y por lo menos tres (3) de sus miembros deberan estar presentes para
que las reuniones del Comite de Auditoria se consideren debidamente instaladas.
El Comite de Auditoria se podra reunir en cualquier momento que sea convocado
por cualquiera de sus miembros.
El Comite de Auditoria de la Sociedad tendra las siguientes facultades: (i)
revisar y recomendar al Consejo de Administracion de la Sociedad actos y
politicas relacionadas con la estructura de capital de la Sociedad,
financiamientos que incurra la Sociedad y pagos por parte de la Sociedad asi
como con respecto a controles financieros y otros asuntos relacionados con la
preparacion de estados financieros de la Sociedad, (ii) supervisar auditorias
internas en relacion con los contadores publicos independientes de la Sociedad y
revisar y recomendar al Consejo de Administracion de la Sociedad actos y
politicas relacionados con las mismas, incluyendo la designacion o remocion de
dichos contadores Publicos independientes y (iii) realizar cualquier otro acto
que le delegue mediante resolucion el Consejo de Administracion de la Sociedad
de conformidad con la legislacion aplicable.
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DECIMA NOVENA-"B". La Sociedad tendra un Comite Ejecutivo el cual estara
integrado por dos (2) miembros que deberan ser designados y removidos por el
Consejo de Administracion de la Sociedad. Los miembros del Comite Ejecutivo
desempanaran su cargo hasta que sus sucesores hayan sido designados y asuman sus
funciones. El Consejo de Administracion de la Sociedad unicamente podra
designar como miembros del Comite Ejecutivo a las personas que formen parte del
Consejo de Administracion de la Sociedad. Las decisiones del Comite Ejecutivo
deberan ser adoptadas por decision unanime de sus miembros. El Comite Ejecutivo
podra reunirse en cualquier momento que sea convocado por alguno de sus
miembros.
El Comite Ejecutivo de la Sociedad tendra las mismas facultades otorgadas al
Consejo de Administracion en estos estatutos (incluyendo, sin limitacion alguna,
la facultad para otorgar poderes para actos de dominio, actos de administracion
y pleitos y cobranzas); en el entendido, de que, en todo caso, el Comite
-- -- ---------
Ejecutivo sera responsable ante el Consejo de Administracion el cual podra
limitar las facultades del Comite Ejecutivo mediante resolucion por escrito en
cualquier momento.
ASAMBLEAS DE ACCIONISTAS
VIGESIMA. La autoridad suprema de la sociedad es la Asamblea General Ordinaria
de Accionistas, la cual podra por lo tanto adoptar toda clase de acuerdos y
ratificar todos los actos y transacciones realizadas por la sociedad. Los
acuerdos adoptados por la Asamblea de Accionistas seran implementados por el
Administrador Unico o el Consejo de Administracion, segun sea el caso, o por la
persona expresamente designada para tales efectos por la Asamblea de
Accionistas. Toda Asamblea de Accionistas se celebrara en el domicilio social,
salvo que el Administrador Unico o el Consejo de Administracion senalen otro
lugar para tal efecto, o bien, por caso fortuito o fuerza mayor.
VIGESIMA PRIMERA. Las Asambleas de Accionistas seran Ordinarias o
Extraordinarias. Las Asambleas Ordinarias de Accionistas se
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celebraran por lo menos una vez al ano dentro de los primeros cuatro meses
posteriores al cierre del ejercicio fiscal. Las Asambleas Extraordinarias de
Accionistas tendran lugar cuando sea necesario resolver cualquiera de los
asuntos contenidos en el articulo 182 de la Ley General de Sociedades
Mercantiles.
VIGESIMA SEGUNDA. Las Asambleas de Accionistas, ya sean ordinarias o
extraordinarias, se celebraran previa convocatoria del Administrador Unico o el
Consejo de Administracion, o por cualquiera de los Comisarios en caso de
incumplimiento del Administrador Unico o del Consejo de Administracion de
conformidad con lo establecido en el articulo 166, fraccion VI de la Ley General
de Sociedades Mercantiles. Las Asambleas se celebraran tambien a solicitud los
accionistas en los terminos de los articulos 184 y 185 de la Ley General de
Sociedades Mercantiles.
Las convocatorias para las asambleas de accionistas contendran el lugar, fecha y
hora en la cual se celebrara la asamblea, asi como la mencion de ser la primera
o subsecuente convocatoria. Las convocatorias se publicaran en uno de los
periodicos de mayor circulacion en el domicilio social, con por lo menos quince
(15) dias naturales anteriores a la fecha fijada para la asamblea. En caso de
una segunda convocatoria, se publicara dicha convocatoria por lo menos tres (3)
dias anteriores a la fecha fijada para la asamblea. Las convocatorias para
cualquier Asamblea de Accionistas tambien deberan ser enviadas por telecopia a
cualquier accionista extranjero para asegurar su recepcion con por lo menos
quince (15) dias de anticipacion a la fecha de la asambleas.
Los acuerdos unanimemente aprobados por todos los accionistas que no se hayan
reunido en una asamblea, tendran, para todos los efectos legales, los mismos
efectos juridicos que si se hubieran tomado en una asamblea, siempre y cuando
sean confirmados por escrito en cualquier momento posterior al cual en que
fueron tomados.
VIGESIMA TERCERA. Las Asambleas Ordinarias de Accionistas quedaran legalmente
instaladas en la primera convocatoria si los
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accionistas tenedores de por lo menos el 50% (cincuenta por ciento) del capital
social con derecho a voto de la sociedad se encuentran presentes o debidamente
representados en dicha asamblea y, los acuerdos ahi tomados seran validos
unicamente si son aprobados por el voto de la mayoria de los accionistas
presentes en dicha asamblea. En el caso de que una Asamblea Ordinaria no se
celebre en la fecha programada por la falta de quorum, una segunda convocatoria
o una subsecuente convocatoria se realizara con la mencion de dicha
circunstancia y, en dicho caso, las Asambleas Ordinarias de Accionistas seran
consideradas como legalmente instaladas independientemente del numero de las
acciones presentes o representadas en la asamblea y los acuerdos adoptados seran
validos si son aprobados por el voto favorable de los presentes o representados.
VIGESIMA CUARTA. Las Asambleas Extraordinarias de Accionistas quedaran
legalmente instaladas en la primera convocatoria si los accionistas tenedores de
por lo menos el 75% del capital social con derecho a voto de la sociedad estan
presentes o debidamente representados en dicha asamblea; y en el caso de una
segunda o subsecuente convocatoria, las Asamblea Extraordinaria de Accionistas
quedara legalmente instalada si por lo menos el 50% (cincuenta por ciento) de
los accionistas tenedores de las acciones representativas del capital social con
derecho a voto se encuentran presentes o debidamente representados en cualquier
asamblea. Los acuerdos tomados en Asamblea Extraordinaria de Accionistas, ya sea
en primera o subsecuentes convocatorias, seran validas si son aprobadas por el
voto favorable de los accionistas que representen por lo menos la mitad del
capital social con derecho a voto de la sociedad.
VIGESIMA QUINTA. Para poder asistir a las asambleas, los accionistas deberan de
acreditar su capacidad como tales por medio de su registro en el Libro de
Registro de Accionistas. Los Accionistas podran ser representados en las
asambleas por un apoderado que cuente con un poder general o especial o por un
apoderado designado por medio de carta poder.
Las asambleas de accionistas seran presididas por el Administrador
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Unico o el Consejo de Administracion, segun sea el caso. En su ausencia, dichas
asambleas seran presididas por la persona que designe para tales efectos la
mayoria de los asistentes de la asamblea correspondiente. El Secretario del
Consejo de Administracion actuara como Secretario de la Asamblea de Accionistas
y, en su ausencia, la persona designada para tales efectos por los accionistas
en la asamblea correspondiente. El Presidente nombrara a uno o dos de los
asistentes como escrutadores, los cuales podran ser o no miembros del Consejo de
Administracion o accionistas, para que puedan determinar si se ha reunido el
quorum legal y para contar los votos emitidos si fuera necesario o solicitado
por el Presidente de la asamblea.
VIGESIMA SEXTA. Una vez legalmente instalada la asamblea, si alguno de los
puntos del orden del dia no ha sido resuelto, dicha asamblea podra ser pospuesta
y continuara el siguiente dia habil, sin necesidad de una nueva convocatoria.
Las actas de las Asambleas de accionistas seran registradas en el Libro de Actas
las cuales conservara el Secretario, junto con un juego duplicado de las actas,
una lista de los accionistas que asistieron a la asamblea, firmada por el
escrutador, los poderes, copias de la publicacion en la cual se publico la
convocatoria, copias de cualquier reporte, cuentas de la sociedad y cualesquier
otro documento que haya sido presentado en la asamblea. Cuando las actas de una
asamblea no puedan ser registradas en el Libro de Actas, dichas actas deberan de
protocolizarse ante notario publico. Las actas de las Asambleas Extraordinarias
de Accionistas deberan protocolizarse e inscribirse en el Registro Publico de
Comercio del domicilio social. Todas las actas de asambleas de accionistas, asi
como el registro de aquellas no celebradas por falta de quorum, deberan firmarse
por el Presidente y el Secretario de la Asamblea, asi como por los Comisarios
que deberan haber asistido a cualquier asamblea.
VIGESIMA SEPTIMA. Cualquier Asamblea Ordinaria o Extraordinaria de accionistas
estara legalmente celebrada sin necesidad de convocatoria previa si todas las
acciones representativas del
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capital social se encuentran presentes al momento de la emision de los votos.
Las Asamblea de Accionistas determinara la remuneracion, si tal es el caso, a
los miembros del Consejo de Administracion y a los Comisarios de la sociedad.
VIGILANCIA
VIGESIMA OCTAVA. La vigilancia de la Sociedad quedara confiada a uno o mas
Comisarios, tal como sea determinado por los Accionistas en una Asamblea
Ordinaria. Un Comisario Suplente podra ser designado por cada Comisario
Propietario.
Los Comisarios, por regla general, ocuparan su cargo durante un ano, contado a
partir de la fecha de su designacion, debiendo continuar en su encargo hasta que
sus sucesores tomen posesion de sus cargos.
La remuneracion que perciban los Comisarios sera determinada por los Accionistas
en una Asamblea General.
VIGESIMA NOVENA. Los Comisarios tendran las facultades y obligaciones contenidas
en el articulo 166 de la Ley General de Sociedades Mercantiles.
EJERCICIO FISCAL Y UTILIDADES
TRIGESIMA. El ejercicio fiscal de la sociedad no excedera de un ano calendario
e iniciara y terminara en las fechas determinadas por los Accionistas en una
Asamblea ordinaria o por el Administrador Unico o el Consejo de Administracion.
TRIGESIMA PRIMERA. Las utilidades netas obtenidas en cada ejercicio fiscal, se
aplicaran conforme a lo siguiente:
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A) Dicha cantidad que podra ser determinada por los accionistas debera
primeramente apartarse para la creacion o restablecimiento de la Reserva
Legal, segun el caso; dicha suma no sera menor al 5% de las utilidades
netas hasta que sea equivalente a una quinta parte del capital social.
B) La cantidad necesaria para pagar a los trabajadores y empleados, el
reparto de utilidades correspondiente conforme a la ley; y,
C) El remanente sera distribuido conforme a lo dispuesto por los
Accionistas en una asamblea especial.
DISOLUCION Y LIQUIDACION
TRIGESIMA SEGUNDA. La sociedad sera disuelta anticipadamente en caso de:
I. Si la realizacion del objeto social se volviese imposible;
II. Por resolucion de los accionistas tomada en una Asamblea
Extraordinaria de Accionistas,
III. Si el numero de accionistas se reduzca a un numero menor del minimo
legal (dos).
IV. En caso de perdida de dos terceras partes del capital de la sociedad,
salvo que los accionistas restablezcan o reduzcan el mismo; y
V. En cualquier otro caso previsto en la ley.
En caso de disolucion, la sociedad se colocara en liquidacion, la cual sera
confiada a un liquidador designado por la misma Asamblea Extraordinaria que
resuelva de la disolucion. El liquidador podra o no ser accionista de la
sociedad y tendra la facultad y recibir la remuneracion aprobada por la Asamblea
de Accionistas. La Asamblea de Accionistas establecera un termino para la
consecucion
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de los encargos del liquidador, asi como las reglas generales para la
realizacion de dichas tareas.
TRIGESIMA TERCERA. Durante el proceso de liquidacion, las Asambleas de
Accionistas se celebraran de conformidad con los terminos establecidos en este
instrumento. Los Liquidadores tendran las facultades envestidas en el Consejo
de Administracion, con las limitaciones impuestas por el proceso de liquidacion.
Los Comisarios deberan realizar las mismas funciones durante el proceso de
liquidacion que en funcionamiento normal de la sociedad y mantendran la misma
relacion con los liquidadores que la que mantenida con los Consejeros,
TRIGESIMA CUARTA. En todos los asuntos que no esten especificamente
mencionados en este instrumento, aplicaran las disposiciones de la Ley General
de Sociedades Mercantiles.
RESPONSABILIDAD DE CONSEJEROS Y FUNCIONARIOS
TRIGESIMO QUINTA. Indemnizacion. La Sociedad indemnizara a cualquier persona que
haya sido o sea parte o se vea amenazada con ser parte de cualquier accion,
litigio o procedimiento inminente, pendiente o consumado, ya sea civil, penal,
administrativo o de investigacion, con motivo de que haya sido, sea o haya
aceptado ser consejero o funcionario de la Sociedad, o haya prestado, preste o
haya aceptado prestar servicios, a solicitud de la Sociedad, como consejero o
funcionario de otra sociedad, co-inversion, asociacion en participacion,
fideicomiso u otra empresa, o con motivo de cualquier otro acto que se alegue
que haya cometido u omitido en su caracter de consejero o funcionario, y podra
tambien indemnizar a
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17
cualquier persona que haya sido, sea o se vea amenazada con ser parte de dicha
accion, litigio o procedimiento con motivo de que haya sido, sea o haya aceptado
ser empleado o agente de la Sociedad, o es, fue o haya aceptado ser empleado o
agente de otra sociedad, asociacion en participacion, fideicomiso u otra
empresa, a solicitud de la Sociedad, contra cualesquier gastos (incluyendo
honorarios de abogados), sentencias, multas asi como cantidades pactadas para
transigir, que efectiva y razonablemente se hayan incurrido por, o en nombre de
cualquiera de dichas personas, en relacion con dicha accion, litigio o
procedimiento asi como cualquier apelacion de los mismos, solo en la medida en
que haya actuado de buena fe y se haya conducido de manera tal que haya
considerado razonablemente que actuaba de acuerdo con, o sin estar en contra de,
el mejor interes de la Sociedad, y, en relacion con cualquier accion o
procedimiento penal, no tenia ninguna causa razonable para considerar que se
actuaba de manera ilegal. En el caso de una accion o litigio instaurado por, o
en representacion de, la Sociedad para buscar una sentencia en favor de la
Sociedad (1) dicha indemnizacion estara limitada a gastos (incluyendo honorarios
-
de abogados) que efectiva y razonablemente se hayan incurrido por dicha persona
en la defensa o resolucion de dicha accion o litigio, y (2) ninguna
-
indemnizacion sera hecha con respecto de cualquier reclamacion, asunto o
cuestion en la que dicha persona haya sido sentenciada judicialmente como
responsable ante la Sociedad a menos que, y solo en la medida en que, el
tribunal en que dicha accion o litigio sea oido determine que, no obstante la
responsabilidad de dicha persona y en vista de las circunstancias generales del
caso, dicha persona tiene justa y razonablemente derecho a ser indemnizada por
los gastos que el tribunal correspondiente determine como apropiados.
La terminacion de cualquier accion, litigio o procedimiento por sentencia,
transaccion, convenio, o por desistimiento o su equivalente, no debera, por si
misma, crear una presuncion de que la persona no actuo de buena fe y de una
manera tal que estimo razonablemente que se conducia de acuerdo con, o sin estar
en contra de, el mejor interes de la Sociedad, y, en relacion con cualquier
accion o procedimiento penal, que no tenia ninguna causa razonable para estimar
que se conducia de manera ilegal.
17
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18
TRIGESIMO SEXTA. Defensa Favorable. En la medida que un consejero, funcionario,
empleado o agente de la Sociedad haya tenido exito en la defensa de cualquier
accion, litigio o procedimiento a los que se refiere la Clausula Trigesimo
Quinta anterior, o en defensa de cualquier reclamacion, asunto o cuestion
relacionados con los mismos, debera ser indemnizado por los gastos (incluyendo
honorarios de abogados) que efectiva y razonablemente haya incurrido al
respecto.
TRIGESIMO SEPTIMA. Determinacion de que la Indemnizacion es Adecuada.
Cualquier indemnizacion a un consejero o funcionario de la Sociedad al amparo de
la Clausula Trigesimo Quinta anterior (a menos que se determine mediante orden
judicial) se hara por la Sociedad, a menos que se determine que la indemnizacion
no proceda en las circunstancias por no haberse cumplido con el estandar de
conducta aplicable bajo la Clausula Trigesimo Quinta de los presentes estatutos
sociales. Cualquier indemnizacion a un empleado o agente de la Sociedad al
amparo de dicha Clausula Trigesimo Quinta (a menos que se determine mediante
orden judicial) se hara por la Sociedad si se determina que dicha indemnizacion
procede en las circunstancias por haberse cumplido con el estandar de conducta
aplicable descrito en la clausula antes mencionada. Cualquiera de dichas
determinaciones deberan ser efectuadas por (1) el Consejo de Administracion por
-
mayoria de votos con un quorum formado por consejeros que no hayan sido parte de
dicha accion, litigio o procedimiento, o (2) si no se puede obtener dicho
-
quorum, o, si se puede obtener un quorum de consejeros desinteresados, pero los
consejeros asi lo acuerdan, por un asesor legal independiente mediante opinion
legal por escrito, o (3) por los accionistas.
-
TRIGESIMA OCTAVA. Pago de Gastos. Los gastos (incluyendo honorarios de
abogados) incurridos por un consejero o funcionario de la Sociedad en la defensa
de cualquier accion, litigio o procedimiento civil, penal, administrativo o de
investigacion, deberan ser pagados por la Sociedad antes de la resolucion final
de dicha accion, litigio o procedimiento contra recibo por parte de la Sociedad
del compromiso del, o a nombre del, consejero o funcionario de que se trate, de
pagar dicha cantidad, si en ultima instancia se determinara que no tiene derecho
a ser
18
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19
indemnizado por la Sociedad segun se autoriza en estos estatutos. Los gastos
(incluyendo honorarios de abogados) incurridos por otros empleados o agentes de
la Sociedad, tambien seran pagados en los mismos terminos y condiciones, si el
Consejo de Administracion asi lo determina. El Consejo de Administracion podra
autorizar al asesor legal de la Sociedad para representar a dicho consejero,
funcionario, empleado o agente en cualquier accion, litigio o procedimiento, sea
o no la Sociedad parte en dicha accion, litigio o procedimiento.
TRIGESIMO NOVENA. Procedimiento para la Indemnizacion a los Consejeros y
Funcionarios. Cualquier indemnizacion a un consejero o funcionario de la
Sociedad al amparo de la Clausula Trigesimo Quinta y Trigesimo Sexta, o
cualesquier adelanto de costos, cargos o gastos a un consejero o funcionario
bajo la Clausula Trigesimo Octava, debera ser hecha de manera oportuna, dentro
de los 30 dias siguientes a la solicitud por escrito del consejero o funcionario
de que se trate. Si se requiere que la Sociedad resuelva si el consejero o
funcionario tiene derecho a ser indemnizado en los terminos de la presente
Clausula, y la Sociedad no da respuesta dentro de los sesenta dias siguientes a
la solicitud por escrito de indemnizacion, se considerara que la Sociedad ha
aprobado dicha solicitud. Si la Sociedad niega una solicitud por escrito de
indemnizacion o un adelanto de gastos, en todo o en parte, o si el pago total en
relacion con dicha solicitud no se efectua dentro del plazo de 30 dias
mencionado, el derecho a indemnizacion o pago anticipado que se concede en la
presente Clausula podra ser demandada por el consejero o funcionario de que se
trate ante los tribunales competentes. Los gastos y costas incurridos por
cualquier consejero o funcionario para establecer judicialmente que tiene
derecho a la indemnizacion, solo si es exitoso, tambien seran indemnizados por
la Sociedad. Sera una defensa contra cualquiera de dichas acciones (distinta de
la accion para reclamar el anticipo de costos, cargos o gastos al amparo de la
Clausula Trigesimo Octava, cuando el compromiso al que se refiere dicha
clausula, de existir, haya sido recibido por la Sociedad) que el actor no haya
cumplido con los estandares de conducta que se describen en la Clausula
Trigesimo Quinta de estos estatutos, pero la carga de probarlo recaera sobre la
Sociedad. El hecho de que la Sociedad
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20
(incluyendo su Consejo de Administracion, su asesor legal independiente, y sus
accionistas) no hayan determinado, antes de la interposicion de la accion
instaurada por el consejero o funcionario de que se trate; que la indemnizacion
en favor del actor es adecuada dadas las circunstancias, por haber cumplido con
el estandar de conducta descrito en la Clausula Trigesimo Quinta, asi como el
hecho de que haya habido una resolucion por parte de la Sociedad (incluyendo el
Consejo de Administracion, su asesor legal independiente, y sus accionistas) de
que el actor no cumplio con el estandar aplicable de conducta; no seran una
defensa contra la reclamacion del consejero o funcionario de que se trate, ni
crearan una presuncion de que el reclamante no haya cumplido con el estandar
aplicable de conducta.
CUADRAGESIMA. Sobrevivencia; Preservacion de Otros Derechos. La indemnizacion
mencionada en clausulas anteriores sera considerada como un contrato celebrado
entre la Sociedad y cada uno de los consejeros, funcionarios, empleados y
agentes que actuen como tales, en cualquier momento, en tanto las disposiciones
de estos estatutos se encuentren vigentes y cualquier modificacion de estos
estatutos no afectara o limitara los derechos que surjan validamente antes de
dicha modificacion. Dichos derechos no podran ser modificados retroactivamente
sin el previo consentimiento del consejero, funcionario, empleado o agente que
resulte o pueda resultar afectado.
La indemnizacion prevista por estos estatutos sociales, no se considerara como
excluyente de otros derechos a los cuales las personas con derecho a ser
indemnizadas, puedan ser acreedoras bajo otros estatutos sociales, convenios,
decisiones de organismos corporativos, o de cualesquier otra forma, tanto para
el caso de que actue dentro de sus facultades oficiales como para el caso de que
actue en otro caracter mientras detente un cargo en la Sociedad y continuara con
respecto a personas que hayan dejado de prestar sus servicios y beneficios a sus
herederos, ejecutores y administradores de dichas personas.
CUADRAGESIMA PRIMERA. Seguro. La Sociedad contratara y mantendra un seguro en
nombre de cada persona que haya convenido en ser consejero o funcionario de la
Sociedad, o que preste sus
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21
servicios como consejero o funcionario a solicitud de la Sociedad, en otra
sociedad, asociacion, fideicomiso o cualesquier otro negocio, contra cualquier
responsabilidad que pudiera resultar en su contra en virtud de su puesto, ya sea
que la Sociedad tenga o no, la obligacion de indemnizarlo contra dicha
responsabilidad en los terminos de estos estatutos sociales, en el entendido que
dicho seguro debe estar disponible en terminos aceptables, el cual se
determinara por el voto de todos los miembros del Consejo de Administracion.
CUADRAGESIMA SEGUNDA. Divisibilidad. Si este capitulo de los estatutos
sociales o cualquiera de sus clausulas se declara invalida por cualesquier
tribunal competente, entonces la Sociedad debera no obstante indemnizar a cada
consejero o funcionario y debera indemnizar a cada empleado o agente de la
Sociedad de los costos, gastos y erogaciones (incluyendo honorarios de abogados)
multas y cantidades pagadas en relacion con cualquier accion, litigio o
procedimiento, ya sea civil, criminal, administrativo o con cualquier
investigacion, incluyendo la accion por, o en defensa de los derechos de la
Sociedad, en la medida que lo permita la legislacion aplicable, y en los
terminos de cualquier clausula de estos estatutos, que no haya sido declarada
invalida por el tribunal competente de que se trate.
21
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English Translation
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(For information purposes only)
-----------------------------
ESTATUTOS SOCIALES OF
JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V.
CLAUSES
NAME, PURPOSE, DOMICILE, DURATION AND NATIONALITY
ONE. The name of the company is Jafra Cosmetics International which
denomination shall always be followed by the words "SOCIEDAD ANONIMA DE CAPITAL
VARIABLE" or by their abbreviation "S.A. DE C.V.".
TWO. The purpose of the company is:
1. Production, sale, purchase, manufacture, distribution, import, export,
storage and trade of skin care products, color cosmetics, fragances and
other personal care products, and any other products as the management of
the Company will judge necessary or convenient, as well as any related
activity with such purpose.
2. To acquire and dispose of, in any legal manner, any type of shares,
interests or participations in other corporations, trusts, businesses or
associations, whether of a civil or mercantile nature.
3. To purchase, sell, lease, mortgage, encumber or otherwise dispose of, in
any legal manner, of any such real or personal property as may necessary or
convenient for the achievement of the corporate purposes.
4. To lend and borrow money with or without security and to guarantee the
obligations of third parties by any means (including by means of a personal
guaranty, mortgage, pledge, aval or otherwise).
----
5. To acquire, transfer or dispose of in any legal manner of
<PAGE>
2
any patents, patent rights, inventions, trademarks, tradenames, copyrights
or any other intellectual property of any kind as may be necessary or
convenient for the achievement of the corporate purposes.
6. To act as agent, commission agent, representative, attorney-in-fact or in
any other manner to represent all kinds of companies and individuals,
within or outside the United Mexican States.
7. To receive and render any and all types of services related to the
corporate purposes of the company.
8. In general carry out and perform any and all business or activities related
directly or indirectly to the corporate purposes.
THREE. The domicile of the company is Mexico City, Federal District which
domicile shall not be deemed modified even if the company establishes agencies
or branches elsewhere (whether in Mexico or outside of Mexico) or if the company
designates conventional domiciles for the execution of specific acts and
contracts.
FOUR. The duration of the company is indefinite.
FIVE. The company is of Mexican nationality. Any foreigner who at the time of
incorporation or at any time thereafter, acquires a corporate interest or
participation in the company shall be considered by that fact alone as Mexican
with respect to such interest or participation and it shall be understood that
such foreigner agrees not to invoke the protection of its Government under
penalty, in case of failure to comply with such agreement, of forfeiture of such
interest or participation in favor of the Mexican Nation.
CAPITAL STOCK AND SHARES
SIX. The capital stock shall be variable. The fixed portion of the capital
stock shall not be subject to withdrawal and is the sum of $50,000.00 Pesos
(FIFTY THOUSAND PESOS 0/100 Mex.
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3
Cy.), represented by 50 ordinary, Series "B" registered shares with no par
value, all of which are fully subscribed and paid.
The variable portion of the capital stock shall be unlimited and will be
represented by ordinary, registered shares with no par value.
All shares shall confer equal rights and obligations to their holders. The
capital stock shall be represented in its fixed and variable portion by series
"B" shares which shall be of free subscription and may be owned by Mexican or
non-Mexican investors.
SEVEN. Future increases or reductions of the variable portion of the capital
stock may be effected upon resolution of the General Ordinary Stockholders'
Meeting which resolution shall not require notarization nor registration in the
Public Registry of Commerce and which meeting shall determine the conditions in
which such increase or reduction shall be effected, such as the terms of
subscription and payment thereof, the characteristics of the shares of stock to
be issued and any other related issue. Such capital increases may be paid in
cash or in kind by the stockholders of the company as resolved by the
stockholders meeting that resolves any such capital increase.
On the other hand, future increases or reductions of the fixed portion of the
capital stock shall be approved by a General Extraordinary Stockholders'
Meeting.
EIGHT. Stock certificates and, if appropriate, provisional certificates shall
comply with the requirements specified in Article 125 of the General
Corporations Law and Clause Five hereof shall also be transcribed therein.
NINE. Each share shall represent one vote at the Stockholders' Meeting; shall
be entitled to vote on all matters submitted to the meeting when by law or by
these estatutos sociales they are entitled to vote; and all shares shall confer
equal rights and obligations to their holders.
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4
TEN. Stock certificates shall bear the signature of the Sole Administrator or
of two members of the Board of Directors, as the case may be. The signature of
the Directors may be a facsimile, if so authorized by the Board of Directors,
subject to the condition that in such case, the originals of the respective
signatures be deposited with the corresponding Public Registry of Commerce.
Upon request from any stockholder, who shall bear all costs derived therefrom,
share certificates may be exchanged for different certificates representing a
different number of shares.
ELEVEN. The company shall keep a Stock Registry Book in which all of the
operations of subscription or transfer, as well as any liens involving the
shares representing the capital stock, shall be recorded.
The company shall consider as owner of the shares the person recorded as such in
the Stock Registry Book. For this purpose, such book shall be closed three days
before the date set for a Stockholders' Meeting and it shall be opened again on
the day following that on which the meeting is held or should have been held.
TWELVE. Increases of capital may be made by contributions in cash or in kind or
by means of the capitalization of reserves, premiums or any other surplus. In
cases of increases of the capital stock by means of new cash contributions,
stockholders shall have a preemptive right to subscribe and pay the shares to be
issued, in proportion to their holdings at the time of exercising such
preemptive right, within the fifteen days following the date of publication of
the corresponding notice in the Federal Official Daily (Diario Oficial de la
Federacion) or calculated from the date the meeting was held, in case all the
shares representing the capital stock of the company shall have been present or
represented at any such meeting.
In the event that after the expiration of the period during which the
stockholders are entitled to exercise their
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5
preemptive rights, some shares are still not subscribed, the Sole Administrator
or Board of Directors shall offer such shares to third parties or keep them in
the treasury of the Company, as resolved by the stockholders' meeting that
approves the capital increase.
New shares may not be issued until all the shares issued before are fully paid.
The company shall keep a Corporate Book of Capital Variations.
ADMINISTRATION
THIRTEEN. The administration of the company shall be entrusted to a Sole
Administrator or to a Board of Directors composed of the number of Directors
determined by the Ordinary Stockholders' Meeting. Alternate Directors to act in
case of absence of regular Directors may also be appointed by the Ordinary
Stockholders' Meeting.
FOURTEEN. The Sole Administrator or the members of the Board of Directors, as
the case may be, need not be stockholders of the company; they shall hold their
offices for one year computed from the date of their appointment as a general
rule but may be reelected. In any event, they shall continue to discharge their
duties until their successors take office.
FIFTEEN. The Stockholders' Meeting or the Board of Directors' Meeting shall
designate one of the Directors as Chairman of the Board of Directors. A
Secretary, who does not need to be a Director, shall also be appointed.
SIXTEEN. Board of Directors' Meetings shall be held in the corporate domicile
or in any other place as may be previously determined in the respective call.
Board meetings may be held at any time at least once a year and shall be
convened by the Chairman or the Secretary of the Board or by any two Directors
or the Statutory Auditors of the company. The person or persons wishing to
convene the meeting shall inform the Board Secretary who shall immediately issue
the respective call.
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6
Calls shall be made in writing and sent by tested telex, confirmed telegram or
telecopy at least 15 calendar days in advance to their domicile or the place
designated for such purpose. Calls shall specify the purpose, hour, date and
place for the meeting and shall be signed by the Secretary of the Board.
Notwithstanding the above, the call requirement may be waived by any or all
directors with respect to any meeting.
SEVENTEEN. In order for meetings of the Board of Directors to be legally
installed, the attendance of at least the majority of the Directors or their
respective alternates shall always be required. Resolutions of the Board of
Directors shall be valid only if adopted by the favorable vote of the majority
of the members of the Board of Directors present at the meeting.
Resolutions unanimously taken by all the Directors not convened in a meeting
shall have, for all legal purposes, the same legal effects as if they were taken
in a meeting as long as they are confirmed in writing at any time after taken.
EIGHTEEN. The Board of Directors may appoint, among its members, one or more
delegates for the performance of specific duties.
NINETEEN. The Sole Administrator or the Board of Directors, as the case may be,
shall have the following authority:
a) General power of attorney for lawsuits and collections, with the broadest
power as permitted by law, in the terms of the first paragraph of Article
2554 of the Civil Code for the Federal District and its correlative
Articles of any Civil Code of the states comprising the United Mexican
States (the "Civil Code"), with all general and such special powers as may
be required, including those provided in Article 2587 of the Civil Code,
wherefore they will have, without limiting the generality of the foregoing,
the following authority: to represent the company before Federal, State,
Municipal, Administrative and Judicial authorities, before the Secretary of
Labor and before Conciliation and Arbitration Boards and to sign such
documents as may be required in the exercise of
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7
this power of attorney; to exercise all types of rights and actions before
any and all authorities and Boards of Conciliation and Arbitration; to
submit to any jurisdiction; to promote and withdraw even from (amparo)
------
litigation; to file charges and criminal complaints and appear as offended
party and assist the District Attorney and grant pardons; to compromise; to
submit to arbitration; to take and answer depositions; to accept and
release all kind of guarantees; to assign property and to perform all other
actions which are expressly determined by law.
b) General power of attorney for acts of administration, in the terms of the
second paragraph of Article 2554 of the Civil Code among which are included
the authority to execute, amend, carry out and rescind all kind of
contracts and agreements, to obtain loans and in general, to carry out all
acts that are related directly or indirectly to the corporate purposes.
c) General power of attorney for acts of ownership, in the terms of the third
paragraph of Article 2554 of the Civil Code including to acquire personal
and real property, to transfer title to as well as to encumber by pledge,
mortgage or otherwise, personal and real property.
d) Power to issue, sign and endorse negotiable instruments in accordance with
Article 9 of the General Law of Negotiable Instruments and Credit
Transactions.
e) Power to confer and revoke general and special powers of attorney within
the scope of the aforementioned powers.
f) Power to establish branches and agencies in any location of the United
Mexican States or abroad and to close such branches or agencies.
g) Power to form subsidiaries in any location of the United Mexican States or
abroad and to liquidate and dissolve such subsidiaries.
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8
h) Power to designate and remove managers, officers and employees of the
company and to determine their powers, duties and remuneration.
NINETEEN-"A". The Company shall have an audit committee which shall be formed
by four (4) members who shall be appointed and removed by the Board of Directors
of the Company. The members of the Audit Committee shall form a part thereof
until their respective successors are appointed. The Board of Directors of the
Company may only appoint as members of the Audit Committee persons who are
members of the Board of Directors of the Company. The Audit Committee of the
Company shall adopt its resolutions by majority vote of those present at the
meetings thereof and at least three (3) of its members shall be present in order
for its meetings to be legally installed. The Audit Committee may meet at any
time it is convened by any of its members.
The Audit Committee of the Company shall have the following authority:
(i) to review and recommend to the Board of Directors of the Company actions and
policies relating to the capital structure of the Company, the borrowing and
payment of funds by the Company, and financial controls and other matters
relating to the preparation of audited financial statements of the Company, (ii)
supervise internal audits in relation to the Company's independent public
accountants and review and recommend to the Board of Directors of the Company
actions and policies relating thereto, including the appointment or discharge of
such independent public accountants and (iii) undertake such other matters as
the Board of Directors of the Company may by resolution so delegate to such
Audit Committee in compliance with applicable law.
NINETEEN-"B". The Company shall have an Executive Committee which shall be
formed by two (2) members who shall be appointed and removed by the Board of
Directors of the Company. The members of the Executive Committee shall form a
part thereof until their respective successors are appointed. The Board of
Directors of the Company may only
<PAGE>
9
appoint as members of the Executive Committee persons who are members of the
Board of Directors of the Company. The decisions of the Executive Committee
shall be adopted by the unanimous decision of its members. The Executive
Committee may meet at any time it is convened by any of its members.
The Executive Committee of the Company shall have the same authority granted to
the Board of Directors of the Company in these by-laws (including, without
limitation, authority to grant powers-of-attorney for acts of ownership, acts of
administration and lawsuits and collections); provided, however, that the
-------- -------
Executive Committee shall at all times be accountable to the Board of Directors
which may limit its authority by written resolution from time to time.
STOCKHOLDERS' MEETINGS
TWENTY. The supreme authority of the company is vested in the stockholders
convened in a General Meeting, which may therefore adopt all kinds of
resolutions and ratify all acts and transactions performed by the company. The
resolutions adopted by the Stockholders' Meeting shall be implemented by the
Sole Administrator or the Board of Directors, as the case may be, or by the
person or persons expressly designated for such purposes by the Stockholders'
Meeting. All Stockholders' Meetings shall be held at the corporate domicile,
except as otherwise located by the Sole Administrator or the Board of Directors
in the case of acts of God or force majeure.
TWENTY ONE. Stockholders' Meetings shall be Ordinary or Extraordinary.
Ordinary Stockholders' Meetings shall be held at least once a year within the
first four months following the closing of each fiscal year. Extraordinary
Stockholders' Meetings shall be held when necessary, to resolve on any of the
matters provided for in Article 182 of the General Corporations Law.
TWENTY TWO. Stockholders' Meetings, whether ordinary or extraordinary, shall be
held upon call by the Sole Administrator or the Board of Directors, or by any of
the Statutory Auditors in case of failure of the Sole
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10
Administrator or of the Board of Directors in accordance with the provisions of
Article 166, paragraph VI of the General Corporations Law. Meetings shall be
held also at the request of the stockholders in terms of Articles 184 and 185 of
the General Corporations Law.
Calls for Stockholders' Meetings shall contain the place, date and time at which
the meeting will be held, and an indication as to the fact of being first or
latter call. Calls shall be published in one daily newspapers with general
circulation in the corporate domicile, at least fifteen (15) calendar days prior
to the date set for the meeting. In the event of a second call, it shall be
published at least three (3) days before the date scheduled for the meeting.
Calls for any Stockholders' Meeting must be sent also by telecopy to any foreign
stockholder to ensure the receipt thereof at least fifteen (15) days in advance
of the date of the meeting.
Resolutions unanimously taken by all the stockholders not convened in a meeting
shall have, for all legal purposes, the same legal effects as if they were taken
in a meeting as long as they are confirmed in writing.
TWENTY THREE. Ordinary Stockholders' Meetings shall be considered as legally
installed on a first call if stockholders holding at least 50% (fifty per cent)
of all of outstanding voting capital stock of the company are present or duly
represented at such meeting and the resolutions thereof shall be valid only if
adopted by the favorable vote of the majority of the stockholders present at
such meetings. In the event an Ordinary Meeting is not held on the proposed
date due to lack of quorum, a second call or a subsequent call will be made with
indication of such circumstance and, in such event, Ordinary Stockholders'
Meetings shall be considered as legally installed regardless of the number of
shares present or represented at the meeting and the resolutions thereof shall
be valid if adopted by majority vote of those present or represented.
TWENTY FOUR. Extraordinary Stockholders' Meetings shall be considered as
legally installed on a first call, if
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11
stockholders holding at least 75% (seventy five per cent) of all of the
outstanding voting capital stock of the company are present or duly represented
in such meetings; and in the event of a second or any subsequent call,
Extraordinary Stockholders' Meeting shall be considered as legally installed if
stockholders holding at least 50% (fifty per cent) of all of the outstanding
voting capital stock of the company are present or duly represented at any such
meeting. Resolutions of Extraordinary Stockholders' Meetings, either in first or
subsequent calls, shall be valid if adopted by the favorable vote of
stockholders representing at least one half of the outstanding voting capital
stock of the company.
TWENTY FIVE. In order to attend meetings, stockholders shall prove their
capacity as such by means of their registration in the Stock Registry Book.
Stockholders may be represented at the meetings by an attorney-in-fact holding a
general or a special power of attorney or by an attorney-in-fact designated by
means of a simple letter of proxy.
Stockholders meetings shall be presided by the Sole Administrator or the
Chairman of the Board of Directors, as the case may be. In their absence, such
meetings shall be presided by the person designated for such purposes by the
majority of those present at the corresponding meeting. The Secretary of the
Board of Directors shall act as Secretary of Stockholders' Meetings and, in his
absence, the person designated for such purposes by stockholders in the
corresponding meeting. The President shall name one or two of those present,
who may or may not be members of the Board of Directors or stockholders, as
examiners, in order that they determine if the legal quorum has or has not been
met and to count the votes cast if the latter should be necessary or requested
by the President of the meeting.
TWENTY SIX. Once a meeting is legally installed, if any of the items included
in the agenda is not resolved, such meeting may be adjourned and be continued on
the following business day, without need of a further call.
The minutes of the stockholders' meetings shall be recorded in
<PAGE>
12
a Minute Book which shall be kept by the Secretary, together with a duplicate
set of minutes, a list of the stockholders who attended the meeting signed by
the examiner, the proxies, copies of the publication in which the call for the
meeting was published, copies of any reports, accounts of the company and any
other documents which were submitted at the meeting. Whenever the minutes of a
meeting cannot be recorded in the Minute Book, such minutes shall be notarized
before a public notary. Minutes of Extraordinary Stockholders Meetings shall be
notarized and recorded in the Public Registry of Commerce of the corporate
domicile. All minutes of stockholders meetings, as well as a record of those not
held for lack of quorum, shall be signed by the President and the Secretary of
the Meeting, as well as by the Statutory Auditors (comisarios) who shall have
----------
attended any such meeting.
TWENTY SEVEN. Any Ordinary or Extraordinary Stockholders' Meeting shall be
legally held without needing a previous call if all of the shares representing
the capital stock are present at the moment votes are cast.
The Stockholders' Meeting will determine the compensation payable, if any, to
the members of the Board of Directors and the Statutory Auditors (comisarios) of
----------
the company.
SURVEILLANCE
TWENTY EIGHT. The surveillance of the company shall be entrusted to one or more
Statutory Auditors, as may be determined by the Stockholders in a General
Meeting. An Alternate Statutory Auditor may be designated for each Statutory
Auditor.
The Statutory Auditors shall hold their position for one year, from the date of
their appointment, as general rule, but shall continue to discharge their duties
until their successors take office.
The compensation of the Statutory Auditors shall be determined by the
Stockholders in a General Meeting.
<PAGE>
13
TWENTY NINE. Statutory Auditors shall have the powers and duties provided for
in Article 166 of the General Corporations Law.
FISCAL YEAR AND PROFITS
THIRTY. The fiscal year of the company shall not exceed one calendar year and
shall commence and end on the dates determined by the Stockholders at an
Ordinary meeting or by the Sole Administrator or the Board of Directors.
THIRTY ONE. The net profits obtained in each fiscal year shall be applied as
follows:
a) Such sum as may be determined by the stockholders shall first be set aside
for creating or restoring the Legal Reserve, as the case may be, which sum
shall not be less than 5% of the net profits until it equals one-fifth of
the corporate capital stock;
b) The amount necessary to pay to workers and employees the corresponding
profit sharing as provided by law; and
c) The remainder shall be distributed as determined by the Stockholders in a
special meeting.
DISSOLUTION AND LIQUIDATION
THIRTY TWO. The company shall be dissolved in advance:
I. If continued execution of the corporate purposes shall become impossible;
II. By resolution of the stockholders adopted in Extraordinary Stockholders'
Meeting;
III. If the number of stockholders shall be reduced to less than the legal
minimum required (two);
IV. In case of loss of two-thirds of the corporate capital,
<PAGE>
14
unless the stockholders restore or reduce the same; and
V. In any other event foreseen by law.
Upon dissolution, the company shall be placed in liquidation, which shall be
entrusted to one liquidator appointed by the same Extraordinary Meeting
resolving upon the dissolution. The liquidator need not be a stockholder of the
company and shall have the authority and receive the compensation approved by
the Stockholders' Meeting. The Stockholders' Meeting shall also establish a
term for the achievement of the duties of the liquidator, as well as the general
rules governing the performance of such duties.
THIRTY THREE. During the liquidation process, Stockholders Meetings shall be
held pursuant to the terms hereof. Liquidators shall have the authority vested
in the Board of Directors of the company with the limitations imposed by the
liquidation process. The Statutory Auditors shall discharge the same duties
during the liquidation process as during the normal existence of the company and
shall maintain with respect to the liquidators the same relationship as that
maintained with respect to the Directors.
THIRTY FOUR. In all matters not specifically provided for herein, the
provisions of the General Corporation Law shall govern.
RESPONSIBILITIES OF DIRECTORS AND OFFICERS
THIRTY FIVE. Indemnity. The Company shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was or has agreed to become a
director or officer of the Company, or is or was serving or has agreed to serve
at the request of the Company as a director or officer, of another corporation,
partnership, joint venture, trust or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity, and may indemnify
any person who was or is a party or is threatened to be made a
<PAGE>
15
party to such an action, suit or proceeding by reason of the fact that he is or
was or has agreed to become an employee or agent of the Company, or is or was
serving or has agreed to serve at the request of the Company as an employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding had no reasonable cause to believe his conduct
was unlawful; except that in the case of an action or suit by or in the right of
the Company to procure a judgment in its favor (1) such indemnification shall be
-
limited to expenses (including attorneys' fees) actually and reasonably incurred
by such person in the defense or settlement of such action or suit, and (2) no
-
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Company unless
and only to the extent the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the corresponding court shall deem
proper.
The termination of any action, suit or proceeding by judgment, order
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
---- ----------
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
THIRTY SIX. Successful Defense. To the extent that a director, officer,
employee or agent of the Company has been successful on the merits or otherwise
in defense of any
<PAGE>
16
action, suit or proceeding referred to in Article Thirty Five hereof or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
THIRTY SEVEN. Determination That Indemnification Is Proper. Any
indemnification of a director or officer of the Company under Article Thirty
Five hereof (unless ordered by a court) shall be made by the Company unless a
determination is made that indemnification of the director or officer is not
proper in the circumstances because he has not met the applicable standard of
conduct set forth in Article Thirty Five hereof. Any indemnification of an
employee or agent of the Company under Article Thirty Five hereof (unless
ordered by a court) may be made by the Company upon a determination that
indemnification of the employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in Article Thirty Five
hereof. Any such determination shall be made (1) by the Board of Directors by a
-
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
-
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
-
THIRTY EIGHT. Payment of Expenses.. Expenses (including attorneys' fees)
incurred by a director or officer in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Company in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of the director or officer to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Company as authorized in this Article. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board of Directors deems
appropriate. The Board of Directors may authorize the Company's counsel to
represent such director, officer,
<PAGE>
17
employee or agent in any action, suit or proceeding, whether or not the Company
is a party to such action, suit or proceeding.
THIRTY NINE. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the Company under Articles Thirty
Five and Thirty Six, or advance of costs, charges and expenses to a director or
officer under Article Thirty Eight hereof, shall be made promptly, and in any
event within 30 days, upon the written request of the director or officer. If a
determination by the Company that the director or officer is entitled to
indemnification pursuant to this Article is required, and the Company fails to
respond within sixty days to a written request for indemnity, the Company shall
be deemed to have approved such request. If the Company denies a written
request for indemnity or advancement of expenses, in whole or in part, or if
payment in full pursuant to such request is not made within 30 days, the right
to indemnification or advances as granted by this Article shall be enforceable
by the director or officer in any court of competent jurisdiction. Such
person's costs and expenses incurred in connection with successfully
establishing his right to indemnification, in whole or in part, in any such
action shall also be indemnified by the Company. It shall be a defense to any
such action (other than an action brought to enforce a claim for the advance of
costs, charges and expenses under Article Thirty Eight where the required
undertaking, if any, has been received by the Company) that the claimant has not
met the standard of conduct set forth in Article Thirty Five hereof, but the
burden of proving such defense shall be on the Company. Neither the failure of
the Company (including its Board of Directors, its independent legal counsel,
and its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in Article
Thirty Five hereof, nor the fact that there has been an actual determination by
the Company (including its Board of Directors, its independent legal counsel,
and its stockholders) that the claimant has
<PAGE>
18
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
FORTY. Survival; Preservation of Other Rights. The foregoing indemnification
provisions shall be deemed to be a contract between the Company and each
director, officer, employee and agent who serves in any such capacity at any
time while these provisions are in effect and any repeal or modification thereof
shall not affect any right or obligation then existing with respect to any state
of facts then or previously existing or any action, suit or proceeding
previously or thereafter brought or threatened based in whole or in part upon
any such state of facts. Such a contract right may not be modified
retroactively without the consent of such director, officer, employee or agent.
The indemnification contemplated in these by-laws shall not be deemed exclusive
of any other rights to which those indemnified may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
FORTY ONE. Insurance. The Company shall purchase and maintain insurance on
behalf of any person who is or was or has agreed to become a director or officer
of the Company, or is or was serving at the request of the Company as a director
or officer of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him or on
his behalf in any such capacity, or arising out of his status as such, whether
or not the Company would have the power to indemnify him against such liability
under the provisions of these by-laws, provided that such insurance is available
--------
on acceptable terms, which determination shall be made by a
<PAGE>
19
vote of a majority of the entire Board of Directors.
FORTY TWO. Severability. If this chapter of these by-laws or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Company shall nevertheless indemnify each director or
officer and may indemnify each employee or agent of the Company as to costs,
charges and expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement with respect to any action, suit or proceeding, whether
civil, criminal, administrative or investigative, including an action by or in
the right of the Company, to the fullest extent permitted by any applicable
portion of these by-laws that shall not have been invalidated and to the fullest
extent permitted by applicable law.
<PAGE>
EXHIBIT 4.1
CONFORMED COPY
--------------
================================================================================
CDRJ ACQUISITION CORPORATION
(to be renamed JAFRA COSMETICS INTERNATIONAL, INC.)
and
JAFRA COSMETICS INTERNATIONAL, S.A. de C.V.,
as several and not joint Issuers and as Note Guarantors,
CDRJ INVESTMENTS (LUX) S.A.
and the other Note Guarantors from time to time parties hereto,
as Note Guarantors
and
STATE STREET BANK AND TRUST COMPANY,
as Trustee
_____________
INDENTURE
Dated as of April 30, 1998
_____________
11 3/4% Senior Subordinated Notes Due 2008
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
Section 101. Definitions.................................................................... 2
Section 102. Other Definitions.............................................................. 35
Section 103. Rules of Construction.......................................................... 37
Section 104. Incorporation by Reference of TIA.............................................. 37
Section 105. Conflict with TIA.............................................................. 38
Section 106. Compliance Certificates and Opinions........................................... 38
Section 107. Form of Documents Delivered to Trustee......................................... 39
Section 108. Acts of Noteholders; Record Dates.............................................. 39
Section 109. Notices, etc., to Trustee and Company.......................................... 42
Section 110. Notices to Holders; Waiver..................................................... 42
Section 111. Effect of Headings and Table of Contents....................................... 43
Section 112. Successors and Assigns......................................................... 43
Section 113. Separability Clause............................................................ 43
Section 114. Benefits of Indenture.......................................................... 43
Section 115. GOVERNING LAW.................................................................. 43
Section 116. Legal Holidays................................................................. 43
Section 117. No Personal Liability of Directors, Officers, Employees, Incorporators
and Stockholders............................................................... 44
Section 118. Exhibits and Schedules......................................................... 44
Section 119. Counterparts................................................................... 44
Section 120. Company as Agent for Issuers................................................... 44
ARTICLE 2
NOTE FORMS
Section 201. Forms Generally................................................................ 45
Section 202. Form of Trustee's Certificate of Authentication................................ 46
Section 203. Restrictive and Global Note Legends............................................ 47
</TABLE>
i
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<S> <C>
ARTICLE 3
THE NOTES
Section 301. Title and Terms................................................................ 49
Section 302. Denominations.................................................................. 50
Section 303. Execution, Authentication and Delivery and Dating.............................. 50
Section 304. Temporary Notes................................................................ 51
Section 305. Registration, Registration of Transfer and Exchange............................ 51
Section 306. Mutilated, Destroyed, Lost and Stolen Notes.................................... 52
Section 307. Payment of Interest Rights Preserved........................................... 53
Section 308. Persons Deemed Owners.......................................................... 54
Section 309. Cancellation................................................................... 54
Section 310. Computation of Interest........................................................ 55
Section 311. CUSIP Numbers.................................................................. 55
Section 312. Book-Entry Provisions for Global Notes......................................... 55
Section 313. Special Transfer Provisions.................................................... 57
Section 314. Payment of Additional Interest................................................. 60
ARTICLE 4
COVENANTS
Section 401. Payment of Principal, Premium and Interest..................................... 60
Section 402. Maintenance of Office or Agency................................................ 60
Section 403. Money for Payments To Be Held in Trust......................................... 61
Section 404. Additional Amounts............................................................. 62
Section 405. SEC Reports.................................................................... 64
Section 406. Statement as to Default........................................................ 65
Section 407. Limitation on Indebtedness..................................................... 65
Section 408. Limitation on Other Subordinated Indebtedness.................................. 69
Section 409. Limitation on Restricted Payments.............................................. 69
Section 410. Limitation on Restrictions on Distributions from Restricted Subsidiaries....... 73
Section 411. Limitation on Sales of Assets and Subsidiary Stock............................. 75
Section 412. Limitation on Transactions with Affiliates..................................... 78
Section 413. Limitation on Liens............................................................ 80
Section 414. Future Note Guarantors......................................................... 80
Section 415. Purchase of Notes Upon a Change in Control..................................... 81
</TABLE>
ii
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<S> <C>
ARTICLE 5
SUCCESSORS
Section 501. When the Company or an Issuer May Merge, etc................................... 82
Section 502. Successor Substituted.......................................................... 83
ARTICLE 6
REMEDIES
Section 601. Events of Default.............................................................. 84
Section 602. Acceleration of Maturity; Rescission and Annulment............................. 86
Section 603. Other Remedies; Collection Suit by Trustee..................................... 87
Section 604. Trustee May File Proofs of Claim............................................... 87
Section 605. Trustee May Enforce Claims Without Possession of Notes......................... 88
Section 606. Application of Money Collected................................................. 88
Section 607. Limitation on Suits............................................................ 88
Section 608. Unconditional Right of Holders to Receive Principal, Premium and
Interest....................................................................... 89
Section 609. Restoration of Rights and Remedies............................................. 89
Section 610. Rights and Remedies Cumulative................................................. 89
Section 611. Delay or Omission Not Waiver................................................... 89
Section 612. Control by Holders............................................................. 90
Section 613. Waiver of Past Defaults........................................................ 90
Section 614. Undertaking for Costs.......................................................... 91
Section 615. Waiver of Stay, Extension or Usury Laws........................................ 91
ARTICLE 7
THE TRUSTEE
Section 701. Certain Duties and Responsibilities............................................ 91
Section 702. Notice of Defaults............................................................. 92
Section 703. Certain Rights of Trustee...................................................... 93
Section 704. Not Responsible for Recitals or Issuance of Notes.............................. 94
Section 705. May Hold Notes................................................................. 94
Section 706. Money Held in Trust............................................................ 94
Section 707. Compensation and Reimbursement................................................. 94
</TABLE>
iii
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Section 708. Conflicting Interests.......................................................... 95
Section 709. Corporate Trustee Required; Eligibility........................................ 95
Section 710. Resignation and Removal; Appointment of Successor.............................. 95
Section 711. Acceptance of Appointment by Successor......................................... 97
Section 712. Merger, Conversion, Consolidation or Succession to Business.................... 97
Section 713. Preferential Collection of Claims Against Issuers.............................. 98
Section 714. Appointment of Authenticating Agent............................................ 98
Section 715. Withholding Taxes.............................................................. 98
ARTICLE 8
HOLDERS' LISTS AND REPORTS BY
TRUSTEE AND ISSUERS
Section 801. Issuers to Furnish Trustee Names and Addresses of Holders...................... 98
Section 802. Preservation of Information; Communications to Holders......................... 99
Section 803. Reports by Trustee............................................................. 99
ARTICLE 9
AMENDMENT, SUPPLEMENT OR WAIVER
Section 901. Without Consent of Holders..................................................... 100
Section 902. With Consent of Holders........................................................ 101
Section 903. Execution of Amendments, Supplements or Waivers................................ 102
Section 904. Revocation and Effect of Consents.............................................. 103
Section 905. Conformity with TIA............................................................ 103
Section 906. Notation on or Exchange of Notes............................................... 103
ARTICLE 10
REDEMPTION OF NOTES
Section 1001. Right of Redemption............................................................ 104
Section 1002. Applicability of Article....................................................... 105
Section 1003. Election to Redeem; Notice to Trustee.......................................... 105
Section 1004. Selection by Trustee of Notes to Be Redeemed................................... 106
Section 1005. Notice of Redemption........................................................... 106
Section 1006. Deposit of Redemption Price.................................................... 107
Section 1007. Notes Payable on Redemption Date............................................... 107
</TABLE>
iv
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Section 1008. Notes Redeemed in Part......................................................... 108
ARTICLE 11
SATISFACTION AND DISCHARGE
Section 1101. Satisfaction and Discharge of Indenture........................................ 108
Section 1102. Application of Trust Money..................................................... 109
ARTICLE 12
DEFEASANCE OR COVENANT DEFEASANCE
Section 1201. The Issuers' Option To Effect Defeasance or Covenant Defeasance................ 110
Section 1202. Defeasance and Discharge....................................................... 110
Section 1203. Covenant Defeasance............................................................ 111
Section 1204. Conditions to Defeasance or Covenant Defeasance................................ 111
Section 1205. Deposited Money and U.S. Government Obligations To Be Held in
Trust; Other Miscellaneous Provisions.......................................... 113
Section 1206. Reinstatement.................................................................. 113
Section 1207. Repayment to Issuers........................................................... 114
ARTICLE 13
NOTE GUARANTEES
Section 1301. Guarantees Generally........................................................... 114
Section 1302. Continuing Guarantees.......................................................... 116
Section 1303. Release of Note Guarantees..................................................... 117
Section 1304. Agreement to Subordinate....................................................... 118
Section 1305. Waiver of Subrogation.......................................................... 118
Section 1306. Notation Not Required.......................................................... 118
Section 1307. Successors and Assigns of Note Guarantors...................................... 119
Section 1308. Execution and Delivery of Subsidiary Guarantees................................ 119
Section 1309. Notices........................................................................ 119
</TABLE>
v
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ARTICLE 14
SUBORDINATION
Section 1401. Agreement To Subordinate....................................................... 119
Section 1402. Liquidation, Dissolution, Bankruptcy........................................... 120
Section 1403. Default on Senior Indebtedness................................................. 120
Section 1404. Acceleration of Payment of Notes............................................... 121
Section 1405. When a Distribution Must Be Paid Over.......................................... 121
Section 1406. Subrogation.................................................................... 122
Section 1407. Relative Rights................................................................ 122
Section 1408. Subordination May Not Be Impaired by Issuers................................... 122
Section 1409. Rights of Trustee and Paying Agent............................................. 122
Section 1410. Distribution or Notice to Representative....................................... 123
Section 1411. Article 14 Not To Prevent Events of Default or Limit Right To
Accelerate..................................................................... 123
Section 1412. Trust Moneys Not Subordinated.................................................. 123
Section 1413. Trustee Entitled To Rely....................................................... 123
Section 1414. Trustee To Effectuate Subordination............................................ 124
Section 1415. Trustee Not Fiduciary for Holders of Senior Indebtedness....................... 124
Section 1416. Reliance by Holders of Senior Indebtedness on Subordination
Provisions..................................................................... 124
Section 1417. Trustee's Compensation Not Prejudiced.......................................... 124
ARTICLE 15
SUBORDINATION OF NOTE GUARANTEES
Section 1501. Agreement To Subordinate....................................................... 125
Section 1502. Liquidation, Dissolution, Bankruptcy........................................... 125
Section 1503. Default on Senior Indebtedness................................................. 125
Section 1504. Acceleration of Payment of Notes............................................... 127
Section 1505. When a Distribution Must Be Paid Over.......................................... 127
Section 1506. Subrogation.................................................................... 127
Section 1507. Relative Rights................................................................ 128
Section 1508. Subordination May Not Be Impaired by Note Guarantors........................... 128
Section 1509. Rights of Trustee and Paying Agent............................................. 128
Section 1510. Distribution or Notice to Representative....................................... 129
</TABLE>
vi
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Section 1511. Article 15 Not To Prevent Events of Default or Limit Right To
Accelerate..................................................................... 129
Section 1512. Trust Moneys Not Subordinated.................................................. 129
Section 1513. Trustee Entitled To Rely....................................................... 129
Section 1514. Trustee To Effectuate Subordination............................................ 130
Section 1515. Trustee Not Fiduciary for Holders of Senior Indebtedness....................... 130
Section 1516. Reliance by Holders of Senior Indebtedness on Subordination
Provisions..................................................................... 130
Section 1517. Trustee's Compensation Not Prejudiced.......................................... 130
</TABLE>
Exhibit A Form of Note
Exhibit B Form of Supplemental Indenture
Exhibit C Form of Regulation S Certificate
Exhibit D Form of Certificate of Beneficial Ownership
Exhibit E Form of First Supplemental Indenture
vii
<PAGE>
Certain Sections of this Indenture relating to Sections 310 through 318
inclusive of the Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
<S> <C>
(S) 310(a)(1) ................................... 709
(a)(2) ................................... 709
(a)(3) ................................... Not Applicable
(a)(4) ................................... Not Applicable
(b) ................................... 708
(S) 311(a) ................................... 713
(b) ................................... 713
(b)(2) ................................... 803
803
(S) 312(a) ................................... 801
802
(b) ................................... 802
(c) ................................... 802
(S) 313(a) ................................... 803
(b) ................................... 803
(c) ................................... 803
803
(d) ................................... 803
(S) 314(a) ................................... 405
(a)(4) ................................... 102
406
(b) ................................... Not Applicable
(c)(1) ................................... 102
(c)(2) ................................... 102
(c)(3) ................................... Not Applicable
(d) ................................... Not Applicable
(e) ................................... 102
</TABLE>
viii
<PAGE>
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
<S> <C>
(S) 315(a) ................................... 701
(b) ................................... 702
803
(c) ................................... 701
(d) ................................... 701
(d)(1) ................................... 701
(d)(2) ................................... 701
(d)(3) ................................... 701
(e) ................................... 614
(S) 316(a) ................................... 101
612
(a)(1)(A) ................................... 602
612
(a)(1)(B) ................................... 613
(a)(2) ................................... Not Applicable
(b) ................................... 608
(c) ................................... 104
(S) 317(a)(1).......................................... 603
(a)(2).......................................... 604
(b)............................................. 403
(S) 318(a)............................................. 107
</TABLE>
______________________
This cross-reference table shall not for any purpose be deemed to be part of the
Indenture.
ix
<PAGE>
INDENTURE, dated as of April 30, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Indenture"), among CDRJ
---------
Acquisition Corporation, a corporation organized under the laws of the state of
Delaware (to be renamed Jafra Cosmetics International, Inc.), and Jafra
Cosmetics International, S.A. de C.V., a corporation organized under the laws of
Mexico, as several and not joint Issuers and as Note Guarantors; CDRJ
Investments (Lux) S.A., a corporation organized under the laws of Luxembourg, as
Note Guarantor; and State Street Bank and Trust Company, a Massachusetts trust
company, as Trustee.
RECITALS OF THE ISSUERS AND NOTE GUARANTORS
Each Issuer has duly authorized the execution and delivery of this
Indenture to provide for the issuance of the Notes. Each Note Guarantor party
hereto has duly authorized the execution and delivery of this Indenture to
provide for its guarantee of the Notes, as provided in this Indenture. Each Note
Guarantor party hereto has received good and valuable consideration for its
execution and delivery of the Indenture and its guarantee of the Notes.
All things necessary to make the Original Notes, when executed and
delivered by the Issuers and authenticated and delivered by the Trustee
hereunder and duly issued by the Issuers, the valid several obligations of the
Issuers, and to make this Indenture a valid agreement of the Issuers and each
Note Guarantor party hereto as of the date hereof, in accordance with the terms
of the Original Notes and this Indenture, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually agreed, for the equal and ratable benefit
of all Holders of the Notes, as follows:
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ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
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Section 101 Definitions.
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"Acquisition" means the acquisition by the Company of the worldwide
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Jafra cosmetics business from The Gillette Company.
"Additional Assets" means (i) any property or assets that replace the
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property or assets that are the subject of an Asset Disposition; (ii) any
property or assets (other than Indebtedness and Capital Stock) to be used by the
Company or a Restricted Subsidiary in a Related Business; (iii) the Capital
Stock of a Person that is engaged in a Related Business and becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by the Company
or another Restricted Subsidiary; or (iv) Capital Stock of any Person that at
such time is a Restricted Subsidiary, acquired from a third party.
"Additional Notes" means any notes issued under this Indenture in
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addition to the Original Notes (other than any Notes issued pursuant to Section
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304, 305, 306, 312(c), 312(d) or 1008).
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"Affiliate" of any specified Person means any other Person, directly
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or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"all or substantially all" has the meaning given to such phrase in the
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Revised Model Business Corporation Act and commentary thereto.
"Asset Disposition" means any sale, lease, transfer or other
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disposition of shares of Capital Stock of a Restricted Subsidiary (other than
Designated Equity Interests, or (in the case of a Foreign Subsidiary) to the
extent required by applicable law), property or other assets (each referred to
for the purposes of this definition as a "disposition") by the Company or any of
its Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction), other than (i) a disposition to the
Company or any Restricted Subsidiary, (ii) a disposition in the ordinary course
of business, (iii) the sale or discount (with or without recourse, and on
customary or commercially reasonable terms) of accounts receivable or notes
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receivable arising in the ordinary course of business, or the conversion or
exchange of accounts receivable for notes receivable, (iv) any Restricted
Payment Transaction, (v) a disposition that is governed by Article 5, (vi) any
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Financing Disposition, (vii) any "fee in lieu" or other disposition of assets to
any governmental authority or agency that continue in use by the Company or any
Restricted Subsidiary, so long as the Company or any Restricted Subsidiary may
obtain title to such assets upon reasonable notice by paying a nominal fee,
(viii) any exchange of like property pursuant to Section 1031 (or any successor
section) of the Code, (ix) any financing transaction with respect to property
built or acquired by the Company or any Restricted Subsidiary after the Issue
Date, including any sale/leaseback transaction or asset securitization, (x) any
disposition arising from foreclosure, condemnation or similar action with
respect to any property or other assets, (xi) any disposition of Capital Stock,
Indebtedness or other securities of an Unrestricted Subsidiary, (xii) a
disposition of Capital Stock of a Restricted Subsidiary pursuant to an agreement
or other obligation with or to a Person (other than the Company or a Restricted
Subsidiary) from whom such Restricted Subsidiary was acquired, or from whom such
Restricted Subsidiary acquired its business and assets (having been newly formed
in connection with such acquisition), entered into in connection with such
acquisition, (xiii) a disposition of not more than 5% of the outstanding Capital
Stock of a Foreign Subsidiary that has been approved by the Board of Directors
or (xiv) any disposition or series of related dispositions for aggregate
consideration not exceeding $1.0 million.
"Authenticating Agent" means any Person authorized by the Trustee
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pursuant to Section 714 to act on behalf of the Trustee to authenticate Notes of
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one or more series.
"Average Life" means, as of the date of determination, with respect to
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any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means (i) any and all amounts, whether outstanding
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on the Issue Date or thereafter incurred, payable under or in respect of the
Senior Credit Facility, including principal, premium (if any), interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company, either Issuer or any
Restricted Subsidiary whether or not a claim for post-filing interest is allowed
in such proceedings), fees, charges, expenses, reimbursement obligations,
guarantees, other monetary obligations of any nature and all other amounts
payable thereunder or in respect thereof and (ii) all Hedging Obligations
arising in connection therewith to any party to the Senior Credit Facility (or
any affiliate thereof).
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"Board of Directors" means the board of directors or other governing
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body of the Company or any committee thereof duly authorized to act on behalf of
such board or governing body.
"Borrowing Base" means the sum (determined as of the end of the most
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recently ended fiscal quarter for which consolidated financial statements of the
Company are available) of (1) 60% of Inventory of the Company and its Restricted
Subsidiaries and (2) 80% of Receivables of the Company and its Restricted
Subsidiaries.
"Business Day" means a day other than a Saturday, Sunday or other day
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on which commercial banking institutions are authorized or required by law to
close in New York City.
"Capital Stock" of any Person means any and all shares, interests,
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rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligation" means an obligation that is required to
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be classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP. The Stated Maturity of any Capitalized Lease
Obligation shall be the date of the last payment of rent or any other amount due
under the related lease.
"Cash Equivalents" means any of the following: (a) securities issued
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or fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof, (b) time deposits, certificates of deposit or bankers'
acceptances of (i) any lender under the Senior Credit Agreement or (ii) any
commercial bank having capital and surplus in excess of $500,000,000 and the
commercial paper of the holding company of which is rated at least A-1 or the
equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's
(or if at such time neither is issuing ratings, then a comparable rating of
another nationally recognized rating agency), (c) commercial paper rated at
least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent
thereof by Moody's (or if at such time neither is issuing ratings, then a
comparable rating of another nationally recognized rating agency) and (d)
investments in money market funds complying with the risk limiting conditions of
Rule 2a-7 or any successor rule of the SEC under the Investment Company Act of
1940, as amended.
"CDR" means Clayton, Dubilier & Rice, Inc.
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"CDR Fund V" means Clayton, Dubilier & Rice Fund V Limited
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Partnership, a Cayman Islands exempted limited partnership, and any successor in
interest thereto.
"Cedel" means Cedel Bank, societe anonyme.
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"Change of Control" means:
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(i) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of a percentage of the total voting
power of the Voting Stock of the Company that is (x) greater than the
percentage thereof that is then held in the aggregate by Permitted Holders
and (y) greater than 35% of the total voting power of the Voting Stock of
the Company (for the purposes of this clause (i), such other person shall
be deemed to beneficially own any Voting Stock of the Company held by a
parent corporation, if the Company is a Subsidiary of such parent
corporation and such other person is the beneficial owner (as defined in
this clause (i)), directly or indirectly, of a percentage of the total
voting power of the Voting Stock of the parent corporation that is (x)
greater than the percentage thereof that is then held in the aggregate by
Permitted Holders and (y) greater than 35% of the total voting power of the
Voting Stock of such parent corporation);
(ii) the Company ceases to beneficially own, directly or indirectly,
100% of the aggregate voting power of the Voting Stock of either Issuer
(excluding beneficial ownership of any other Person attributable to
Designated Equity Interests), other than in a transaction by the Company
in compliance with the provisions of Article 5 in which the Company's
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Successor succeeds to such beneficial ownership of the Company;
(iii) during any period of two consecutive years (during which period
the Company has been a party to this Indenture), individuals who at the
beginning of such period were members of the board of directors of the
Company (together with any new members thereof whose election by such board
of directors or whose nomination for election by holders of Capital Stock
of the Company was approved by one or more Permitted Holders or by a vote
of a majority of the members of such board of directors then still in
office who were either members thereof at the beginning of such period or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of such board of directors then in
office; or
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(iv) the Company merges or consolidates with or into, or sells or
transfers (in one or a series of related transactions) all or substantially
all of the assets of the Company and its Restricted Subsidiaries to,
another Person (other than one or more Permitted Holders) and any "person"
(as defined in clause (i) above), other than one or more Permitted Holders,
is or becomes the "beneficial owner" (as defined in clause (i) above),
directly or indirectly, of a percentage of the total voting power of the
Voting Stock of the surviving Person in such merger or consolidation, or
the transferee Person in such sale or transfer of assets, as the case may
be, that is (x) greater than the percentage thereof that is then held in
the aggregate by Permitted Holders and (y) greater than 35% of the total
voting power of such Voting Stock (for purposes of this clause (iv), such
other person shall be deemed to beneficially own any Voting Stock of such
surviving or transferee Person held by a parent corporation, if such
surviving or transferee Person is a Subsidiary of such parent corporation
and such other person is the beneficial owner (as defined in clause (i)
above), directly or indirectly, of a percentage of the total voting power
of the Voting Stock of such parent corporation that is (x) greater than the
percentage thereof that is then held in the aggregate by Permitted Holders
and (y) greater than 35% of the total voting power of such Voting Stock).
"Change of Control Triggering Event" means the occurrence after the
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Issue Date of both (a) a Change of Control and (b) the failure of the Notes to
have, on the 30th day after such Change of Control, a rating of at least BBB-
(or equivalent successor rating) by S&P and a rating of at least Baa3 (or
equivalent successor rating) by Moody's.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Company" means CDRJ Investments (Lux) S.A., a Luxembourg corporation,
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and any successor in interest thereto.
"Company Request", "Company Order" and "Company Consent" mean,
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respectively, a written request, order or consent signed in the name of the
Company or the Issuers, as the case may be, pursuant to Section 120 by an
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Officer of the Company (in the case of the Company) or an Officer of each Issuer
(in the case of the Issuers).
"Consolidated Coverage Ratio" as of any date of determination means
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the ratio of (i) the aggregate amount of Consolidated EBITDA of the Company and
its Restricted Subsidiaries for the period of the most recent four consecutive
fiscal quarters ending prior to the date of such determination for which
consolidated financial statements of the Company are available to (ii)
Consolidated Interest Expense for such four fiscal quarters (in each case,
determined, for each fiscal quarter (or portion thereof) of the four fiscal
quarters ending prior
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to the Issue Date, on a pro forma basis to give effect to the Acquisition as if
it had occurred at the beginning of such four-quarter period); provided, that
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(1) if since the beginning of such period the Company or any
Restricted Subsidiary has Incurred any Indebtedness that remains
outstanding on such date of determination or if the transaction giving rise
to the need to calculate the Consolidated Coverage Ratio is an Incurrence
of Indebtedness, Consolidated EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving effect on a pro forma basis to
such Indebtedness as if such Indebtedness had been Incurred on the first
day of such period (except that in making such computation, the amount of
Indebtedness under any revolving credit facility outstanding on the date of
such calculation shall be computed based on (A) the average daily balance
of such Indebtedness during such four fiscal quarters or such shorter
period for which such facility was outstanding or (B) if such facility was
created after the end of such four fiscal quarters, the average daily
balance of such Indebtedness during the period from the date of creation of
such facility to the date of such calculation),
(2) if since the beginning of such period the Company or any
Restricted Subsidiary has repaid, repurchased, redeemed, defeased or
otherwise acquired, retired or discharged any Indebtedness (each, a
"Discharge") since the beginning of the period or if the transaction giving
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rise to the need to calculate the Consolidated Coverage Ratio involves a
Discharge of Indebtedness (in each case other than Indebtedness Incurred
under any revolving credit facility unless such Indebtedness has been
permanently repaid), Consolidated EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving effect on a pro forma
basis to such Discharge of such Indebtedness, including with the proceeds
of such new Indebtedness, as if such Discharge had occurred on the first
day of such period,
(3) if since the beginning of such period the Company or any
Restricted Subsidiary shall have disposed of any company, any business or
any group of assets constituting an operating unit of a business (any such
disposition, a "Sale"), the Consolidated EBITDA for such period shall be
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reduced by an amount equal to the Consolidated EBITDA (if positive)
attributable to the assets that are the subject of such Sale for such
period or increased by an amount equal to the Consolidated EBITDA (if
negative) attributable thereto for such period and Consolidated Interest
Expense for such period shall be reduced by an amount equal to (A) the
Consolidated Interest Expense attributable to any Indebtedness of the
Company or any Restricted Subsidiary repaid, repurchased, redeemed,
defeased or otherwise acquired, retired or discharged with respect to the
Company and its continuing Restricted Subsidiaries in connection with such
Sale for such period (including through the assumption of such Indebtedness
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by another Person) plus (B) if the Capital Stock of any Restricted
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Subsidiary is sold, the Consolidated Interest Expense for such period
attributable to the Indebtedness of such Restricted Subsidiary to the
extent the Company and its continuing Restricted Subsidiaries are no longer
liable for such Indebtedness after such Sale,
(4) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger, consolidation or otherwise) shall have
made an Investment in any Person that thereby becomes a Restricted
Subsidiary, or otherwise acquired any company, any business or any group of
assets constituting an operating unit of a business, including any such
Investment or acquisition occurring in connection with a transaction
causing a calculation to be made hereunder (any such Investment or
acquisition, a "Purchase"), Consolidated EBITDA and Consolidated Interest
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Expense for such period shall be calculated after giving pro forma effect
thereto (including the Incurrence of any related Indebtedness) as if such
Purchase occurred on the first day of such period, and
(5) if since the beginning of such period any Person became a
Restricted Subsidiary or was merged or consolidated with or into the
Company or any Restricted Subsidiary, and since the beginning of such
period such Person shall have Discharged any Indebtedness or made any Sale
or Purchase that would have required an adjustment pursuant to clause (2),
(3) or (4) above if made by the Company or a Restricted Subsidiary during
such period, Consolidated EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto as if such
Discharge, Sale or Purchase occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be
given to any Sale, Purchase or other transaction, or the amount of income or
earnings relating thereto and the amount of Consolidated Interest Expense
associated with any Indebtedness Incurred or repaid, repurchased, redeemed,
defeased or otherwise acquired, retired or discharged in connection therewith,
the pro forma calculations in respect thereof (including in respect of
anticipated cost savings or synergies relating to any such Sale, Purchase or
other transaction) shall be as determined in good faith by a responsible
financial or accounting Officer of the Company. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Indebtedness shall be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Indebtedness). If
any Indebtedness bears, at the option of the Company or a Restricted Subsidiary,
a rate of interest based on a prime or similar rate, a eurocurrency interbank
offered rate or other fixed or floating rate, and such Indebtedness is being
given pro forma effect, the interest expense on such Indebtedness shall be
calculated by applying such optional rate as the Company or such Restricted
Subsidiary may
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designate. If any Indebtedness that is being given pro forma effect was Incurred
under a revolving credit facility, the interest expense on such Indebtedness
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period. Interest on a Capitalized Lease Obligation shall
be deemed to accrue at an interest rate determined in good faith by a
responsible financial or accounting officer of the Company to be the rate of
interest implicit in such Capitalized Lease Obligation in accordance with GAAP.
"Consolidated EBITDA" means, for any period, the Consolidated Net
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Income for such period, plus the following to the extent deducted in calculating
such Consolidated Net Income: (i) provision for all taxes (whether or not paid,
estimated or accrued) based on income, profits or capital, (ii) Consolidated
Interest Expense and any Receivables Fees, (iii) depreciation, amortization
(including amortization of goodwill and intangibles and amortization and write-
off of financing costs) and all other non-cash charges or non-cash losses, and
(iv) any expenses or charges related to any Equity Offering, Investment or
Indebtedness permitted by this Indenture (whether or not consummated or
incurred).
"Consolidated Interest Expense" means, for any period, (i) the total
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interest expense of the Company and its Restricted Subsidiaries to the extent
deducted in calculating Consolidated Net Income, net of any interest income of
the Company and its Restricted Subsidiaries, including any such interest expense
consisting of (a) interest expense attributable to Capitalized Lease
Obligations, (b) amortization of debt discount, (c) interest in respect of
Indebtedness of any other Person that has been Guaranteed by the Company or any
Restricted Subsidiary, but only to the extent that such interest is actually
paid by the Company or any Restricted Subsidiary, (d) non-cash interest expense,
(e) the interest portion of any deferred payment obligation, and (f)
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, plus (ii) Preferred Stock dividends
paid in cash in respect of Disqualified Stock of the Company held by Persons
other than the Company or a Restricted Subsidiary and minus (iii) to the extent
otherwise included in such interest expense referred to in clause (i) above,
Receivables Fees and amortization or write-off of financing costs, in each case
under clauses (i) through (iii) as determined on a Consolidated basis in
accordance with GAAP; provided, however, that gross interest expense shall be
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determined after giving effect to any net payments made or received by the
Company and its Restricted Subsidiaries with respect to Interest Rate
Agreements.
"Consolidated Net Income" means, for any period, the net income (loss)
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of the Company and its Restricted Subsidiaries, determined on a consolidated
basis in accordance with GAAP and before any reduction in respect of Preferred
Stock dividends; provided, however, that there shall not be included in such
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Consolidated Net Income:
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(i) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that (A) subject to the limitations contained
in clause (iv) below, the Company's equity in the net income of any such
Person for such period shall be included in such Consolidated Net Income up
to the aggregate amount actually distributed by such Person during such
period to the Company or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to a
Restricted Subsidiary, to the limitations contained in clause (iii) below)
and (B) the Company's equity in the net loss of such Person shall be
included to the extent of the aggregate Investment of the Company or any of
its Restricted Subsidiaries in such Person,
(ii) any net income (loss) of any Person acquired by the Company or a
Restricted Subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition,
(iii) any net income (loss) of any Restricted Subsidiary that is not
an Issuer or a Subsidiary Guarantor if such Restricted Subsidiary is
subject to restrictions, directly or indirectly, on the payment of
dividends or the making of similar distributions by such Restricted
Subsidiary, directly or indirectly, to the Company by operation of the
terms of such Restricted Subsidiary's charter or any agreement, instrument,
judgment, decree, order, statute or governmental rule or regulation
applicable to such Restricted Subsidiary or its stockholders (other than
(x) restrictions that have been waived or otherwise released, (y)
restrictions pursuant to the Notes or this Indenture and (z) restrictions
in effect on the Issue Date with respect to a Restricted Subsidiary and
other restrictions with respect to such Restricted Subsidiary that taken as
a whole are not materially less favorable to the Noteholders than such
restrictions in effect on the Issue Date), except that (A) subject to the
limitations contained in clause (iv) below, the Company's equity in the net
income of any such Restricted Subsidiary for such period shall be included
in such Consolidated Net Income up to the aggregate amount of any dividend
or distribution that was or that could have been made by such Restricted
Subsidiary during such period to the Company or another Restricted
Subsidiary (subject, in the case of a dividend that could have been made to
another Restricted Subsidiary, to the limitation contained in this clause)
and (B) the net loss of such Restricted Subsidiary shall be included to the
extent of the aggregate Investment of the Company or any of its other
Restricted Subsidiaries in such Restricted Subsidiary,
(iv) any gain or loss realized upon the sale or other disposition of
any asset of the Company or any Restricted Subsidiary (including pursuant
to any sale/leaseback transaction) that is not sold or otherwise disposed
of in the ordinary course of business (as determined in good faith by the
Board of Directors),
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(v) any item classified as an extraordinary, unusual or
nonrecurring gain, loss or charge (including (a) any compensation expense
for stock options that will be cashed out, converted, exchanged or
otherwise retired in connection with the Acquisition, (b) any charge or
expense incurred for employee bonuses in connection with the Acquisition,
and (c) fees, expenses and charges associated with the Acquisition or any
acquisition, merger or consolidation after the Issue Date),
(vi) the cumulative effect of a change in accounting principles,
(vii) all deferred financing costs written off and premiums paid in
connection with any early extinguishment of Indebtedness,
(viii) any unrealized gains or losses in respect of Currency
Agreements,
(ix) any unrealized foreign currency transaction gains or losses in
respect of Indebtedness of any Person denominated in a currency other than
the functional currency of such Person, and
(x) any non-cash compensation charge arising from any grant of
stock, stock options or other equity-based awards.
In the case of any unusual or nonrecurring gain, loss or charge not
included in Consolidated Net Income pursuant to clause (v) above in any
determination thereof, the Company will deliver an Officer's Certificate to the
Trustee promptly after the date on which Consolidated Net Income is so
determined, setting forth the nature and amount of such unusual or nonrecurring
gain, loss or charge.
"Consolidated Total Assets" means, as of any date of determination,
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the total assets shown on the consolidated balance sheet of the Company and its
Restricted Subsidiaries as of the most recent date for which such a balance
sheet is available, determined on a consolidated basis in accordance with GAAP
(and, in the case of any determination relating to any Incurrence of
Indebtedness or any Investment, on a pro forma basis including any property or
assets being acquired in connection therewith), provided that for purposes of
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paragraph (b) of Section 407 and the definition of "Permitted Investment,"
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Consolidated Total Assets shall not be less than $258.5 million.
"Consolidation" means the consolidation of the accounts of each of the
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Restricted Subsidiaries with those of the Company in accordance with GAAP;
provided, however, that "Consolidation" will not include consolidation of the
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accounts of any Unrestricted Subsidiary, but the interest of the Company or any
Restricted Subsidiary in any
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Unrestricted Subsidiary will be accounted for as an investment. The term
"Consolidated" has a correlative meaning.
"Corporate Trust Office" means the office of the Trustee in the
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Borough of Manhattan, the City of New York, at which at any particular time its
corporate trust business shall be administered, which office on the Issue Date
is located at 61 Broadway, 15th Floor, New York, New York 10006.
"Currency Agreement" means, in respect of a Person, any foreign
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exchange contract, currency swap agreement or other similar agreement or
arrangements (including derivative agreements or arrangements), as to which such
Person is a party or a beneficiary.
"Default" means any event or condition that is, or after notice or
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passage of time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and
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successors.
"Designated Equity Interests" means (i) directors' qualifying shares,
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or (ii) in the case of a Foreign Subsidiary, Capital Stock required by law to be
held by a Person other than the Company or any Restricted Subsidiary.
"Designated Senior Indebtedness" with respect to a Person means (i)
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the Bank Indebtedness and (ii) any other Senior Indebtedness of such Person
that, at the date of determination, has an aggregate principal amount equal to
or under which, at the date of determination, the holders thereof are committed
to lend up to, at least $10.0 million and is specifically designated by such
Person in an agreement or instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture.
"Disinterested Director" means, with respect to any Affiliate
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Transaction, a member of the Board of Directors having no material direct or
indirect financial interest in or with respect to such Affiliate Transaction. A
member of the Board of Directors shall not be deemed to have such a financial
interest in any Affiliate Transaction by reason of such member's holding Capital
Stock of the Company or a Parent or any options, warrants or other rights in
respect of such Capital Stock.
"Disqualified Stock" means, with respect to any Person, any Capital
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Stock (other than Management Stock) that by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable) or upon the happening of any event (other than following the
occurrence of a Change of Control or other similar event
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described under such terms as a "change of control," or any Asset Disposition)
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof
(other than following the occurrence of a Change of Control or other similar
event described under such terms as a "change of control," or any Asset
Disposition), in whole or in part, in each case on or prior to the final Stated
Maturity of the Notes.
"Equity Offering" means a sale of Capital Stock (other than
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Disqualified Stock) (x) that is a sale of Capital Stock of the Company, or (y)
proceeds of which in an amount equal to or exceeding the Redemption Amount are
contributed to the Company or any of its Restricted Subsidiaries.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
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Office, as operator of the Euroclear System.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Exchange Notes" means the Issuers' 11 3/4% Senior Subordinated Notes
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Due 2008, containing terms substantially identical to the Initial Notes or any
Initial Additional Notes (except that (i) such Exchange Notes shall not contain
terms with respect to transfer restrictions and shall be registered under the
Securities Act, and (ii) certain provisions relating to an increase in the
stated rate of interest thereon shall be eliminated), that are issued and
exchanged for (a) the Initial Notes, as provided for in a registration rights
agreement relating to such Initial Notes and this Indenture, or (b) such Initial
Additional Notes as may be provided in any registration rights agreement
relating to such Additional Notes and this Indenture (including any amendment or
supplement hereto).
"Excluded Contribution" means Net Cash Proceeds, or the fair value, as
---------------------
determined in good faith by the Board of Directors, of property or assets,
received by the Company as capital contributions to the Company after the Issue
Date or from the issuance or sale (other than to a Subsidiary of the Company) of
Capital Stock (other than Disqualified Stock) of the Company, in each case to
the extent designated as an Excluded Contribution pursuant to an Officer's
Certificate of the Company and not previously included in the calculation set
forth in Section 409(a)(3)(B)(x) for purposes of determining whether a
-----------------------
Restricted Payment may be made.
"Financing Disposition" means any sale, transfer, conveyance or other
---------------------
disposition of property or assets by the Company or any Subsidiary thereof to
any Receivables Entity, or by any Receivables Subsidiary, in each case in
connection with the Incurrence by a
13
<PAGE>
Receivables Entity of Indebtedness, or obligations to make payments to the
obligor on Indebtedness, which may be secured by a Lien in respect of such
property or assets.
"First Supplemental Indenture" means the First Supplemental Indenture,
----------------------------
to be entered into substantially in the form attached hereto as Exhibit E.
---------
"Foreign Subsidiary" means (a) any Restricted Subsidiary of the
------------------
Company that is not organized under the laws of the United States of America or
any state thereof or the District of Columbia and (b) any Restricted Subsidiary
of the Company that has no material assets other than securities of one or more
Foreign Subsidiaries, and other assets relating to an ownership interest in any
such securities or Subsidiaries.
"GAAP" means generally accepted accounting principles in the United
----
States of America as in effect on the Issue Date (for purposes of the
definitions of the terms "Consolidated Coverage Ratio," "Consolidated EBITDA,"
"Consolidated Interest Expense," "Consolidated Net Income" and "Consolidated
Total Assets," all defined terms in this Indenture to the extent used in or
relating to any of the foregoing definitions, and all ratios and computations
based on any of the foregoing definitions) and as in effect from time to time
(for all other purposes of this Indenture), including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession.
All ratios and computations based on GAAP contained in this Indenture shall be
computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any
---------
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person; provided, however, that the term "Guarantee" shall not
-------- -------
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such
-------------------
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
------ ----------
registered in the Note Register.
"Holding Company Expenses" means (i) costs (including all professional
------------------------
fees and expenses) incurred by a Parent to comply with its reporting obligations
under federal or state laws or under this Indenture, including any reports filed
with respect to the Securities
14
<PAGE>
Act, Exchange Act or the respective rules and regulations promulgated
thereunder, (ii) indemnification obligations of a Parent owing to directors,
officers, employees or other Persons under its charter or by-laws or pursuant to
written agreements with any such Person, (iii) other operational expenses of a
Parent incurred in the ordinary course of business, and (iv) expenses incurred
by a Parent in connection with any public offering of Capital Stock or
Indebtedness (x) where the net proceeds of such offering are intended to be
received by or contributed or loaned to the Company or a Restricted Subsidiary,
or (y) in a prorated amount of such expenses in proportion to the amount of such
net proceeds intended to be so received, contributed or loaned, or (z) otherwise
on an interim basis prior to completion of such offering so long as a Parent
shall cause the amount of such expenses to be repaid to the Company or the
relevant Restricted Subsidiary out of the proceeds of such offering promptly if
completed.
"Incur" means issue, assume, enter into any Guarantee of, incur or
-----
otherwise become liable for; provided, however, that any Indebtedness or Capital
-------- -------
Stock of a Person existing at the time such Person becomes a Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary. Accrual of
interest, the accretion of accreted value and the payment of interest in the
form of additional Indebtedness will not be deemed to be an Incurrence of
Indebtedness. Any Indebtedness issued at a discount (including Indebtedness on
which interest is payable through the issuance of additional Indebtedness) shall
be deemed Incurred at the time of original issuance of the Indebtedness at the
initial accreted amount thereof.
"Indebtedness" means, with respect to any Person on any date of
------------
determination (without duplication):
(i) the principal of indebtedness of such Person for borrowed money,
(ii) the principal of obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments,
(iii) all reimbursement obligations of such Person in respect of
letters of credit or other similar instruments (the amount of such obligations
being equal at any time to the aggregate then undrawn and unexpired amount of
such letters of credit or other instruments plus the aggregate amount of
drawings thereunder that have not then been reimbursed),
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property (except Trade Payables), which purchase price is due
more than one year after the date of placing such property in final service or
taking final delivery and title thereto,
(v) all Capitalized Lease Obligations of such Person,
15
<PAGE>
(vi) the redemption, repayment or other repurchase amount of such
Person with respect to any Disqualified Stock of such Person or (if such Person
is a Subsidiary of the Company other than an Issuer or a Subsidiary Guarantor)
any Preferred Stock of such Subsidiary, but excluding, in each case, any accrued
dividends (the amount of such obligation to be equal at any time to the maximum
fixed involuntary redemption, repayment or repurchase price for such Capital
Stock, or if less (or if such Capital Stock has no such fixed price), to the
involuntary redemption, repayment or repurchase price therefor calculated in
accordance with the terms thereof as if then redeemed, repaid or repurchased,
and if such price is based upon or measured by the fair market value of such
Capital Stock, such fair market value shall be as determined in good faith by
the Board of Directors or the board of directors or other governing body of the
issuer of such Capital Stock),
(vii) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided, however, that the amount of Indebtedness of such Person shall
-------- -------
be the lesser of (A) the fair market value of such asset at such date of
determination (as determined in good faith by the Company) and (B) the amount of
such Indebtedness of such other Persons,
(viii) all Indebtedness of other Persons to the extent Guaranteed by
such Person, and
(ix) to the extent not otherwise included in this definition, net
Hedging Obligations of such Person (the amount of any such obligation to be
equal at any time to the termination value of such agreement or arrangement
giving rise to such Hedging Obligation that would be payable by such Person at
such time).
The amount of Indebtedness of any Person at any date shall be determined as set
forth above or otherwise provided in this Indenture, or otherwise shall equal
the amount thereof that would appear on a balance sheet of such Person
(excluding any notes thereto) prepared in accordance with GAAP.
"Initial Additional Notes" means Additional Notes issued in an
------------------------
offering not registered under the Securities Act.
"Initial Jafra S.A. Subsidiaries" means Consultoria Jafra, S.A. de
-------------------------------
C.V., Distribuidora Venus, S.A. de C.V., Dirsamex, S.A. de C.V., Reday, S.A. de
C.V., Qualifax, S.A. de C.V., and Jafra Cosmetics, S.R.L., each a corporation
organized under the laws of Mexico, upon their becoming Restricted Subsidiaries
of Jafra S.A. on the Issue Date.
16
<PAGE>
"Initial Notes" means the Issuers' 11 3/4% Senior Subordinated Notes
-------------
Due 2008, issued on the Issue Date (and any Notes issued in respect thereof
pursuant to Section 304, 305, 306, 312(c), 312(d) or 1008).
----------- --- --- ------ ------ ----
"Interest Payment Date" means, when used with respect to any Note and
---------------------
any installment of interest thereon, the date specified in such Note as the
fixed date on which such installment of interest is due and payable, as set
forth in such Note.
"Interest Rate Agreement" means, with respect to any Person, any
-----------------------
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement (including derivative agreements or
arrangements), as to which such Person is party or a beneficiary.
"Inventory" means goods held for sale or lease by a Person in the
---------
ordinary course of business, net of any reserve for goods that have been
segregated by such Person to be returned to the applicable vendor for credit, as
determined in accordance with GAAP.
"Investment" in any Person by any other Person means any direct or
----------
indirect advance, loan or other extension of credit (other than to customers,
suppliers, directors, officers or employees of any Person in the ordinary course
of business) or capital contribution (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others) to, or any purchase or acquisition of Capital Stock, Indebtedness
or other similar instruments issued by, such Person. For purposes of the
definition of "Unrestricted Subsidiary" and Section 409, (i) "Investment" shall
-----------
include the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of any Subsidiary of the
Company at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a
-------- -------
Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive)
equal to (x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation, (ii) any property transferred to
or from an Unrestricted Subsidiary shall be valued at its fair market value at
the time of such transfer and (iii) in each case under clause (i) or (ii) above,
fair market value shall be as determined in good faith by the Board of
Directors. Guarantees shall not be deemed to be Investments. The amount of any
Investment outstanding at any time shall be the original cost of such
Investment, reduced (at the Company's option) by any dividend, distribution,
interest payment, return of capital, repayment or other amount or value received
in respect of such Investment; provided, however, that to the extent that the
-------- -------
amount of
17
<PAGE>
Restricted Payments outstanding at any time is so reduced by any portion of any
such amount or value that would otherwise be included in the calculation of
Consolidated Net Income, such portion of such amount or value shall not be so
included for purposes of calculating the amount of Restricted Payments that may
be made pursuant to Section 409(a).
--------------
"Investor" means CDR Fund V.
--------
"Issue Date" means the first date on which Initial Notes are issued.
----------
"Issuer" means Jafra S.A. and JCI.
------
"Jafra S.A." means Jafra Cosmetics International, S.A. de C.V., a
---------
corporation organized under the laws of Mexico, until a Successor shall have
become such pursuant to the applicable provisions of this Indenture and
thereafter means such Successor.
"Jafra S.A. Subsidiary Guarantor" means each Restricted Subsidiary of
-------------------------------
Jafra S.A. that enters into a Subsidiary Guarantee.
"JCI" means Jafra Cosmetics International, Inc., a Delaware
---
corporation (known as CDRJ Acquisition Corporation prior to the Mergers), until
a Successor shall have become such pursuant to the applicable provisions of this
Indenture and thereafter means such Successor.
"Lien" means any mortgage, pledge, security interest, encumbrance,
----
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Management Advances" means (1) loans or advances made to directors,
-------------------
officers or employees of a Parent, the Company or any Restricted Subsidiary (x)
in respect of travel, entertainment or moving-related expenses incurred in the
ordinary course of business, (y) in respect of moving-related expenses incurred
in connection with any closing or consolidation of any facility or (z) in the
ordinary course of business and (in the case of this clause (z)) not exceeding
$2.5 million in the aggregate outstanding at any time, (2) promissory notes of
Management Investors acquired in connection with the issuance of Management
Stock to such Management Investors, (3) Management Guarantees or (4) other
Guarantees of borrowings by Management Investors in connection with the purchase
of Management Stock, which Guarantees are permitted under Section 407.
-----------
"Management Agreements" means, collectively, the Consulting Agreement
---------------------
and the Indemnification Agreement, each dated as of April 30, 1998, each between
the Company
18
<PAGE>
and CD&R (and its permitted successors and assigns thereunder), as each may be
amended, supplemented, waived or otherwise modified from time to time in
accordance with the terms thereof and of this Indenture.
"Management Guarantees" means guarantees (x) of up to an aggregate
---------------------
principal amount of $10.0 million of borrowings by Management Investors in
connection with their purchase of Management Stock or (y) made on behalf of, or
in respect of loans or advances made to directors, officers or employees of a
Parent, the Company or any Restricted Subsidiary (1) in respect of travel,
entertainment and moving-related expenses incurred in the ordinary course of
business, or (2) in the ordinary course of business and (in the case of this
clause (2)) not exceeding $2.5 million in the aggregate outstanding at any time.
"Management Investors" means the officers, directors, employees and
--------------------
other members of the management of a Parent, the Company or any of its
Subsidiaries, or family members or relatives thereof, or trusts or partnerships
for the benefit of any of the foregoing, or any of their heirs, executors,
successors and legal representatives, who at any date beneficially own or have
the right to acquire, directly or indirectly, Capital Stock of the Company or a
Parent.
"Management Stock" means Capital Stock of the Company or a Parent
----------------
(including any options, warrants or other rights in respect thereof) held by any
of the Management Investors.
"Mergers" means the merger of JCI with and into the California
-------
corporation then known as Jafra Cosmetics International, Inc., with JCI
surviving, and the merger of Jafra S.A. with and into Grupo Jafra, S.A. de C.V.,
a Mexican corporation ("Grupo Jafra"), with Jafra S.A. surviving.
-----------
"Moody's" means Moody's Investors Service, Inc., and its successors.
-------
"Net Available Cash" from an Asset Disposition means cash payments
------------------
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other non-cash form) therefrom, in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, provincial, foreign and local taxes required
to be paid or accrued as a liability under GAAP, as a consequence of such Asset
Disposition (including as a consequence of any transfer of funds in connection
with the application thereof in accordance with Section 411),
-----------
19
<PAGE>
(ii) all payments made, and all installment payments required to be made, on any
Indebtedness that is secured by any assets subject to such Asset Disposition, in
accordance with the terms of any Lien upon such assets, or that must by its
terms, or in order to obtain a necessary consent to such Asset Disposition, or
by applicable law, be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition, or to any other Person (other than the Company or a Restricted
Subsidiary) owning a beneficial interest in the assets disposed of in such Asset
Disposition and (iv) any liabilities or obligations associated with the assets
disposed of in such Asset Disposition and retained by the Company or any
Restricted Subsidiary after such Asset Disposition, including pension and other
post-employment benefit liabilities, liabilities related to environmental
matters, and liabilities relating to any indemnification obligations associated
with such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of any
-----------------
securities of the Company or any Subsidiary by the Company or any Subsidiary, or
any capital contribution, means the cash proceeds of such issuance, sale or
contribution net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees actually incurred in connection with such issuance, sale or
contribution and net of taxes paid or payable as a result thereof.
"Non-U.S. Person" means a Person who is not a U.S. person, as defined
---------------
in Regulation S.
"Note Guarantee" means any of (i) the Guarantee of the Notes by the
--------------
Company, the Guarantee of the Guaranteed JCI Obligations by Jafra S.A., the
Guarantee of the Guaranteed Jafra Obligations by JCI, and the Subsidiary
Guarantees of the Initial Jafra S.A. Subsidiaries, to be entered into on the
Issue Date, as provided in Section 1301, and (ii) any Subsidiary Guarantee that
------------
may from time to time be entered into by a Restricted Subsidiary pursuant to
Section 414.
- -----------
"Note Guarantor" means any of the Company and its Restricted
--------------
Subsidiaries that enters into a Note Guarantee.
"Notes" means the Initial Notes, any Additional Notes and the Exchange
-----
Notes.
"Officer" means, with respect to the Company, an Issuer or any other
-------
obligor upon the Notes, the Chairman of the Board, the Vice Chairman of the
Board, the President, the Chief Executive Officer, the Chief Operating Officer,
the Chief Financial Officer, any Vice President, the Controller, the Treasurer
or the Secretary of such Person.
20
<PAGE>
"Officer's Certificate" means, with respect to the Company, an Issuer
---------------------
or any other obligor upon the Notes, a certificate signed by one Officer of such
Person.
"Opinion of Counsel" means a written opinion from legal counsel who
------------------
is, reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company, an Issuer or the Trustee.
"Original Notes" means the Initial Notes and any Exchange Notes issued
--------------
in exchange therefor.
"Outstanding" when used with respect to Notes means, as of the date of
-----------
determination, all Notes theretofore authenticated and delivered under this
Indenture, except:
------
(i) Notes theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Notes for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
in trust for the Holders of such Notes, provided that, if such Notes are to
--------
be redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor reasonably satisfactory to the Trustee
has been made; and
(iii) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture.
A Note does not cease to be Outstanding because an Issuer or any
Affiliate of the Issuers holds the Note, provided that in determining whether
--------
the Holders of the requisite amount of Outstanding Notes have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Notes
owned by an Issuer or any Affiliate of an Issuer shall be disregarded and deemed
not to be Outstanding, except that, for the purpose of determining whether the
Trustee shall be protected in relying on any such request, demand,
authorization, direction, notice, consent or waiver, only Notes which the
Trustee actually knows are so owned shall be so disregarded. Notes so owned
that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the reasonable satisfaction of the Trustee the pledgee's
right to act with respect to such Notes and that the pledgee is not an Issuer or
an Affiliate of any Issuer.
"Parent" means any Person of which the Company at any time is or
------
becomes a Subsidiary after the Issue Date.
21
<PAGE>
"Paying Agent" means any Person authorized by either Issuer to pay the
------------
principal of (and premium, if any) or interest on any Notes on behalf of such
Issuer.
"Permitted Holder" means any of the following: (i) any of the
----------------
Investor, Management Investors, CDR and their respective Affiliates; (ii) any
investment fund or vehicle managed, sponsored or advised by CDR; (iii) any
limited or general partners of, or other investors in, any of the Investor and
its Affiliates, or any such investment fund or vehicle; and (iv) any Person
acting in the capacity of an underwriter in connection with a public or private
offering of Capital Stock of a Parent or the Company.
"Permitted Investment" means an Investment by the Company or any
--------------------
Restricted Subsidiary in, or consisting of, any of the following:
(i) a Restricted Subsidiary, the Company, or a Person that will,
upon the making of such Investment, become a Restricted Subsidiary;
(ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, or is liquidated into, the Company or a
Restricted Subsidiary;
(iii) Temporary Cash Investments or Cash Equivalents;
(iv) receivables owing to the Company or any Restricted Subsidiary,
if created or acquired in the ordinary course of business;
(v) any securities or other Investments received as consideration
in, or retained in connection with, sales or other dispositions of property or
assets, including Asset Dispositions made in compliance with Section 411;
-----------
(vi) securities or other Investments received in settlement of debts
created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary, or as a result of foreclosure, perfection or enforcement
of any Lien, or in satisfaction of judgments, including in connection with any
bankruptcy proceeding or other reorganization of another Person;
(vii) Investments in existence or made pursuant to legally binding
written commitments in existence on the Issue Date;
(viii) Currency Agreements, Interest Rate Agreements and related
Hedging Obligations, which obligations are Incurred in compliance with Section
-------
407;
- ---
22
<PAGE>
(ix) pledges or deposits (x) with respect to leases or utilities
provided to third parties in the ordinary course of business or (y) otherwise
described in the definition of "Permitted Liens" or made in connection with
Liens permitted under Section 413;
-----------
(x) any Investment in a joint venture or similar entity that is not
a Restricted Subsidiary, or in any Related Business, in an aggregate amount
outstanding at any time not to exceed 4% of Consolidated Total Assets;
(xi) (1) Investments in any Receivables Subsidiary, or in connection
with a Financing Disposition by or to any Receivables Entity, including
Investments of funds held in accounts permitted or required by the arrangements
governing such Financing Disposition or any related Indebtedness, or (2) any
promissory note issued by the Company or a Parent to a Receivables Subsidiary;
provided that if such Parent receives cash from the relevant Receivables Entity
- --------
in exchange for such note, an equal cash amount is contributed by such Parent to
the Company;
(xii) bonds secured by assets leased to and operated by the Company
or any Restricted Subsidiary that were issued in connection with the financing
of such assets so long as the Company or any Restricted Subsidiary may obtain
title to such assets at any time by paying a nominal fee, canceling such bonds
and terminating the transaction;
(xiii) Notes;
(xiv) any Investment to the extent made using Capital Stock of the
Company (other than Disqualified Stock), or Capital Stock of a Parent, as
consideration;
(xv) Management Advances; and
(xvi) other Investments in an aggregate amount outstanding at any
time not to exceed 6% of Consolidated Total Assets.
"Permitted Liens" means:
---------------
(i) Liens for taxes, assessments or other governmental charges not
yet delinquent or the nonpayment of which in the aggregate would not reasonably
be expected to have a material adverse effect on the Company and its Restricted
Subsidiaries, or that are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of the Company or a Subsidiary thereof, as the case may be, in accordance
with GAAP;
23
<PAGE>
(ii) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other like Liens arising in the ordinary course of
business in respect of obligations that are not overdue for a period of more
than 60 days, or that are bonded or that are being contested in good faith and
by appropriate proceedings;
(iii) pledges, deposits or Liens in connection with workers'
compensation, unemployment insurance and other social security and other similar
legislation or other insurance-related obligations (including pledges or
deposits securing liability to insurance carriers under insurance or self-
insurance arrangements);
(iv) pledges, deposits or Liens to secure the performance of bids,
tenders, trade, government or other contracts (other than for borrowed money),
obligations for utilities, leases, licenses, statutory obligations, completion
guarantees, surety, judgment, appeal or performance bonds, other similar bonds,
instruments or obligations, and other obligations of a like nature incurred in
the ordinary course of business;
(v) easements (including reciprocal easement agreements),
rights-of-way, building, zoning and similar restrictions, utility agreements,
covenants, reservations, restrictions, encroachments, changes, and other similar
encumbrances or title defects incurred, or leases or subleases granted to
others, in the ordinary course of business, which do not in the aggregate
materially interfere with the ordinary conduct of the business of the Company
and its Subsidiaries, taken as a whole;
(vi) Liens existing on, or provided for under written arrangements
existing on, the Issue Date, or (in the case of any such Liens securing
Indebtedness of the Company or any of its Subsidiaries existing or arising under
written arrangements existing on the Issue Date) securing any Refinancing
Indebtedness in respect of such Indebtedness so long as the Lien securing such
Refinancing Indebtedness is limited to all or part of the same property or
assets (plus improvements, accessions, proceeds or dividends or distributions in
respect thereof) that secured (or under such written arrangements could secure)
the original Indebtedness;
(vii) (i) mortgages, liens, security interests, restrictions,
encumbrances or any other matters of record that have been placed by any
developer, landlord or other third party on property over which the Company or
any Restricted Subsidiary of the Company has easement rights or on any leased
property and subordination or similar agreements relating thereto and (ii) any
condemnation or eminent domain proceedings affecting any real property;
(viii) Liens securing Hedging Obligations, Purchase Money Obligations
or Capitalized Lease Obligations Incurred in compliance with Section 407;
-----------
24
<PAGE>
(ix) Liens arising out of judgments, decrees, orders or awards in
respect of which the Company shall in good faith be prosecuting an appeal or
proceedings for review, which appeal or proceedings shall not have been finally
terminated, or if the period within which such appeal or proceedings may be
initiated shall not have expired;
(x) leases, subleases, licenses or sublicenses to third parties;
(xi) Liens securing (1) Indebtedness Incurred in compliance with
clause (b)(i), (b)(iv), (b)(v), (b)(vii), (b)(viii)(E) or (b)(x) of Section 407,
-----------
or clause (b)(iii) thereof (other than Refinancing Indebtedness Incurred in
respect of the Notes or Indebtedness described in paragraph (a) thereof), (2)
Bank Indebtedness, (3) commercial bank Indebtedness, (4) Indebtedness of any
Restricted Subsidiary that is not a Subsidiary Guarantor or an Issuer, (5) the
Notes or (6) Indebtedness or other obligations of any Receivables Entity;
(xii) Liens existing on property or assets of a Person at the time
such Person becomes a Subsidiary of the Company (or at the time the Company or a
Restricted Subsidiary acquires such property or assets); provided, however, that
-------- -------
such Liens are not created in connection with, or in contemplation of, such
other Person becoming such a Subsidiary (or such acquisition of such property or
assets), and that such Liens are limited to all or part of the same property or
assets (plus improvements, accessions, proceeds or dividends or distributions in
respect thereof) that secured (or, under the written arrangements under which
such Liens arose, could secure) the obligations to which such Liens relate;
(xiii) Liens on Capital Stock or other securities of an Unrestricted
Subsidiary that secure Indebtedness or other obligations of such Unrestricted
Subsidiary;
(xiv) any encumbrance or restriction (including put and call
agreements) with respect to Capital Stock of any joint venture or similar
arrangement pursuant to any joint venture or similar agreement; and
(xv) Liens securing Refinancing Indebtedness Incurred in respect of
any Indebtedness secured by, or securing any refinancing, refunding, extension,
renewal or replacement (in whole or in part) of any other obligation secured by,
any other Permitted Liens, provided that any such new Lien is limited to all or
part of the same property or assets (plus improvements, accessions, proceeds or
dividends or distributions in respect thereof) that secured (or, under the
written arrangements under which the original Lien arose, could secure) the
obligations to which such Liens relate.
"Permitted Parent Payments" means loans, advances, dividends or
-------------------------
distributions to a Parent or other payments by the Company or any Restricted
Subsidiary (A) to permit such
25
<PAGE>
Parent to satisfy obligations under the Management Agreements or (B) to pay or
permit such Parent to pay any Holding Company Expenses or any Related Taxes.
"Person" means any individual, corporation, partnership, joint
------
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Place of Payment" means a city or any political subdivision thereof
----------------
referred to in Article 3 and initially designated under Section 402.
--------- -----------
"Predecessor Notes" of any particular Note means every previous Note
-----------------
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 306 in lieu of a mutilated, lost,
-----------
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Preferred Stock" as applied to the Capital Stock of any corporation
---------------
means Capital Stock of any class or classes (however designated) that by its
terms is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Purchase Money Obligations" means any Indebtedness Incurred to
--------------------------
finance or refinance the acquisition, leasing, construction or improvement of
property (real or personal) or assets, and whether acquired through the direct
acquisition of such property or assets or the acquisition of the Capital Stock
of any Person owning such property or assets, or otherwise.
"QIB" or "Qualified Institutional Buyer" means a "qualified
--- -----------------------------
institutional buyer," as that term is defined in Rule 144A under the Securities
Act.
"Receivable" means a right to receive payment arising from a sale or
----------
lease of goods or services by a Person pursuant to an arrangement with another
Person pursuant to which such other Person is obligated to pay for goods or
services under terms that permit the purchase of such goods and services on
credit, as determined in accordance with GAAP.
"Receivables Entity" means (x) any Receivables Subsidiary or (y) any
------------------
other Person that is engaged in the business of acquiring, selling, collecting,
financing or refinancing Receivables, accounts (as defined in the Uniform
Commercial Code as in effect in any jurisdiction from time to time), other
accounts or other receivables, or related assets.
26
<PAGE>
"Receivables Fees" means distributions or payments made directly or by
----------------
means of discounts with respect to any participation interest issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Financing.
"Receivables Financing" means any financing of Receivables of the
---------------------
Company or any Restricted Subsidiary that have been transferred to a Receivables
Entity in a Financing Disposition.
"Receivables Subsidiary" means a Subsidiary of the Company that (a) is
----------------------
engaged solely in the business of acquiring, selling, collecting, financing or
refinancing Receivables, accounts (as defined in the Uniform Commercial Code as
in effect in any jurisdiction from time to time) and other accounts and
receivables (including any thereof constituting or evidenced by chattel paper,
instruments or general intangibles), all proceeds thereof and all rights
(contractual and other), collateral and other assets relating thereto, and any
business or activities incidental or related to such business, and (b) is
designated as a "Receivables Subsidiary" by the Board of Directors.
"Redemption Date" when used with respect to any Note to be redeemed or
---------------
purchased means the date fixed for such redemption or purchase by or pursuant to
this Indenture and the Notes.
"Redemption Price" when used with respect to any Note to be redeemed
----------------
or purchased means the price at which it is to be redeemed or purchased pursuant
to this Indenture and the Notes.
"refinance" means refinance, refund, replace, renew, repay, modify,
---------
restate, defer, substitute, supplement, reissue, resell or extend (including
pursuant to any defeasance or discharge mechanism); and the terms "refinances,"
"refinanced" and "refinancing" as used for any purpose in this Indenture shall
have a correlative meaning.
"Refinancing Indebtedness" means Indebtedness that is Incurred to
------------------------
refinance any Indebtedness existing on the Issue Date or Incurred in compliance
with this Indenture (including Indebtedness of the Company that refinances
Indebtedness of any Restricted Subsidiary (to the extent permitted in this
Indenture) and Indebtedness of any Restricted Subsidiary that refinances
Indebtedness of another Restricted Subsidiary) including Indebtedness that
refinances Refinancing Indebtedness; provided, however, that with respect to any
-------- -------
Refinancing Indebtedness (other than Bank Indebtedness), (i) if the Indebtedness
being refinanced is a Subordinated Obligation, the Refinancing Indebtedness has
an Average Life at the time such Refinancing Indebtedness is Incurred that is
equal to or greater than the Average
27
<PAGE>
Life of the Indebtedness being refinanced, (ii) such Refinancing Indebtedness is
Incurred in an aggregate principal amount (or if issued with original issue
discount, an aggregate issue price) that is equal to or less than the sum of (x)
the aggregate principal amount (or if issued with original issue discount, the
aggregate accreted value) then outstanding of the Indebtedness being refinanced,
plus (y) fees, underwriting discounts, premiums and other costs and expenses
incurred in connection with such Refinancing Indebtedness, and (iii) Refinancing
Indebtedness shall not include (x) Indebtedness of a Restricted Subsidiary that
is not a Subsidiary Guarantor or an Issuer that refinances Indebtedness of the
Company, an Issuer or a Subsidiary Guarantor that was Incurred by such Company,
Issuer or Subsidiary Guarantor pursuant to Section 407(a) or (y) Indebtedness of
--------------
the Company or a Restricted Subsidiary that refinances Indebtedness of an
Unrestricted Subsidiary.
"Regular Record Date" for the interest payable on any Interest Payment
-------------------
Date means the date specified for that purpose in Section 301.
-----------
"Regulation S" means Regulation S under the Securities Act.
------------
"Regulation S Certificate" means a certificate substantially in the
------------------------
form attached hereto as Exhibit C.
---------
"Related Business" means those businesses in which the Company or any
----------------
of its Subsidiaries is engaged on the Issue Date, or that are related,
complementary, incidental or ancillary thereto or extensions, developments or
expansions thereof.
"Related Taxes" means (x) any taxes, charges or assessments, including
-------------
sales, use, transfer, rental, ad valorem, value-added, stamp, property,
consumption, franchise, license, capital, net worth, gross receipts, excise,
occupancy, intangibles or similar taxes, charges or assessments (other than
federal, state or local taxes measured by income and federal, state or local
withholding imposed on payments made by a Parent), required to be paid by such
Parent by virtue of its being incorporated or having Capital Stock outstanding
(but not by virtue of owning stock or other equity interests of any corporation
or other entity other than the Company or any of its Subsidiaries), or being a
holding company parent of the Company or having received Capital Stock of the
Company as a capital contribution, or receiving dividends from or other
distributions in respect of the Capital Stock of the Company, or having
guaranteed any obligations of the Company or any Subsidiary thereof, or having
made any payment in respect of any of the items for which the Company is
permitted to make payments to such Parent pursuant to Section 409, or (y) any
-----------
other U.S. or non-U.S. taxes measured by income for which such Parent is liable
up to an amount not to exceed with respect to U.S. federal taxes the amount of
any such taxes that the Company would have been required to pay on a separate
company basis or on a consolidated basis if the Company had filed a
28
<PAGE>
consolidated return on behalf of an affiliated group (as defined in Section 1504
of the Code) of which it were the common parent, or with respect to non-U.S.
taxes and U.S. state and local taxes, on a combined basis if the Company had
filed a combined return on behalf of an affiliated group consisting only of the
Company and its Subsidiaries.
"Representative" means the trustee, agent or representative (if any)
--------------
for an issue of Senior Indebtedness.
"Resale Restriction Termination Date" means, with respect to any Note,
-----------------------------------
the date that is two years (or such other period as may hereafter be provided
under Rule 144(k) under the Securities Act or any successor provision thereto as
permitting the resale by non-affiliates of Restricted Securities without
restriction) after the later of the original issue date in respect of such Note
and the last date on which an Issuer or any Affiliate of an Issuer was the owner
of such Note (or any Predecessor Note thereto).
"Responsible Officer" when used with respect to the Trustee means the
-------------------
chairman or vice-chairman of the board of directors, the chairman or vice-
chairman of the executive committee of the board of directors, the president,
any vice president or assistant vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, the cashier, any assistant
cashier, any trust officer or assistant trust officer, the controller and any
assistant controller or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Restricted Payment Transaction" means any Restricted Payment
------------------------------
permitted pursuant to Section 409, any Permitted Payment, any Permitted
-----------
Investment, or any transaction (other than Guarantees) specifically excluded
from the definition of the term "Restricted Payment."
"Restricted Security" has the meaning assigned to such term in Rule
-------------------
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
-------- -------
entitled to receive, at its request, and conclusively rely on an Opinion of
Counsel with respect to whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company other than
---------------------
an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
---
29
<PAGE>
"Secured Indebtedness" with respect to a Person means any Indebtedness
--------------------
of such Person secured by a Lien.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Senior Credit Agreement" means the credit agreement dated as of April
-----------------------
30, 1998, among the Company, the Issuers, the lenders named therein, and Credit
Suisse First Boston, as administrative agent, as such agreement may be assumed
by any successor in interest, and as such agreement may be amended,
supplemented, waived or otherwise modified from time to time, or refunded,
refinanced, restructured, replaced, renewed, repaid, increased or extended from
time to time (whether in whole or in part, whether with the original agent and
lenders or other agents and lenders or otherwise, and whether provided under the
original Senior Credit Agreement or otherwise).
"Senior Credit Facility" means the collective reference to the Senior
----------------------
Credit Agreement, any Loan Documents (as defined therein), any notes and letters
of credit issued pursuant thereto and any guarantee and collateral agreement,
patent and trademark security agreement, mortgages, letter of credit
applications and other guarantees, pledge agreements, security agreements and
collateral documents, and other instruments and documents, executed and
delivered pursuant to or in connection with any of the foregoing, in each case
as the same may be amended, supplemented, waived or otherwise modified from time
to time, or refunded, refinanced, restructured, replaced, renewed, repaid,
increased or extended from time to time (whether in whole or in part, whether
with the original agent and lenders or other agents and lenders or otherwise,
and whether provided under the original Senior Credit Agreement or one or more
other credit agreements, indentures (including the Indenture) or financing
agreements or otherwise). Without limiting the generality of the foregoing, the
term "Senior Credit Facility" shall include any agreement (i) changing the
maturity of any Indebtedness incurred thereunder or contemplated thereby, (ii)
adding Subsidiaries of the Company as additional borrowers or guarantors
thereunder, (iii) increasing the amount of Indebtedness incurred thereunder or
available to be borrowed thereunder or (iv) otherwise altering the terms and
conditions thereof.
"Senior Indebtedness" means, with respect to either Issuer or any Note
-------------------
Guarantor, the following obligations, whether outstanding on the date of this
Indenture or thereafter issued, without duplication: (i) all Bank Indebtedness,
(ii) all obligations of such Person in respect of any Receivables Financing, and
(iii) all obligations of such Person consisting of the principal of and premium,
if any, and accrued and unpaid interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to such
Person regardless of whether post-filing interest is allowed in such proceeding)
on, and fees and other amounts owing in respect of, all other Indebtedness of
such Person,
30
<PAGE>
unless, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is expressly provided that the obligations in
respect of such Indebtedness are not senior in right of payment to the Notes or
the Note Guarantee of such Person; provided, however, that Senior Indebtedness
-------- -------
shall not include (1) any obligation of such Person to any Subsidiary of such
Person, (2) any liability for Federal, state, foreign, local or other taxes owed
or owing by such Person, (3) any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities), (4) any Indebtedness of
such Person that is expressly subordinated in right of payment to any other
Indebtedness of such Person, (5) any Capital Stock of such Person or (6) that
portion of any Indebtedness of such Person that is Incurred by such Person in
violation of Section 407 (but no such violation shall be deemed to exist for
-----------
purposes of this clause (6) if any holder of such Indebtedness or such holder's
representative shall have received an Officer's Certificate of the Company to
the effect that such Incurrence of such Indebtedness does not (or that the
Incurrence of the entire committed amount thereof at the date on which the
initial borrowing thereunder is made would not) violate Section 407). If any
-----------
Senior Indebtedness is disallowed, avoided or subordinated pursuant to the
provisions of Section 548 of Title 11 of the United States Code or any
applicable state fraudulent conveyance law, such Senior Indebtedness
nevertheless will constitute Senior Indebtedness.
"Senior Subordinated Indebtedness" with respect to either Issuer or
--------------------------------
any Note Guarantor means the Notes (in the case of such Issuer) or the Note
Guarantee of such Person (in the case of such Note Guarantor) and any other
Indebtedness of such Person that ranks pari passu with the Notes or such Note
---- -----
Guarantee, as the case may be.
"Significant Subsidiary" means any Restricted Subsidiary that would be
----------------------
a "significant subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC, as in effect on the Issue Date.
"Special Record Date" for the payment of any Defaulted Interest means
-------------------
a date fixed by the Trustee pursuant to Section 307.
-----------
"S&P" means Standard & Poor's Ratings Service, a division of The
---
McGraw-Hill Companies, Inc., and its successors.
"Stated Maturity" means, with respect to any security, the date
---------------
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
31
<PAGE>
"Subordinated Obligations" with respect to either Issuer or any Note
------------------------
Guarantor means any Indebtedness of such Person (whether outstanding on the
Issue Date or thereafter Incurred) that is expressly subordinated in right of
payment to the Notes (in the case of such Issuer) or to the Note Guarantee of
such Person (in the case of such Note Guarantor), pursuant to a written
agreement.
"Subsidiary" of any Person means any corporation, association,
----------
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other equity interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such Person
or (ii) one or more Subsidiaries of such Person.
"Subsidiary Guarantee" means any of (i) the Guarantees of the
--------------------
Guaranteed JCI Obligations by the U.S. Subsidiary Guarantors and the Guarantees
of the Guaranteed Jafra Obligations by the Jafra S.A. Subsidiary Guarantors, to
be entered into on the Issue Date as provided in Section 1301, and (ii) any
------------
Guarantee in respect of the Notes that may from time to time be entered into by
a Restricted Subsidiary pursuant to Section 414.
-----------
"Subsidiary Guarantor" means any Restricted Subsidiary that enters
--------------------
into a Subsidiary Guarantee.
"Temporary Cash Investments" means any of the following: (i) any
--------------------------
investment in (x) direct obligations of the United States of America or any
agency or instrumentality thereof or obligations Guaranteed by the United States
of America or any agency or instrumentality thereof or (y) direct obligations of
any foreign country recognized by the United States of America rated at least
"A" by S&P or "A-1" by Moody's (or, in either case, the equivalent of such
rating by such organization or, if no rating of S&P or Moody's then exists, the
equivalent of such rating by any nationally recognized rating organization),
(ii) overnight bank deposits, and investments in time deposit accounts,
certificates of deposit, bankers' acceptances and money market deposits (or,
with respect to foreign banks, similar instruments) maturing not more than one
year after the date of acquisition thereof issued by (x) any lender under the
Senior Credit Agreement or (y) a bank or trust company that is organized under
the laws of the United States of America, any state thereof or any foreign
country recognized by the United States of America having capital and surplus
aggregating in excess of $250 million (or the foreign currency equivalent
thereof) and whose long term debt is rated at least "A" by S&P or "A-1" by
Moody's (or, in either case, the equivalent of such rating by such organization
or, if no rating of S&P or Moody's then exists, the equivalent of such rating by
any nationally recognized rating organization) at the time such Investment is
made, (iii) repurchase obligations with a term of not more than 30 days for
underlying
32
<PAGE>
securities of the types described in clause (i) or (ii) above entered into with
a bank meeting the qualifications described in clause (ii) above, (iv)
Investments in commercial paper, maturing not more than 270 days after the date
of acquisition, issued by a Person (other than the Company or any of its
Subsidiaries) with a rating at the time as of which any Investment therein is
made of "P-2" (or higher) according to Moody's or "A-2" (or higher) according to
S&P (or, in either case, the equivalent of such rating by such organization or,
if no rating of S&P or Moody's then exists, the equivalent of such rating by any
nationally recognized rating organization), (v) Investments in securities
maturing not more than one year after the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least "A" by S&P or "A" by Moody's (or, in either case, the equivalent of
such rating by such organization or, if no rating of S&P or Moody's then exists,
the equivalent of such rating by any nationally recognized rating organization),
(vi) Preferred Stock (other than of the Company or any of its Subsidiaries)
having a rating of "A" or higher by S&P or "A2" or higher by Moody's (or, in
either case, the equivalent of such rating by such organization or, if no rating
of S&P or Moody's then exists, the equivalent of such rating by any nationally
recognized rating organization), (vii) investment funds investing 95% of their
assets in securities of the type described in clauses (i)-(vi) above (which
funds may also hold reasonable amounts of cash pending investment or
distribution), (viii) any money market deposit accounts issued or offered by a
domestic commercial bank or a commercial bank organized and located in a country
recognized by the United States of America, in each case, having capital and
surplus in excess of $250 million (or the foreign currency equivalent thereof),
or investments in money market funds complying with the risk limiting conditions
of Rule 2a-7 (or any successor rule) of the SEC under the Investment Company Act
of 1940, as amended and (ix) similar short-term investments approved by the
Board of Directors in the ordinary course of business.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
---
7bbbb) as in effect on the Issue Date.
"Trade Payables" means, with respect to any Person, any accounts
--------------
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.
"Transactions" means, collectively, the Acquisition, the Mergers, the
------------
initial equity investment by the Investor and (if applicable) one or more
Management Investors, the offering and the issuance of the Original Notes, the
initial borrowings under the Senior Credit Facility, and all other transactions
relating to the Acquisition or the financing thereof.
33
<PAGE>
"Trust Officer" means the Chairman of the Board, the President or any
-------------
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Trustee" means the Person named as the "Trustee" in the first
-------
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
-----------------------
at the time of determination is an Unrestricted Subsidiary, as designated by the
Board of Directors in the manner provided below, and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any other Restricted Subsidiary of the
Company that is not a Subsidiary of the Subsidiary to be so designated;
provided, however, that either (A) the Subsidiary to be so designated has total
- -------- -------
consolidated assets of $1,000 or less or (B) if such Subsidiary has consolidated
assets greater than $1,000, then such designation would be permitted under
Section 409. The Board of Directors may designate any Unrestricted Subsidiary
- -----------
to be a Restricted Subsidiary; provided, however, that immediately after giving
-------- -------
effect to such designation either (x) the Company could incur at least $1.00 of
additional Indebtedness under Section 407(a) or (y) the Consolidated Coverage
--------------
Ratio would be greater than it was immediately prior to giving effect to such
designation. Any such designation by the Board of Directors shall be evidenced
to the Trustee by promptly filing with the Trustee a copy of the resolution of
the Board of Directors giving effect to such designation and an Officer's
Certificate of the Company certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligation" means (x) any security that is (i) a
--------------------------
direct obligation of the United States of America for the payment of which the
full faith and credit of the United States of America is pledged or (ii) an
obligation of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case under the preceding clause (i) or (ii),
is not callable or redeemable at the option of the issuer thereof, and (y) any
depositary receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act) as custodian with respect to any U.S. Government Obligation that
is specified in clause (x) above and held by such bank for the account of the
holder of such depositary receipt, or with respect to any specific payment of
principal of or interest on any U.S. Government Obligation that is so specified
and held, provided that (except as required by law) such custodian is not
--------
authorized to make any
34
<PAGE>
deduction from the amount payable to the holder of such depositary receipt from
any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal or interest evidenced by such
depositary receipt.
"U.S. Subsidiary" means any Restricted Subsidiary of the Company other
---------------
than a Foreign Subsidiary.
"U.S. Subsidiary Guarantor" means any U.S. Subsidiary of JCI that
-------------------------
enters into a Subsidiary Guarantee.
"Vice President" when used with respect to any Person means any vice
--------------
president of such Person, whether or not designated by a number or a word or
words added before or after the title "vice president."
"Voting Stock" of an entity means all classes of Capital Stock of such
------------
entity then outstanding and normally entitled to vote in the election of
directors or all interests in such entity with the ability to control the
management or actions of such entity.
Section 102. Other Definitions.
-----------------
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Act"......................................................... 108
---
"Additional Amounts".......................................... 404
------------------
"Affiliate Transaction"....................................... 412
---------------------
"Agent Members"............................................... 312
-------------
"Amendment"................................................... 410
---------
"Authentication Order"........................................ 303
--------------------
"Bankruptcy Law".............................................. 601
--------------
"Blockage Notice"............................................. 1403
---------------
"Covenant Defeasance"......................................... 1203
-------------------
"Custodian"................................................... 601
---------
"Defaulted Interest".......................................... 307
------------------
"Defeasance".................................................. 1202
----------
"Defeased Notes".............................................. 1201
--------------
"Event of Default"............................................ 601
----------------
"Excessive Additional Amounts"................................ 1001
----------------------------
"Expiration Date"............................................. 108
---------------
"Global Notes"................................................ 201
------------
"Guaranteed Jafra S.A. Obligations"........................... 1301
---------------------------------
</TABLE>
35
<PAGE>
<TABLE>
<S> <C>
"Guaranteed JCI Obligations"................................... 1301
--------------------------
"Guaranteed Note Obligations".................................. 1301
---------------------------
"Guarantor Blockage Notice".................................... 1503
-------------------------
"Guarantor Non-payment Default"................................ 1503
-----------------------------
"Guarantor Payment Blockage Period"............................ 1503
---------------------------------
"Guarantor Payment Default".................................... 1503
-------------------------
"Initial Agreement"............................................ 410
-----------------
"Initial Lien"................................................. 413
------------
"Jafra S.A. Portion"........................................... 301
------------------
"JCI Portion".................................................. 301
-----------
"Non-payment Default".......................................... 1403
-------------------
"Note Register" and "Note Registrar"........................... 305
----------------------------------
"Offer"........................................................ 411
-----
"Offshore Global Note"......................................... 201
--------------------
"Offshore Note Exchange Date".................................. 313
---------------------------
"Offshore Physical Note"....................................... 201
----------------------
"pay its Note Guarantee"....................................... 1503
----------------------
"pay the Notes"................................................ 1403
-------------
"Payment Blockage Period"...................................... 1403
-----------------------
"Payment Default".............................................. 1403
---------------
"Payor"........................................................ 404
-----
"Permitted Payment"............................................ 409
-----------------
"Physical Notes"............................................... 201
--------------
"Portion"...................................................... 301
-------
"Private Placement Legend"..................................... 203
------------------------
"Redemption Amount"............................................ 1001
-----------------
"Refinancing Agreement"........................................ 410
---------------------
"Restricted Payment"........................................... 409
------------------
"Several Share"................................................ 301
-------------
"Successor".................................................... 501
---------
"Successor Jurisdiction"....................................... 404
----------------------
"Taxes"........................................................ 404
-----
"Unitary Global Note".......................................... 201
-------------------
"U.S. Global Note"............................................. 201
----------------
"U.S. Physical Note"........................................... 201
------------------
</TABLE>
36
<PAGE>
Section 103. Rules of Construction. For all purposes of this
---------------------
Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the terms defined in this Indenture have the meanings assigned to
them in this Indenture;
(2) "or" is not exclusive;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(4) the words "herein," "hereof" and "hereunder" and other words of
------ ------ ---------
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(5) all references to "$" or "dollars" shall refer to the lawful
- -------
currency of the United States of America;
(6) the words "include," "included" and "including" as used herein
------- -------- ---------
shall be deemed in each case to be followed by the phrase "without
-------
limitation," if not expressly followed by such phrase or the phrase "but
----------
not limited to";
(7) words in the singular include the plural, and words in the plural
include the singular; and
(8) any reference to a Section or Article refers to such Section or
Article of this Indenture.
Section 104. Incorporation by Reference of TIA. Whenever this
---------------------------------
Indenture refers to a provision of the TIA, the provision is incorporated by
reference in and made a part of this Indenture. This Indenture is subject to
the mandatory provisions of the TIA, which are incorporated by reference in and
made a part of this Indenture. Any terms incorporated by reference in this
Indenture that are defined by the TIA, defined by any TIA reference to another
statute or defined by SEC rule under the TIA, have the meanings so assigned to
them therein. The following TIA terms have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
37
<PAGE>
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, an Issuer,
any other Note Guarantor, and any other obligor on the indenture securities.
Section 105. Conflict with TIA. If any provision hereof limits,
-----------------
qualifies or conflicts with a provision of the TIA that is required under the
TIA to be a part of and govern this Indenture, the latter provision shall
control. If any provision of this Indenture modifies or excludes any provision
of the TIA that may be so modified or excluded, the latter provision shall be
deemed (i) to apply to this Indenture as so modified or (ii) to be excluded, as
the case may be.
Section 106. Compliance Certificates and Opinions. Upon any
------------------------------------
application or request by the Company, by the Issuers, by the Company on behalf
of the Issuers, or by any other obligor upon the Notes (including any Note
Guarantor), to the Trustee to take any action under any provision of this
Indenture, the Company or the Issuers or such other obligor (including any Note
Guarantor), as the case may be, shall furnish to the Trustee such certificates
and opinions as may be required under the TIA. Each such certificate or opinion
shall be given in the form of one or more Officer's Certificates, if to be given
by an Officer, or an Opinion of Counsel, if to be given by counsel, and shall
comply with the requirements of the TIA and any other requirements set forth in
this Indenture. Notwithstanding the foregoing, in the case of any such request
or application as to which the furnishing of any Officer's Certificate or
Opinion of Counsel is specifically required by any provision of this Indenture
relating to such particular request or application, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (except for certificates
provided for in Section 406) shall include:
-----------
(1) a statement that the individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
38
<PAGE>
(3) a statement that, in the opinion of such individual, he or she
made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of such individual,
such condition or covenant has been complied with.
Section 107. Form of Documents Delivered to Trustee. In any case
--------------------------------------
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an Officer may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such Officer knows that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion of counsel may
be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an Officer or Officers to the effect that the
information with respect to such factual matters is in the possession of the
Company or an Issuer, unless such counsel knows that the certificate or opinion
or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 108. Acts of Noteholders; Record Dates. (a) Any request,
---------------------------------
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Holders may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
by such Holders in person or by agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee, and, where it is
hereby expressly required, to the Issuers or the Company, as the case may be.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
---
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient
39
<PAGE>
for any purpose of this Indenture and (subject to Section 701) conclusive in
-----------
favor of the Trustee, the Issuers and any other obligor upon the Notes, if made
in the manner provided in this Section 108.
-----------
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by an officer of a corporation or a member of a partnership or
other entity, on behalf of such corporation or partnership or other entity, such
certificate or affidavit shall also constitute sufficient proof of such Person's
authority. The fact and date of the execution of any such instrument or
writing, or the authority of the person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Note shall bind the Holder of every
Note issued upon the transfer thereof or in exchange therefor or in lieu
thereof, in respect of anything done or suffered to be done by the Trustee, the
Issuers or any other obligor upon the Notes in reliance thereon, whether or not
notation of such action is made upon such Note.
(e) (i) The Issuers may set any day as a record date for the purpose
of determining the Holders of Outstanding Notes entitled to give, make or take
any request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given, made or taken by
Holders of Notes, provided that the Issuers may not set a record date for, and
--------
the provisions of this paragraph shall not apply with respect to, the giving or
making of any notice, declaration, request or direction referred to in the next
paragraph. If any record date is set pursuant to this paragraph, the Holders of
Outstanding Notes on such record date (or their duly designated proxies), and no
other Holders, shall be entitled to take the relevant action, whether or not
such Persons remain Holders after such record date; provided that no such action
--------
shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Notes on such record date. Nothing in this paragraph shall be construed to
prevent the Issuers from setting a new record date for any action for which a
record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be cancelled and of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the requisite principal
amount of Outstanding Notes on the date such action is taken. Promptly after
any record date is set pursuant to this paragraph, the Issuers, at their several
expense, shall cause notice of
40
<PAGE>
such record date, the proposed action by Holders and the applicable Expiration
Date to be given to the Trustee in writing and to each Holder of Notes in the
manner set forth in Section 110.
-----------
(ii) The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Notes entitled to join in the giving or
making of (A) any Notice of Default, (B) any declaration of acceleration
referred to in Section 602, (C) any request to institute proceedings referred to
-----------
in Section 607(2) or (D) any direction referred to in Section 612, in each case
-------------- -----------
with respect to Notes. If any record date is set pursuant to this paragraph,
the Holders of Outstanding Notes on such record date, and no other Holders,
shall be entitled to join in such notice, declaration, request or direction,
whether or not such Holders remain Holders after such record date; provided that
--------
no such action shall be effective hereunder unless taken on or prior to the
applicable Expiration Date by Holders of the requisite principal amount of
Outstanding Notes on such record date. Nothing in this paragraph shall be
construed to prevent the Trustee from setting a new record date for any action
for which a record date has previously been set pursuant to this paragraph
(whereupon the record date previously set shall automatically and with no action
by any Person be cancelled and of no effect), and nothing in this paragraph
shall be construed to render ineffective any action taken by Holders of the
requisite principal amount of Outstanding Notes on the date such action is
taken. Promptly after any record date is set pursuant to this paragraph, the
Trustee, at the Issuers' several expense, shall cause notice of such record
date, the proposed action by Holders and the applicable Expiration Date to be
given to the Company in writing and to each Holder of Notes in the manner set
forth in Section 110.
-----------
(iii) With respect to any record date set pursuant to this Section
-------
108, the party hereto that sets such record dates may designate any day as the
- ---
"Expiration Date" and from time to time may change the Expiration Date to any
---------------
earlier or later day; provided that no such change shall be effective unless
--------
notice of the proposed new Expiration Date is given to the Issuers or the
Trustee, whichever such party is not setting a record date pursuant to this
Section 108(e) in writing, and to each Holder of Notes in the manner set forth
- --------------
in Section 110, on or prior to the existing Expiration Date. If an Expiration
-----------
Date is not designated with respect to any record date set pursuant to this
Section, the party hereto that set such record date shall be deemed to have
initially designated the 180th day after such record date as the Expiration Date
with respect thereto, subject to its right to change the Expiration Date as
provided in this paragraph. Notwithstanding the foregoing, no Expiration Date
shall be later than the 180th day after the applicable record date.
(iv) Without limiting the foregoing, a Holder entitled hereunder to
take any action hereunder with regard to any particular Note may do so with
regard to all or any part of
41
<PAGE>
the principal amount of such Note or by one or more duly appointed agents each
of which may do so pursuant to such appointment with regard to all or any part
of such principal amount.
Section 109. Notices, etc., to Trustee and Company. Any request,
-------------------------------------
demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by the Company or by the Issuers or
any other obligor upon the Notes shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or with the
Trustee at its 225 Asylum Street, 23rd Floor, Hartford, Connecticut 06103,
Attention: Corporate Trust Department (telephone: (860) 244-1842;
telecopier: (860) 244-1869) or at any other address furnished in writing to
the Company by the Trustee, or
(2) the Company or the Issuers by the Trustee or by any Holder shall
be sufficient for every purpose hereunder if in writing and mailed, first-
class postage prepaid, to the Company or the Issuers addressed to any of
them, as the case may be, c/o Jafra Cosmetics International, Inc., 2451
Townsgate Road, Westlake Village, California 91361, Attention: Chief
Financial Officer (telephone: (805) 449-3000; telecopier: (805) 449-2949),
with copies to Debevoise & Plimpton, 875 Third Avenue, New York, New York
10022, Attention: David Brittenham, Esq. (telephone: (212) 909-6000;
telecopier: (212) 909-6836), or at any other address previously furnished
in writing to the Trustee by the Company.
Section 110. Notices to Holders; Waiver. Where this Indenture
--------------------------
provides for notice to Holders of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at such
Holder's address as it appears in the Note Register, not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
42
<PAGE>
In case, by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail notice of any event as
required by any provision of this Indenture, then such notification as shall be
made with the approval of the Trustee (such approval not to be unreasonably
withheld) shall constitute a sufficient notification for every purpose
hereunder.
Section 111. Effect of Headings and Table of Contents. The Article
----------------------------------------
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
Section 112. Successors and Assigns. All covenants and agreements in
----------------------
this Indenture by the Company or an Issuer shall bind its respective successors
and assigns, whether so expressed or not.
Section 113. Separability Clause. In case any provision in this
-------------------
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 114. Benefits of Indenture. Nothing in this Indenture or in
---------------------
the Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, any Paying Agent and the Holders, any
benefit or any legal or equitable right, remedy or claim under this Indenture,
except as provided in Article 14 and Article 15.
---------- ----------
Section 115. GOVERNING LAW. THIS INDENTURE AND THE NOTES SHALL BE
-------------
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO ANY PRINCIPLES OF CONFLICT OF LAWS TO THE EXTENT
THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY. THE TRUSTEE, THE COMPANY, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES
AND (BY THEIR ACCEPTANCE OF THE NOTES) THE HOLDERS, AGREE TO SUBMIT TO THE
JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH
OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS INDENTURE OR THE NOTES.
Section 116. Legal Holidays. In any case where any Interest Payment
--------------
Date, Redemption Date or Stated Maturity of any Note shall not be a Business Day
at any Place of Payment, then (notwithstanding any other provision of this
Indenture or of the Notes) payment of interest or principal and premium (if any)
need not be made at such Place of Payment on such date, but may be made on the
next succeeding Business Day at such Place of Payment
43
<PAGE>
with the same force and effect as if made on the Interest Payment Date or
Redemption Date, or at the Stated Maturity.
Section 117. No Personal Liability of Directors, Officers, Employees,
--------------------------------------------------------
Incorporators and Stockholders. No director, officer, employee, incorporator or
- ------------------------------
stockholder, as such, of the Company, the Issuers, any Note Guarantor or any
Subsidiary of any thereof shall have any liability for any obligation of the
Company, the Issuers or any Note Guarantor under the Indenture, the Notes or any
Note Guarantee, or for any claim based on, in respect of, or by reason of, any
such obligation or its creation. Each Noteholder, by accepting the Notes,
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
Section 118. Exhibits and Schedules. All exhibits and schedules
----------------------
attached hereto are by this reference made a part hereof with the same effect as
if herein set forth in full.
Section 119. Counterparts. This Indenture may be executed in any
------------
number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
Section 120. Company as Agent for Issuers. To the extent permitted by
----------------------------
the TIA and any other applicable law, each Issuer hereby appoints the Company as
its attorney-in-fact, which appointment is coupled with an interest, to take any
action that this Indenture may require or permit such Issuer to take, including
(1) the giving of any certification, opinion, order, request or
consent (whether by Officer's Certificate, Opinion of Counsel, Company
Order, Company Request, Company Consent or otherwise),
(2) the giving of any notice (including under Section 1001), and
------------
(3) the setting of any record date,
such appointment to remain in effect until such Issuer shall otherwise notify
the Trustee in writing.
44
<PAGE>
ARTICLE 2
NOTE FORMS
----------
Section 201. Forms Generally. (a) The Notes and the Trustee's
---------------
certificate of authentication relating thereto shall be in substantially the
forms set forth, or referenced, in this Article 2 and Exhibit A annexed hereto,
--------- ---------
which Exhibit is hereby incorporated in and expressly made a part of this
Indenture. The Notes may have such appropriate insertions, omissions,
substitutions, notations, legends, endorsements, identifications and other
variations as are required or permitted by law, stock exchange rule or
Depository rule or usage, agreements to which the Issuers are subject, if any,
or other customary usage, or as may consistently herewith be determined by the
Officers of each Issuer executing such Notes, as evidenced by such execution
(provided always that any such notation, legend, endorsement, identification or
variation is in a form acceptable to the Issuers). Each Note shall be dated the
date of its authentication. The terms of the Notes set forth in Exhibit A are
---------
part of the terms of this Indenture. Any portion of the text of any Note may be
set forth on the reverse thereof, with an appropriate reference thereto on the
face of the Note.
Initial Notes and any Additional Notes offered and sold in reliance on
Rule 144A under the Securities Act shall, unless the Issuers otherwise notify
the Trustee in writing, be issued in the form of one or more permanent global
Notes in substantially the form set forth in Exhibit A (each, a "U.S. Global
--------- -----------
Note"), deposited with the Trustee, as custodian for the Depositary or its
- ----
nominee, duly executed by the Issuers and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of a U.S. Global Note may
from time to time be increased or decreased by adjustments made on the records
of the Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Initial Notes and any Additional Notes offered and sold in offshore
transactions in reliance on Regulation S under the Securities Act shall be
issued (a) in the form of one or more permanent global Notes in substantially
the form set forth in Exhibit A (each, an "Offshore Global Note"), deposited
--------- --------------------
with the Trustee, as custodian for the Depositary or its nominee, duly executed
by the Issuers and authenticated by the Trustee as hereinafter provided or (b)
at the Issuers' option, in the form of and as part of a U.S. Global Note that
has been designated by the Issuers as a "Unitary Global Note" (any U.S. Global
Note that has been so designated, a "Unitary Global Note"). The aggregate
-------------------
principal amount of an Offshore Global Note, if any, may from time to time be
increased or decreased by adjustments made in the records of the Trustee, as
custodian for the Depositary or its nominee, as hereinafter provided. Subject to
the limitations on the issuance of certificated Notes set forth in Sections 312
------------
and 313, Initial Notes and any Initial Additional Notes issued pursuant to
---
Section 305 in exchange for or upon transfer of beneficial interests (x) in a
- ----------- -
U.S. Global Note shall be in the form of
45
<PAGE>
permanent certificated Notes substantially in the form set forth in Exhibit A
---------
and shall contain the Private Placement Legend as set forth in Section 203 (the
-----------
"U.S. Physical Notes") or (y) in an Offshore Global Note (if any), on or after
-------------------
the Offshore Note Exchange Date with respect to such Offshore Global Note, shall
be in the form of permanent certificated Notes substantially in the form set
forth in Exhibit A (the "Offshore Physical Notes"), respectively, as hereinafter
--------- -----------------------
provided.
The Offshore Physical Notes and the U.S. Physical Notes are sometimes
collectively herein referred to as the "Physical Notes". The U.S. Global Note
--------------
and the Offshore Global Note are sometimes collectively referred to as the
"Global Notes."
- -------------
Exchange Notes shall be issued substantially in the form set forth in
Exhibit A and, subject to Section 312(b), shall be in the form of one or more
- --------- --------------
Global Notes.
Section 202 Form of Trustee's Certificate of Authentication. This is
-----------------------------------------------
one of the Notes referred to in the within-mentioned Indenture.
________________________________
as Trustee
By______________________________
Authorized Officer
Dated:
If an appointment of an Authenticating Agent is made pursuant to
Section 714, the Notes may have endorsed thereon, in lieu of the Trustee's
- -----------
certificate of authentication, an alternative certificate of authentication in
the following form:
This is one of the Notes referred to in the within-mentioned
Indenture.
STATE STREET BANK AND TRUST COMPANY
___________________________________
46
<PAGE>
As Trustee
By_________________________________,
As Authenticating Agent
By_________________________________
Authorized Officer
Dated:
Section 203. Restrictive and Global Note Legends. Each Global Note
-----------------------------------
and Physical Note shall bear the following legend set forth below (the "Private
-------
Placement Legend") on the face thereof until the Private Placement Legend is
- ----------------
removed in accordance with Section 313(4):
--------------
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND HAS NOT BEEN REGISTERED UNDER ANY STATE
--------------
SECURITIES LAWS, AND THIS NOTE (AND ANY INTEREST OR PARTICIPATION HEREIN)
MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, ENCUMBERED OR OTHERWISE
TRANSFERRED OR DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY
NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A") OR (B) IT IS NOT A U.S. PERSON AND IS
---------
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION AND (2) AGREES FOR THE
BENEFIT OF THE ISSUERS THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED OR DISPOSED OF ONLY (I) INSIDE THE UNITED STATES
TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING
47
<PAGE>
THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN A
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (IV) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (V) TO THE
ISSUERS, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND SUBJECT
TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER (X) PURSUANT TO CLAUSE (II) OR (III) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND (Y) IN THE CASE OF ANY OF THE FOREGOING CLAUSES (I)
THROUGH (V), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS NOTE IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE COMPANY AND THE TRUSTEE, THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT
OF THE RESALE RESTRICTION REFERRED TO ABOVE. AS USED HEREIN, THE TERMS
"UNITED STATES," "OFFSHORE TRANSACTION" AND "U.S. PERSON" HAVE THE
RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Each Global Note, whether or not an Initial Note, shall also bear the
following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO THE ISSUER OR
---
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
48
<PAGE>
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTIONS 312 AND 313 OF THE INDENTURE.
------------ ---
ARTICLE 3
THE NOTES
---------
Section 301 Title and Terms. The aggregate principal amount of Notes
---------------
that may be authenticated and delivered and Outstanding under this Indenture is
not limited, except as provided in Section 407 and except as may be limited by
-----------
applicable law. The Original Notes will be issued in an aggregate principal
amount of $100.0 million. All the Original Notes shall vote and consent
together on all matters as one class, and none of the Original Notes will have
the right to vote or consent as a class separate from one another on any matter.
Additional Notes (including any Exchange Notes issued in exchange therefor) may
vote as a class with the other Notes and otherwise be treated as Notes for
purposes of this Indenture.
The Notes will be the several obligations of the Issuers. Of the
aggregate principal amount of Original Notes of $100.0 million, JCI will be
severally liable with respect to the payment of $60.0 million of principal,
together with interest thereon (the "JCI Portion"), and Jafra S.A. will be
-----------
severally liable with respect to the payment of $40.0 million of principal,
together with interest thereon (the "Jafra S.A. Portion," and each of the JCI
------------------
Portion and Jafra S.A. Portion, a "Portion"). Except as otherwise described
-------
herein, JCI and Jafra S.A. will be severally liable in respect of each
outstanding Note (including any Additional Notes) in the relative proportions of
the JCI Portion and the Jafra S.A. Portion, respectively (sixty percent (60%) in
the case of JCI and forty percent (40%) in the case of Jafra S.A.). With
respect to each Issuer, such relative proportion of any amount is referred to as
such Issuer's "Several Share."
-------------
The Issuers and, by acquiring the Notes, the Holders agree to treat
$400 of each $1,000 principal amount of the Notes as indebtedness of Jafra S.A.
and $600 of each $1,000 principal amount of the Notes as indebtedness of JCI for
U.S. federal, state and local and non-U.S. tax purposes.
The Notes shall be known and designated as the "11 3/4% Senior
Subordinated Notes Due 2008" of the Issuers. The final Stated Maturity of the
Notes shall be May 1, 2008.
49
<PAGE>
Interest on the Outstanding principal amount of Notes will accrue at the rate of
11 3/4% per annum and will be payable semi-annually in arrears on May 1 and
November 1 in each year, commencing on November 1, 1998, to holders of record on
the immediately preceding April 15 and October 15, respectively (each such April
15 and October 15, a "Regular Record Date"). Interest on the Original Notes will
-------------------
accrue from the most recent date to which interest has been paid or duly
provided for or, if no interest has been paid, from the Issue Date; and interest
on any Additional Notes (and Exchange Notes issued in exchange therefor) will
accrue from the most recent date to which interest has been paid or duly
provided for or, if no interest has been paid on such Additional Notes, from the
date of issuance of such Additional Notes; provided, that if any Note is
--------
surrendered for exchange on or after a record date for an Interest Payment Date
that will occur on or after the date of such exchange, interest on the Note
received in exchange thereof will accrue from the date of such Interest Payment
Date.
The principal of, and premium, if any, and interest, on the Notes
shall be payable at the office or agency of the Issuers maintained for that
purpose in the Borough of Manhattan, The City of New York (the "Place of
--------
Payment"); provided, however, that at the option of the Issuers payment of
- -------- -------- -------
interest on a Note may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Note Register.
Section 302 Denominations. The Notes shall be issuable only in
-------------
registered form without coupons and only in denominations of $1,000 and any
integral multiple thereof.
Section 303 Execution, Authentication and Delivery and Dating. The
-------------------------------------------------
Notes shall be executed on behalf of each Issuer by one Officer of such Issuer.
The signature of any such Officer on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signatures of individuals who
were at any time the proper Officers of either Issuer shall bind such Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Issuers may deliver Notes executed by the Issuers to the
Trustee for authentication; and the Trustee shall authenticate and deliver (i)
Initial Notes for original issue in the aggregate principal amount not to exceed
$100,000,000 and (ii) Additional Notes from time to time for original issue in
aggregate principal amounts specified by the Issuers and (iii) Exchange Notes
from time to time for issue in exchange for a like principal amount of Initial
Notes or Initial Additional Notes, in each case specified in clauses (i) through
(iii) above, upon a written order of the Issuers in the form of an Officer's
Certificate of the Issuers (an "Authentication Order"). Such Officer's
Certificate shall specify the amount of Notes to be
50
<PAGE>
authenticated and the date on which the Notes are to be authenticated, whether
the Notes are to be Initial Notes, Additional Notes or Exchange Notes and
whether the Notes are to be issued as one or more Global Notes or Physical Notes
and such other information as the Issuers may include or the Trustee may
reasonably request.
All Notes shall be dated the date of their authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder.
Section 304. Temporary Notes. Until definitive Notes are ready for
---------------
delivery, the Issuers may prepare and upon receipt of an Authentication Order
the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Issuers consider appropriate for temporary Notes. If temporary Notes are
issued, the Issuers will cause definitive Notes to be prepared without
unreasonable delay. After the preparation of definitive Notes, the temporary
Notes shall be exchangeable for definitive Notes upon surrender of the temporary
Notes at the office or agency of the Issuers in a Place of Payment, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Notes the Issuers shall execute and upon receipt of an Authentication
Order the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Notes of authorized denominations. Until so
exchanged the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as definitive Notes of the same series and tenor.
Section 305. Registration, Registration of Transfer and Exchange. The
---------------------------------------------------
Issuers shall cause to be kept at the Corporate Trust Office of the Trustee a
register (the register maintained in such office and in any other office or
agency of the Issuers in a Place of Payment being herein sometimes collectively
referred to as the "Note Register") in which, subject to such reasonable
-------------
regulations as it may prescribe, the Issuers shall provide for the registration
of Notes and of transfers of Notes. The Trustee is hereby appointed "Note
----
Registrar" for the purpose of registering Notes and transfers of Notes as herein
- ---------
provided.
Upon surrender for transfer of any Note at the office or agency of the
Issuers in a Place of Payment, in compliance with all applicable requirements of
this Indenture and applicable law, the Issuers shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of the same series, of any authorized
denominations and of a like aggregate principal amount.
51
<PAGE>
At the option of the Holder, Notes may be exchanged for other Notes of
the same series, of any authorized denominations and of a like tenor and
aggregate principal amount, upon surrender of the Notes to be exchanged at such
office or agency. Whenever any Notes are so surrendered for exchange, the
Issuers shall execute, and the Trustee shall authenticate and deliver, the Notes
that the Holder making the exchange is entitled to receive.
All Notes issued upon any transfer or exchange of Notes shall be the
valid obligations of the Issuers, evidencing the same debt, and entitled to the
same benefits under this Indenture, as the Notes surrendered upon such transfer
or exchange.
Every Note presented or surrendered for transfer or exchange shall (if
so required by the Issuers or the Trustee) be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the Issuers and the
Note Registrar duly executed, by the Holder thereof or such Holder's attorney
duly authorized in writing.
No service charge shall be made for any transfer or exchange of Notes,
but the Issuers may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any transfer or
exchange of Notes under this Section 305.
-----------
The Issuers shall not be required (i) to issue, transfer or exchange
any Note during a period beginning at the opening of business 15 days before the
day of the mailing of a notice of redemption (or purchase) of Notes selected for
redemption (or purchase) under Section 1004 and ending at the close of business
------------
on the day of such mailing, or (ii) to transfer or exchange any Note so selected
for redemption (or purchase) in whole or in part.
Section 306. Mutilated, Destroyed, Lost and Stolen Notes. If (i) any
-------------------------------------------
mutilated Note is surrendered to the Trustee, or the Issuers and the Trustee
receive evidence to their satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Issuers and the Trustee such security
or indemnity as may be required by them to save each of them harmless, then, in
the absence of notice to the Issuers or the Trustee that such Note has been
acquired by a bona fide purchaser, the Issuers shall execute and upon receipt of
an Authentication Order the Trustee shall authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Note, a new Note
of like tenor and principal amount, bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, the Issuers in their discretion may,
instead of issuing a new Note, pay such Note.
52
<PAGE>
Upon the issuance of any new Note under this Section 306, the Issuers
-----------
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section 306 in lieu of any
-----------
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Issuers, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and ratably with any and all other
Notes duly issued hereunder.
The provisions of this Section 306 are exclusive and shall preclude
-----------
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 307. Payment of Interest Rights Preserved. Interest on any
------------------------------------
Note that is payable, and is punctually paid or duly provided for, on any
Interest Payment Date shall be paid to the Person in whose name that Note (or
one or more Predecessor Notes) is registered at the close of business on the
Regular Record Date for such interest specified in Section 301.
-----------
Any interest on any Note that is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called "Defaulted
---------
Interest") shall forthwith cease to be payable to the registered Holder on the
- --------
relevant Regular Record Date by virtue of having been such Holder; and such
Defaulted Interest may be paid by the Issuer responsible therefor, at its
election in each case; as provided in clause (1) or clause (2) below:
(1) Such Issuer may elect to make payment of any Defaulted Interest
to the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the
following manner. Such Issuer shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Note and the date
of the proposed payment, and at the same time such Issuer shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make arrangements
reasonably satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as provided
in this clause (1). Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than 15
nor less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment.
53
<PAGE>
The Trustee shall promptly notify such Issuer of such Special Record Date
and, in the name and at the expense of such Issuer, shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first class postage prepaid, to each Holder at such
Holder's address as it appears in the Note Register, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose names
the Notes (or their respective Predecessor Notes) are registered on such
Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) Such Issuer may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, if, after notice given by such Issuer
to the Trustee of the proposed payment pursuant to this clause (2), such
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 307, each Note
-----------
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Note shall carry the rights to interest accrued and unpaid, and to
accrue, that were carried by such other Note.
Section 308. Persons Deemed Owners. The Company, the Issuers, any
---------------------
Subsidiary Guarantor, the Trustee and any agent of any of them may treat the
Person in whose name any Note is registered as the owner of such Note for the
purpose of receiving payment of principal of (and premium, if any), and (subject
to Section 307) interest on, such Note and for all other purposes whatsoever,
-----------
whether or not such Note be overdue, and neither the Company, the Issuers, any
Subsidiary Guarantor, the Trustee nor any agent of any of them shall be affected
by notice to the contrary.
Section 309. Cancellation. All Notes surrendered for payment,
------------
redemption, transfer, exchange or conversion shall, if surrendered to any Person
other than the Trustee, be delivered to the Trustee and, if not already
cancelled, shall be promptly cancelled by it. The Issuers may at any time
deliver to the Trustee for cancellation any Notes previously authenticated and
delivered hereunder that either Issuer may have acquired in any manner
whatsoever, and all Notes so delivered shall be promptly cancelled by the
Trustee. No Notes shall be authenticated in lieu of or in exchange for any
Notes cancelled as provided in this Section, except as expressly permitted by
this Indenture. All cancelled Notes held by the Trustee shall be disposed of as
directed by a Company Order of the Issuers and in accordance with Section 313.
-----------
54
<PAGE>
Section 310. Computation of Interest. Interest on the Notes shall be
-----------------------
computed on the basis of a 360-day year of twelve 30-day months.
Section 311. CUSIP Numbers. The Issuers in issuing the Notes may use
-------------
"CUSIP" numbers (if then generally in use), and if so, the Trustee may use the
CUSIP numbers in notices of redemption or exchange as a convenience to Holders;
provided, however, that any such notice may state that no representation is made
- -------- -------
as to the correctness or accuracy of the CUSIP number printed in the notice or
on the Notes, and that reliance may be placed only on the other identification
numbers printed on the Notes.
Section 312. Book-Entry Provisions for Global Notes. (a) Each Global
--------------------------------------
Note initially shall (i) be registered in the name of the Depositary for such
Global Note or the nominee of such Depositary and (ii) be delivered to the
Trustee as custodian for such Depositary. Neither of the Issuers nor any agent
of the Issuers shall have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Global Note, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
Members of, or participants in, the Depositary ("Agent Members") shall
-------------
have no rights under this Indenture with respect to any Global Note, and the
Depositary may be treated by the Issuers, any other obligor upon the Notes, the
Trustee and any agent of any of them as the absolute owner of such Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Issuers, any other obligor upon the Notes, the Trustee or any
agent of any of them from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a beneficial owner of any Note. The registered
holder of a Global Note may grant proxies and otherwise authorize any Person,
including Agent Members and Persons that may hold interests through Agent
Members, to take any action that a Holder is entitled to take under this
Indenture or the Notes.
(b) Transfers of a Global Note shall be limited to transfers of such
Global Note in whole, but, subject to the immediately succeeding sentence, not
in part, to the Depositary, its successors or their respective nominees.
Interests of beneficial owners in a Global Note may not be transferred or
exchanged for Physical Notes unless (i) the Issuers have consented thereto in
writing, or such transfer or exchange is made pursuant to the next sentence, and
(ii) such transfer or exchange is in accordance with the applicable rules and
procedures of the Depositary and the provisions of Sections 305 and 313.
------------ ---
Subject to the limitation on issuance of Physical Notes set forth in Section
-------
313(3), U.S. Physical Notes or Offshore Physical Notes shall be transferred to
- ------
all beneficial owners in exchange for their beneficial interests in the
55
<PAGE>
relevant U.S. Global Note or the relevant Offshore Global Note, respectively, if
(i) the Depositary notifies the Issuers that it is unwilling or unable to
continue as Depositary for the applicable Global Note or the Depositary ceases
to be a "Clearing Agency" registered under the Exchange Act and a successor
depositary is not appointed by the Issuers within 90 days, (ii) the Issuers, at
their option, notify the Trustee in writing that they elect to cause the
issuance of Physical Notes under this Indenture or (iii) an Event of Default has
occurred and is continuing and the Note Registrar has received a written request
from the Depositary to issue Physical Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Note to beneficial owners for Physical Notes
pursuant to paragraph (b) of this Section 312, the Note Registrar shall record
-----------
on its books and records the date and a decrease in the principal amount of such
Global Note in an amount equal to the beneficial interest in the Global Note
being transferred, and the Issuers shall execute, and the Trustee shall
authenticate and deliver, one or more Physical Notes of like tenor and principal
amount of authorized denominations.
(d) In connection with a transfer of an entire Global Note to
beneficial owners pursuant to paragraph (b) of this Section 312, the applicable
-----------
Global Note shall be deemed to be surrendered to the Trustee for cancellation,
and the Issuers shall execute, and the Trustee shall authenticate and deliver,
to each beneficial owner identified by the Depositary in exchange for its
beneficial interest in the applicable Global Note, an equal aggregate principal
amount at maturity of U.S. Physical Notes (in the case of any U.S. Global Note)
or Offshore Physical Notes (in the case of any Offshore Global Note), as the
case may be, of authorized denominations.
(e) The transfer and exchange of a Global Note or beneficial
interests therein shall be effected through the Depositary, in accordance with
this Indenture (including applicable restrictions on transfer set forth in
Section 313) and the procedures of the Depositary therefor. Any beneficial
- -----------
interest in one of the Global Notes that is transferred to a Person who takes
delivery in the form of an interest in a different Global Note will, upon
transfer, cease to be an interest in such Global Note and become an interest in
the other Global Note and, accordingly, will thereafter be subject to all
transfer restrictions, if any, and other procedures applicable to beneficial
interests in such other Global Note for as long as it remains such an interest.
A transferor of a beneficial interest in a Global Note shall deliver to the
Registrar a written order given in accordance with the Depositary's procedures
containing information regarding the participant account of the Depositary to be
credited with a beneficial interest in the relevant Global Note. Subject to
Section 313, the Registrar shall, in accordance with such instructions, instruct
- -----------
the Depositary to credit to the account of the Person specified
56
<PAGE>
in such instructions a beneficial interest in such Global Note and to debit the
account of the Person making the transfer the beneficial interest in the Global
Note being transferred.
(f) Any Physical Note delivered in exchange for an interest in a
Global Note pursuant to paragraph (b) of this Section 312 shall, unless such
-----------
exchange is made on or after the Resale Restriction Termination Date applicable
to such Note and except as otherwise provided in Section 203 and Section 313,
----------- -----------
bear the Private Placement Legend.
(g) The Issuers, any other obligor upon the Notes or the Trustee, in
the discretion of any of them, may treat as the Act of a Holder any instrument
or writing of any Person that is identified by the Depositary as the owner of a
beneficial interest in the Global Note, provided that the fact and date of the
execution of such instrument or writing is proved in accordance with Section
-------
108(b).
- ------
Section 313. Special Transfer Provisions. (1) Transfers to Non-U.S.
--------------------------- ---------------------
Persons. The following provisions shall apply with respect to the registration
- -------
of any proposed transfer of a Note that is a Restricted Security to any Non-U.S.
Person: The Note Registrar shall register such transfer if it complies with all
other applicable requirements of this Indenture (including Section 305) and,
-----------
(a) if (x) such transfer is after the relevant Resale Restriction
Termination Date with respect to such Note or (y) the distribution
compliance period set forth in Regulation S has expired and the proposed
transferor has delivered to the Note Registrar a Regulation S Certificate
and, unless otherwise agreed by the Issuers and the Trustee, an opinion of
counsel, certifications and other information satisfactory to the Issuers
and the Trustee, and
(b) if the proposed transferor is or is acting through an Agent
Member holding a beneficial interest in a Global Note, upon receipt by the
Note Registrar of (x) the certificate, opinion, certifications and other
information, if any, required by clause (a) above and (y) written
instructions given in accordance with the Depositary's and the Note
Registrar's procedures;
whereupon (i) the Note Registrar shall reflect on its books and records the date
and (if the transfer does not involve a transfer of any Outstanding Physical
Note) a decrease in the principal amount of the relevant Global Note in an
amount equal to the principal amount of the beneficial interest in the relevant
Global Note to be transferred, and (ii) either (A) if the proposed transferee is
or is acting through an Agent Member holding a beneficial interest in a relevant
Offshore Global Note, the Trustee shall reflect on its books and records the
date and an increase in the principal amount of such Offshore Global Note in an
amount equal to the
57
<PAGE>
principal amount of the beneficial interest being so transferred or (B)
otherwise the Issuers shall execute and the Trustee shall authenticate and
deliver one or more Physical Notes of like tenor and amount.
(2) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of a Note that is a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons): The
Note Registrar shall register such transfer if it complies with all other
applicable requirements of this Indenture (including Section 305) and,
-----------
(a) if such transfer is being made by a proposed transferor who has
checked the box provided for on the form of such Note stating, or has
otherwise certified to the Issuers and the Note Registrar in writing, that
the sale has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form of
such Note stating, or has otherwise certified to the Issuers and the Note
Registrar in writing, that it is purchasing such Note for its own account
or an account with respect to which it exercises sole investment discretion
and that it and any such account is a QIB within the meaning of Rule 144A,
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as
it has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A; and
(b) if the proposed transferee is an Agent Member, and the Note to be
transferred consists of a Physical Note that after transfer is to be
evidenced by an interest in a Global Note or consists of a beneficial
interest in a Global Note that after the transfer is to be evidenced by an
interest in a different Global Note, upon receipt by the Note Registrar of
written instructions given in accordance with the Depositary's and the Note
Registrar's procedures, whereupon the Note Registrar shall reflect on its
books and records the date and an increase in the principal amount of the
transferee Global Note in an amount equal to the principal amount of the
Physical Note or such beneficial interest in such transferor Global Note to
be transferred, and the Trustee shall cancel the Physical Note so
transferred or reflect on its books and records the date and a decrease in
the principal amount of such transferor Global Note, as the case may be.
(3) Limitation on Issuance of Physical Notes. No Physical Note shall
----------------------------------------
be exchanged for a beneficial interest in any Global Note, except in accordance
with Section 312 and this Section 313.
----------- -----------
58
<PAGE>
A beneficial owner of an interest in a Unitary Global Note or an
Offshore Global Note shall not be permitted to exchange such interest for a
Physical Note until a date, which must be after the expiration of the
distribution compliance period set forth in Regulation S, on which the Issuers
receive a certificate of beneficial ownership substantially in the form of
Exhibit D from such beneficial owner (a "Certificate of Beneficial Ownership").
-----------------------------------
Such date, as it relates to an Offshore Global Note, is herein referred to as
the "Offshore Note Exchange Date."
---------------------------
(4) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Notes not bearing the Private Placement Legend, the Note
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Note Registrar shall deliver only Notes that bear the
Private Placement Legend unless (i) the requested transfer is after the relevant
Resale Restriction Termination Date with respect to such Notes, or (ii) upon
written request of the Issuers after there is delivered to the Note Registrar an
opinion of counsel (which opinion and counsel are satisfactory to the Issuers
and the Trustee) to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act, (iii) with respect to an Offshore Global Note
or Offshore Physical Note only, with the agreement of the Issuers on or after
the Offshore Note Exchange Date with respect to such Note, or (iv) such Notes
are sold or exchanged pursuant to an effective registration statement under the
Securities Act.
(5) Other Transfers. The Note Registrar shall effect and register,
---------------
upon receipt of a written request from the Issuers so to do, a transfer not
otherwise permitted by this Section 313, such registration to be done in
-----------
accordance with the otherwise applicable provisions of Section 313, upon the
-----------
furnishing by the proposed transferor or transferee of a written opinion of
counsel (which opinion and counsel are satisfactory to the Issuers and the
Trustee) to the effect that, and such other certifications or information as the
Issuers may require to confirm that, the proposed transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
A Note that is a Restricted Security may not be transferred other than
as provided in this Section 313. A beneficial interest in a Global Note that is
-----------
a Restricted Security may not be exchanged for a beneficial interest in another
Global Note other than through a transfer in compliance with this Section 313.
-----------
(6) General. By its acceptance of any Note bearing the Private
-------
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
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<PAGE>
The Note Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 312 or this Section
----------- -------
313 (including all Notes received for transfer pursuant to Section 313). The
- --- -----------
Issuers shall have the right to require the Note Registrar to deliver to the
Issuers, at the Issuers' several expense, copies of all such letters, notices or
other written communications at any reasonable time upon the giving of
reasonable written notice to the Note Registrar.
In connection with any transfer of any Note, the Trustee, the Note
Registrar and the Issuers shall be entitled to receive, shall be under no duty
to inquire into, may conclusively presume the correctness of, and shall be fully
protected in relying upon the certificates, opinions and other information
referred to herein (or in the forms provided herein, attached hereto or to the
Notes, or otherwise) received from any Holder and any transferee of any Note
regarding the validity, legality and due authorization of any such transfer, the
eligibility of the transferee to receive such Note and any other facts and
circumstances related to such transfer.
Section 314. Payment of Additional Interest. (a) Under certain
------------------------------
circumstances the Issuers will be obligated to pay certain additional amounts of
interest to the Holders of certain Initial Notes, as more particularly set forth
in such Initial Notes.
(b) Under certain circumstances the Issuers may be obligated to pay
certain additional amounts of interest to the Holders of certain Initial
Additional Notes, as may be more particularly set forth in such Initial
Additional Notes.
ARTICLE 4
COVENANTS
---------
Section 401. Payment of Principal, Premium and Interest. JCI shall
------------------------------------------
duly and punctually pay its Several Share of the principal of (and premium, if
any) and interest on the Notes, severally, in accordance with the terms of the
Notes and this Indenture.
Jafra S.A. shall duly and punctually pay its Several Share of the
principal of (and premium, if any) and interest on the Notes, severally, in
accordance with the terms of the Notes and this Indenture.
Section 402. Maintenance of Office or Agency. The Issuers shall
-------------------------------
maintain in the Borough of Manhattan, The City of New York an office or agency
where Notes may be presented or surrendered for payment, where Notes may be
surrendered for transfer or exchange and where notices and demands to or upon
the Issuers in respect of the Notes and
60
<PAGE>
this Indenture may be served. The Issuers shall give prompt written notice to
the Trustee of the location, and of any change in the location, of such office
or agency. If at any time the Issuers shall fail to maintain such office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee. The Issuers hereby designate the
Corporate Trust Office as the initial Place of Payment and appoint the Trustee
its agent to receive all such presentations, surrenders, notices and demands so
long as such Corporate Trust Office remains the Place of Payment.
Section 403. Money for Payments To Be Held in Trust. If either Issuer
--------------------------------------
shall at any time act as its own Paying Agent, it will, on or before each due
date of the principal of (and premium, if any) or interest on, any of the Notes,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay its Several Share of the principal (and premium, if any)
or interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, and will promptly notify the Trustee
of its action or failure so to act.
If either Issuer is not acting as its own Paying Agent, it will, prior
to each due date of the principal of (and premium, if any) or interest on, any
Notes, deposit with a Paying Agent a sum sufficient to pay its Several Share of
the principal (and premium, if any) or interest, so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal, premium
or interest, and (unless such Paying Agent is the Trustee) each Issuer will
promptly notify the Trustee of its action or failure so to act.
If either Issuer is not acting as its own Paying Agent, such Issuer
will cause each Paying Agent other than the Trustee to execute and deliver to
the Trustee an instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of this Section 403, that such Paying Agent
-----------
will
(1) hold all sums held by it for the payment of principal of (and
premium, if any) or interest on Notes in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Issuers (or any
other obligor upon the Notes) in the making of any such payment of
principal (and premium, if any) or interest;
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
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(4) acknowledge, accept and agree to comply in all respects with the
provisions of this Indenture and TIA relating to the duties, rights and
liabilities of such Paying Agent.
The Issuers may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Issuers or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Issuers or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Issuers, in trust for the payment of the principal of (and premium, if
any) or interest on any Note and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and payable shall be
paid in the appropriate proportion to the Issuers on Company Request, or (if
then held by the Issuers) shall be discharged from such trust; and the Holder of
such Note shall thereafter, as an unsecured general creditor, look only to the
Issuers for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Issuers as
trustee thereof, shall thereupon cease.
Section 404. Additional Amounts. All payments made on behalf of Jafra
------------------
S.A. under or with respect to the Notes or on behalf of any Note Guarantor
(other than JCI) under or with respect to any Note Guarantee (in any case, the
Person making such payment, a "Payor") shall be made free and clear of and
-----
without withholding or deduction for or on account of any present or future tax,
duty, levy, impost, assessment or other governmental charge (including
penalties, interest and other liabilities related thereto) imposed or levied by
or on behalf of the Governments of Mexico, Luxembourg or the jurisdiction of
incorporation, seat of management or residence for income tax purposes of any
future Jafra S.A. Subsidiary Guarantor or any successors to the Company, Jafra
S.A. or any Jafra S.A. Subsidiary Guarantor (each a "Successor Jurisdiction"),
----------------------
as the case may be, or of any territory thereof or by any authority or agency
therein or thereof having power to tax (hereinafter "Taxes"), unless the Payor
-----
is required to withhold or deduct Taxes by law or by the interpretation or
administration thereof by the relevant government authority or agency. If a
Payor is so required to withhold or deduct any amount for or on account of Taxes
from any payment made under or with respect to the Notes or a Note Guarantee,
such Payor will be required to pay such additional amounts ("Additional
----------
Amounts") as may be necessary so that the net amount received by each Holder
- -------
(including Additional Amounts) after such withholding or deduction will not be
less than the amount the Holder would have received if such Taxes had not been
62
<PAGE>
withheld or deducted; provided, however, that no Additional Amounts will be
-------- -------
payable with respect to:
(i) any payment to a Holder which is subject to such Taxes by reason
of its (or the beneficial owner of the Notes) being connected with Mexico,
Luxembourg or any Successor Jurisdiction or any territory thereof other
than a connection arising from the mere holding of Notes or the receipt of
payments in respect of the Notes or the Note Guarantees;
(ii) any Taxes with respect to a Note presented for payment more than
30 days after the date on which such payment became due and payable or the
date on which payment thereof is duly provided for and notice thereof given
to the Holders, whichever occurs later, except to the extent that the
Holder of such Note would have been entitled to such Additional Amounts on
presenting such Note for payment on any date during such 30-day period;
(iii) Taxes that would not have been imposed but for the failure of
the Holder or beneficial owner of a Note to comply with any certification,
identification, information, or other documentation requirement under law,
regulation, administrative practice or an applicable treaty that is a
precondition to exemption from, or reduction in the rate of, the
imposition, deduction or withholding of Taxes; provided that at least 60
--------
days prior to (a) the first payment date with respect to which this clause
(iii) shall be applied and (b) in the event of a change in such
certification, identification, information or other documentation
requirement, the first payment date subsequent to such change, the Payor
shall have notified the Trustee, in writing, that the Holders or beneficial
owners of the Notes will be required to provide such information or
documentation;
(iv) estate, inheritance, gift, sales, transfer, personal property
or other similar taxes imposed with respect to such Notes;
(v) any Tax which is only payable otherwise than by withholding or
deduction from payments in respect of the Notes or the Note Guarantees; and
(vi) any combination of items (i), (ii), (iii), (iv) and (v) above.
Each Payor will also make such withholding or deduction and remit the
full amount deducted or withheld to the relevant authority as and when required
in accordance with applicable law. Each Payor will furnish to the Trustee of the
Notes, within 30 days after the date the payment of any Taxes is due pursuant to
applicable law, certified copies of tax receipts evidencing such payment by such
Payor; provided, however, that if the relevant Payor
-------- -------
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is unable to obtain such receipt within 30 days, notwithstanding such Payor's
best efforts to obtain such receipts, the Payor will furnish such receipts to
the Trustee as soon as receipts can be obtained.
Whenever in this Indenture there is mentioned, in any context, (a) the
payment of principal, (b) purchase prices in connection with a purchase of
Notes, (c) interest or (d) any other amount payable on or with respect to any of
the Notes or a Note Guarantee, such reference shall be deemed to include payment
of Additional Amounts provided for in this section to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof.
Each Payor will pay any present or future stamp, court or documentary
taxes or any other similar taxes, charges or levies that arise in Mexico,
Luxembourg or any Successor Jurisdiction from the execution, delivery,
registration of, or enforcement of rights under, the Notes, the Indenture or
any other document or instrument in relation thereof.
The obligations of each Payor under this Section 404 shall survive any
-----------
termination, defeasance or discharge of the Indenture.
Section 405. SEC Reports. Notwithstanding that the Company may not be
-----------
required to be or remain subject to the reporting requirements of Section 13(a)
or 15(d) of the Exchange Act applicable to a "foreign private issuer" (as such
term is defined in Rule 3b-4 under the Exchange Act), from and after the date on
which the Company first becomes subject to such reporting requirements, the
Company shall file with the SEC (unless such filing is not permitted under the
Exchange Act or by the SEC), so long as Notes are outstanding, the following
reports by the dates indicated (or, in the case of the first such report, if
later, the date that is 45 days after the effectiveness of a registration
statement in respect of Initial Notes or Exchange Notes exchanged therefor, as
the case may be): (i) within 120 days from the end of each fiscal year, an
annual report on Form 20-F (or any successor form) containing the information
required to be contained therein for such fiscal year, and (ii) within 60 days
after the end of each of the first three quarters in each fiscal year, quarterly
reports on Form 6-K containing unaudited financial statements (including a
balance sheet and statement of income, changes in stockholders' equity and cash
flows) and Management's Discussion and Analysis of Financial Condition and
Results of Operations for and as of the end of such quarters (with comparable
financial statements for such quarter of the immediately preceding fiscal year).
The Company will also, within 15 days after the date on which the Company files
such reports, transmit by mail to all Holders, as their names and addresses
appear in the Note Register, and to the Trustee copies of any such information,
documents and reports (without exhibits) (or, in lieu of one or more of the
quarterly reports for fiscal 1998, a registration statement filed with the SEC
under the Securities Act or any amendment thereto, provided
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<PAGE>
such registration statement or amendment contains the information that would
have been included in each such report). The Company will be deemed to have
satisfied such requirements if a Parent files and provides reports, documents
and information of the types otherwise so required to be filed by the Company,
or of the types required to be filed by a U.S. issuer with the SEC pursuant to
Section 13(a) or 15(d) of the Exchange Act, in each case within the applicable
time periods, and the Company is not required to file such reports, documents
and information separately under the applicable rules and regulations of the SEC
(after giving effect to any exemptive relief) because of the filings by such
Parent. The Company (and, to the extent required under the TIA, any other
obligor upon the Notes) also shall comply with the other provisions of TIA (S)
314(a).
Section 406. Statement as to Default. Each Issuer shall deliver to
-----------------------
the Trustee, within 120 days after the end of each fiscal year of such Issuer
ending after the date hereof, an Officer's Certificate, to the effect that to
the best knowledge of the signer thereof such Issuer is or is not in default in
the performance and observance of any of the terms, provisions and conditions of
this Indenture (without regard to any period of grace or requirement of notice
provided hereunder) and, if such Issuer shall be in default, specifying all such
defaults and the nature and status thereof of which such signer may have
knowledge. To the extent required by the TIA, each Note Guarantor shall comply
with TIA (S) 314(a)(4). The individual signing any certificate given by any
Person pursuant to this Section 406 shall be the principal executive, financial
-----------
or accounting officer of such Person, in compliance with TIA (S) 314(a)(4).
Section 407. Limitation on Indebtedness. (a) The Company shall not,
--------------------------
and shall not permit any Restricted Subsidiary to, Incur any Indebtedness;
provided, however, that the Company, either Issuer or any Subsidiary Guarantor
- -------- -------
may Incur Indebtedness if on the date of the Incurrence of such Indebtedness,
after giving effect to the Incurrence thereof, the Consolidated Coverage Ratio
would be greater than 2.00:1.00 if such Indebtedness is Incurred prior to May 1,
2001 or 2.25:1.00 if such Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness Incurred pursuant to the Senior Credit Facility
(including in respect of letters of credit or bankers' acceptances issued
or created thereunder) and Indebtedness of any Foreign Subsidiary Incurred
other than under the Senior Credit Facility, and (without limiting the
foregoing), in each case, any Refinancing Indebtedness in respect thereof,
in a maximum principal amount which, when taken together with the amount of
all Indebtedness Incurred pursuant to this clause (i) and then outstanding,
does not exceed the amount equal to (A) $100.0 million, plus (B) the
----
amount, if any, by which the Borrowing Base exceeds $65.0 million, plus (C)
----
in the
65
<PAGE>
case of any refinancing of the Senior Credit Facility or any portion
thereof, the aggregate amount of fees, underwriting discounts, premiums and
other costs and expenses incurred in connection with such refinancing;
(ii) Indebtedness (A) of any Restricted Subsidiary issued to and
held by the Company or (B) of the Company or any Restricted Subsidiary
issued to and held by any Restricted Subsidiary; provided, however, that
-------- -------
any subsequent issuance or transfer of any Capital Stock of such Restricted
Subsidiary to which such Indebtedness is owed, or any other event, that
results in such Restricted Subsidiary ceasing to be a Restricted Subsidiary
or any other subsequent transfer of such Indebtedness (except to the
Company or a Restricted Subsidiary) will be deemed, in each case, an
Incurrence of such Indebtedness by the issuer thereof;
(iii) Indebtedness represented by the Notes (other than any
Additional Notes), any Indebtedness (other than the Indebtedness described
in clause (i) or (ii) above) outstanding on the Issue Date and any
Refinancing Indebtedness Incurred in respect of any Indebtedness described
in this clause (iii) or paragraph (a) above;
(iv) Purchase Money Obligations and Capitalized Lease Obligations,
and any Refinancing Indebtedness with respect thereto, in an aggregate
principal amount at any time outstanding not exceeding an amount equal to
6% of Consolidated Total Assets at any time outstanding;
(v) Indebtedness of any Foreign Subsidiary Incurred for working
capital purposes;
(vi) (A) Guarantees by the Company or any Restricted Subsidiary of
Indebtedness or any other obligation or liability of the Company or any
Restricted Subsidiary (other than Indebtedness Incurred in violation of
this Section 407) or (B) Indebtedness of the Company or any Restricted
-----------
Subsidiary arising by reason of any Lien granted by or applicable to such
Person securing Indebtedness of the Company or any Restricted Subsidiary
(other than Indebtedness Incurred in violation of this Section 407);
-----------
(vii) Indebtedness of the Company or any Restricted Subsidiary (A)
arising from the honoring of a check, draft or similar instrument of such
Person drawn against insufficient funds, provided that such Indebtedness is
extinguished within five Business Days of its incurrence, or (B) consisting
of guarantees, indemnities, obligations in respect of earnouts or other
purchase price adjustments, or similar obligations, Incurred
66
<PAGE>
in connection with the acquisition or disposition of any business, assets
or Person (including pursuant to the Acquisition);
(viii) Indebtedness of the Company or any Restricted Subsidiary in
respect of (A) letters of credit, bankers' acceptances or other similar
instruments or obligations issued, or relating to liabilities or
obligations incurred, in the ordinary course of business (including those
issued to governmental entities in connection with self-insurance under
applicable workers' compensation statutes), or (B) completion guarantees,
surety, judgment, appeal or performance bonds, or other similar bonds,
instruments or obligations, provided, or relating to liabilities or
obligations incurred, in the ordinary course of business, or (C) Hedging
Obligations entered into for bona fide hedging purposes in the ordinary
course of business, or (D) Management Guarantees or (E) the financing of
insurance premiums in the ordinary course of business;
(ix) Indebtedness of a Receivables Subsidiary secured by a Lien on
all or part of the assets disposed of in, or otherwise incurred in
connection with, a Financing Disposition;
(x) Indebtedness of any Person that is assumed by the Company or
any Restricted Subsidiary in connection with its acquisition of assets from
such Person or any Affiliate thereof or is issued and outstanding on or
prior to the date on which such Person was acquired by the Company or any
Restricted Subsidiary or merged or consolidated with or into the Company or
any Restricted Subsidiary (other than Indebtedness Incurred to finance, or
otherwise in connection with, such acquisition); provided, however, that on
-------- -------
the date of such acquisition, merger or consolidation, after giving effect
thereto, (x) with respect to any such Indebtedness of the Company, either
-
Issuer or any Subsidiary Guarantor, (A) the Company could Incur at least
-
$1.00 of additional Indebtedness pursuant to paragraph (a) above or (B) the
-
Consolidated Coverage Ratio is greater than it was on such date immediately
prior to giving effect to such acquisition and (y) with respect to any such
-
Indebtedness of any Restricted Subsidiary that is not a Subsidiary
Guarantor or an Issuer, the Company could Incur at least $1.00 of
additional Indebtedness pursuant to paragraph (a) above; and any
Refinancing Indebtedness with respect to any such Indebtedness;
(xi) Indebtedness in an amount at any time outstanding not exceeding
twice the amount of Excluded Contributions made after the Issue Date;
provided, however, that the proceeds of such Indebtedness and the related
-------- -------
amount of such Excluded Contributions are used to finance the acquisition
of assets of any Person in a Related Business or the merger or
consolidation of such a Person into or with the Company or any Restricted
Subsidiary (including payment of any related fees and expenses), or to
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<PAGE>
refinance any such acquisition, merger or consolidation with such
Indebtedness being Incurred for such refinancing within nine months of the
closing of such acquisition, merger or consolidation; and any Refinancing
Indebtedness with respect to any such Indebtedness; and
(xii) Indebtedness of the Company or any Restricted Subsidiary in an
aggregate principal amount which, when taken together with the amount of
all Indebtedness Incurred pursuant to this clause (xii) and then
outstanding, does not exceed an amount equal to 11.5% of Consolidated Total
Assets at any time outstanding.
(c) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this Section 407 (i) any other obligation of the obligor on
-----------
such Indebtedness (or of any other Person who could have Incurred such
Indebtedness under this Section 407) arising under any Guarantee, Lien or letter
-----------
of credit, bankers' acceptance or other similar instrument or obligation
supporting such Indebtedness shall be disregarded to the extent that such
Guarantee, Lien or letter of credit, bankers' acceptance or other similar
instrument or obligation secures the principal amount of such Indebtedness; (ii)
in the event that Indebtedness meets the criteria of more than one of the types
of Indebtedness described in paragraph (b) above, the Company, in its sole
discretion, shall classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such clauses; and
(iii) the amount of Indebtedness issued at a price that is less than the
principal amount thereof shall be equal to the amount of the liability in
respect thereof determined in accordance with GAAP.
(d) For purposes of determining compliance with any Dollar-
denominated restriction on the Incurrence of Indebtedness denominated in a
foreign currency, the Dollar-equivalent principal amount of such Indebtedness
Incurred pursuant thereto shall be calculated based on the relevant currency
exchange rate in effect on the date that such Indebtedness was Incurred, in the
case of term Indebtedness, or first committed, in the case of revolving credit
Indebtedness, provided that (x) the Dollar-equivalent principal amount of any
--------
such Indebtedness outstanding on the Issue Date shall be calculated based on the
relevant currency exchange rate in effect on the Issue Date, (y) if such
Indebtedness is Incurred to refinance other Indebtedness denominated in a
foreign currency, and such refinancing would cause the applicable Dollar-
denominated restriction to be exceeded if calculated at the relevant currency
exchange rate in effect on the date of such refinancing, such Dollar-denominated
restriction shall be deemed not to have been exceeded so long as the principal
amount of such refinancing Indebtedness does not exceed the principal amount of
such Indebtedness being refinanced and (z) the Dollar-equivalent principal
amount of Indebtedness denominated in a foreign currency and Incurred pursuant
to the Senior Credit Facility shall be calculated based on the relevant currency
exchange rate in effect on, at the Company's option, (i) the Issue Date, (ii)
any date
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on which any of the respective commitments under the Senior Credit Facility
shall be reallocated between or among facilities or subfacilities thereunder, or
on which such rate is otherwise calculated for any purpose thereunder, or (iii)
the date of such Incurrence. The principal amount of any Indebtedness Incurred
to refinance other Indebtedness, if Incurred in a different currency from the
Indebtedness being refinanced, shall be calculated based on the currency
exchange rate applicable to the currencies in which such respective Indebtedness
is denominated that is in effect on the date of such refinancing.
Section 408. Limitation on Other Subordinated Indebtedness. The
---------------------------------------------
Company shall not permit either Issuer to Incur any Indebtedness that is
expressly subordinated in right of payment to any Senior Indebtedness of such
Issuer, unless such Indebtedness so Incurred ranks pari passu in right of
---- -----
payment with, or is subordinated in right of payment to, such Issuer's
Indebtedness with respect to the Notes. The Company shall not Incur any
Indebtedness that is expressly subordinated in right of payment to any Senior
Indebtedness of the Company, unless such Indebtedness so Incurred ranks pari
----
passu in right of payment with the Company's Note Guarantee, or is subordinated
- -----
in right of payment to the Company's Note Guarantee. The Company shall not
permit any Subsidiary Guarantor to Incur any Indebtedness that is expressly
subordinated in right of payment to any Senior Indebtedness of such Subsidiary
Guarantor, unless such Indebtedness so Incurred ranks pari passu in right of
---- -----
payment with such Subsidiary Guarantor's Subsidiary Guarantee, or is
subordinated in right of payment to such Subsidiary Guarantee. Unsecured
Indebtedness shall not be deemed to be subordinate or junior to secured
Indebtedness merely because it is unsecured, and Indebtedness that is not
guaranteed by a particular Person shall not be deemed to be subordinate or
junior to Indebtedness that is so guaranteed merely because it is not so
guaranteed.
Section 409. Limitation on Restricted Payments. (a) The Company
---------------------------------
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to (i) declare or pay any dividend or make any distribution on or in
respect of its Capital Stock (including any such payment in connection with any
merger or consolidation to which the Company is a party) except (x) dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) and (y) dividends or distributions payable to the Company or any
Restricted Subsidiary (and, in the case of any such Restricted Subsidiary making
such dividend or distribution, to other holders of its Capital Stock on no more
than a pro rata basis, measured by value), (ii) purchase, redeem, retire or
--- ----
otherwise acquire for value any Capital Stock of the Company held by Persons
other than the Company or a Restricted Subsidiary (other than any acquisition of
Capital Stock deemed to occur upon the exercise of options if such Capital Stock
represents a portion of the exercise price thereof), (iii) purchase, repurchase,
redeem, defease or otherwise acquire or retire for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations (other than a purchase, redemption, defeasance or other
acquisition or retirement for value in anticipation of satisfying
69
<PAGE>
a sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of such acquisition or retirement) or (iv) make
any Investment (other than a Permitted Investment) in any Person (any such
dividend, distribution, purchase, redemption, repurchase, defeasance, other
acquisition or retirement or Investment being herein referred to as a
"Restricted Payment"), if at the time the Company or such Restricted Subsidiary
------------------
makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company could not incur at least an additional $1.00 of
Indebtedness pursuant to Section 407(a); or
--------------
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to be
as determined in good faith by the Board of Directors, whose determination
shall be conclusive) declared or made subsequent to the Issue Date and then
outstanding would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from April 30, 1998 to the end of
the most recent fiscal quarter ending prior to the date of such
Restricted Payment for which consolidated financial statements of the
Company are available (or, in case such Consolidated Net Income shall
be a negative number, 100% of such negative number);
(B) the aggregate Net Cash Proceeds, and fair value (as
determined in good faith by the Board of Directors) of property or
assets, received (x) by the Company as capital contributions to the
Company after the Issue Date or from the issuance or sale (other than
to a Restricted Subsidiary) of its Capital Stock (other than
Disqualified Stock) after the Issue Date (other than Excluded
Contributions) or (y) by the Company or any Restricted Subsidiary from
the issuance and sale by the Company or any Restricted Subsidiary
after the Issue Date of Indebtedness that shall have been converted
into or exchanged for Capital Stock of the Company (other than
Disqualified Stock), plus the amount of cash, property or assets
----
(determined as provided above) received by the Company or any
Restricted Subsidiary upon such conversion or exchange;
(C) the aggregate amount equal to the net reduction in
Investments in Unrestricted Subsidiaries resulting from (i) dividends,
distributions, interest payments, return of capital, repayments of
Investments or other transfers of
70
<PAGE>
assets to the Company or any Restricted Subsidiary from any
Unrestricted Subsidiary, or (ii) the redesignation of any Unrestricted
Subsidiary as a Restricted Subsidiary (valued in each case as provided
in the definition of "Investment"), not to exceed in the case of any
such Unrestricted Subsidiary the aggregate amount of Investments
(other than Permitted Investments) made by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary after the Issue
Date; and
(D) in the case of any disposition or repayment of any
Investment constituting a Restricted Payment (without duplication of
any amount deducted in calculating the amount of Investments at any
time outstanding included in the amount of Restricted Payments), an
amount in the aggregate equal to the lesser of the return of capital,
repayment or other proceeds with respect to all such Investments and
the initial amount of all such Investments.
(b) The provisions of Section 409(a) will not prohibit any of the
--------------
following (each, a "Permitted Payment"):
-----------------
(i) any purchase, redemption, repurchase, defeasance or other
acquisition or retirement of Capital Stock of the Company or Subordinated
Obligations made by exchange (including any such exchange pursuant to the
exercise of a conversion right or privilege in connection with which cash
is paid in lieu of the issuance of fractional shares) for, or out of the
proceeds of the substantially concurrent issuance or sale of, Capital Stock
of the Company (other than Disqualified Stock and other than Capital Stock
issued or sold to a Subsidiary) or a substantially concurrent capital
contribution to the Company; provided, however, that the Net Cash Proceeds
-------- -------
from such issuance, sale or capital contribution shall be excluded in
subsequent calculations under Section 409(a)(3)(B);
--------------------
(ii) any purchase, redemption, repurchase, defeasance or other
acquisition or retirement of Subordinated Obligations (x) made by exchange
for, or out of the proceeds of the substantially concurrent issuance or
sale of, Indebtedness of either Issuer or any Note Guarantor or Refinancing
Indebtedness Incurred in compliance with Section 407, (y) from Net
-----------
Available Cash to the extent permitted under Section 411 or (z) to the
-----------
extent required by the agreement governing such Subordinated Obligations,
following the occurrence of a Change of Control (or other similar event
described therein as a "change of control"), but only if the Company shall
have complied with Section 415 and, if required, purchased all Notes
-----------
tendered pursuant to the offer to repurchase all the Notes required
thereby, prior to purchasing or repaying such Subordinated Obligations;
71
<PAGE>
(iii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Section 409(a);
--------------
(iv) Investments or other Restricted Payments in an aggregate amount
outstanding at any time not to exceed the amount of Excluded Contributions;
provided, however, that such Excluded Contributions shall not include any
-------- -------
Excluded Contribution the proceeds of which were used to finance the
acquisition of assets from any Person in a Related Business or the merger
or consolidation of such a Person into or with the Company or any
Restricted Subsidiary pursuant to Section 407(b)(xi);
------------------
(v) payments by the Company to repurchase or otherwise acquire
Capital Stock (including any options, warrants or other rights in respect
thereof), from Management Investors (including loans, advances, dividends
or distributions by the Company to a Parent to permit such Parent to make
any such repurchase or other acquisition), such payments, loans, advances,
dividends or distributions not to exceed an amount (net of repayments of
any such loans or advances) equal to (1) $10.0 million, plus (2) $2.0
- ---- -
million multiplied by the number of calendar years that have commenced
since the Issue Date, plus (3) the Net Cash Proceeds received by the
---- -
Company since the Issue Date from, or as a capital contribution from, the
issuance or sale to Management Investors of Capital Stock (including any
options, warrants or other rights in respect thereof), to the extent such
Net Cash Proceeds are not included in any calculation under clause Section
-------
409(a)(3)(B)(x);
---------------
(vi) the payment of (or loans, advances, dividends or distributions
by the Company to a Parent to pay) dividends on the common stock or equity
of the Company (or such Parent) following a public offering of such common
stock or equity, in an amount not to exceed in any fiscal year 6% of the
aggregate gross proceeds received by the Company in or from such public
offering;
(vii) Restricted Payments (including loans or advances) in an
aggregate amount which, when taken together with all Restricted Payments
made pursuant to this clause (vii) and then outstanding, net of repayments
of any such loans or advances, does not exceed $5.0 million at any time
outstanding;
(viii) payments by the Company or any Restricted Subsidiary to satisfy
obligations under the Management Agreements and Permitted Parent Payments;
(ix) dividends or other distributions of Capital Stock, Indebtedness
or other securities of Unrestricted Subsidiaries; and
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<PAGE>
(x) the Transactions;
provided, that (A) in the case of clauses (iii), (vi) and (vii), the net amount
- --------
of any such Permitted Payment shall be included in subsequent calculations of
the amount of Restricted Payments, (B) in the case of clause (v), at the time of
any calculation of the amount of Restricted Payments, the net amount of
Permitted Payments that have then actually been made under clause (v) that is in
excess of 50% of the total amount of Permitted Payments then permitted under
clause (v) shall be included in such calculation of the amount of Restricted
Payments, (C) in all cases other than pursuant to clauses (A) and (B)
immediately above, the net amount of any such Permitted Payment shall be
excluded in subsequent calculations of the amount of Restricted Payments and (D)
solely with respect to clause (vii), no Default or Event of Default shall have
occurred or be continuing at the time of any such Permitted Payment after giving
effect thereto.
Section 410. Limitation on Restrictions on Distributions from
------------------------------------------------
Restricted Subsidiaries. The Company shall not, and shall not permit any
- -----------------------
Restricted Subsidiary to, create or otherwise cause to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligations owed to the Company, (ii)
make any loans or advances to the Company or (iii) transfer any of its property
or assets to the Company, except any encumbrance or restriction:
(1) pursuant to an agreement or instrument in effect at or entered
into on the Issue Date (including the Senior Credit Facility), this
Indenture or the Notes;
(2) pursuant to any agreement or instrument of a Person, or relating
to Indebtedness or Capital Stock of a Person, which Person is acquired by
or merged or consolidated with or into the Company or any Restricted
Subsidiary, or which agreement or instrument is assumed by the Company or
any Restricted Subsidiary in connection with an acquisition of assets from
such Person, as in effect at the time of such acquisition, merger or
consolidation (except to the extent that such Indebtedness was incurred to
finance, or otherwise in connection with, such acquisition, merger or
consolidation); provided, however, that for purposes of this clause (2), if
-------- -------
a Person other than the Company or the relevant Issuer is the Successor,
any Subsidiary thereof or agreement or instrument of such Person or any
such Subsidiary shall be deemed acquired or assumed, as the case may be, by
the Company or a Restricted Subsidiary, as the case may be, when such
Person becomes the Successor;
(3) pursuant to an agreement or instrument (a "Refinancing
-----------
Agreement") effecting a refinancing of Indebtedness Incurred pursuant to,
---------
or that otherwise extends,
73
<PAGE>
renews, refunds, refinances or replaces, an agreement or instrument
referred to in clause (1) or (2) of this Section 410 or this clause (3) (an
-----------
"Initial Agreement") or contained in any amendment, supplement or other
-----------------
modification to an Initial Agreement (an "Amendment"); provided, however,
--------- -------- -------
that the encumbrances and restrictions contained in any such Refinancing
Agreement or Amendment are not materially less favorable to the Holders of
the Notes taken as a whole than encumbrances and restrictions contained in
the Initial Agreement or Initial Agreements to which such Refinancing
Agreement or Amendment relates (as determined in good faith by the
Company);
(4) (A) that restricts in a customary manner the subletting,
assignment or transfer of any property or asset that is subject to a lease,
license or similar contract, or the assignment or transfer of any lease,
license or other contract, (B) by virtue of any transfer of, agreement to
transfer, option or right with respect to, or Lien on, any property or
assets of the Company or any Restricted Subsidiary not otherwise prohibited
by this Indenture, (C) contained in mortgages, pledges or other security
agreements securing Indebtedness of a Restricted Subsidiary to the extent
restricting the transfer of the property or assets subject thereto, (D)
pursuant to customary provisions restricting dispositions of real property
interests set forth in any reciprocal easement agreements of the Company or
any Restricted Subsidiary, (E) pursuant to Purchase Money Obligations that
impose encumbrances or restrictions on the property or assets so acquired,
(F) on cash or other deposits or net worth imposed by customers under
agreements entered into in the ordinary course of business, (G) pursuant to
customary provisions contained in agreements and instruments entered into
in the ordinary course of business (including leases and joint venture and
other similar agreements entered into in the ordinary course of business)
or (H) that arises or is agreed to in the ordinary course of business and
does not detract from the value of property or assets of the Company or any
Restricted Subsidiary in any manner material to the Company or such
Restricted Subsidiary;
(5) with respect to a Restricted Subsidiary (or any of its property
or assets) imposed pursuant to an agreement entered into for the direct or
indirect sale or disposition of all or substantially all the Capital Stock
or assets of such Restricted Subsidiary (or the property or assets that are
subject to such restriction) pending the closing of such sale or
disposition;
(6) required by any applicable law, rule, regulation or order or by
any regulatory authority having jurisdiction over the Company or any
Restricted Subsidiary or any of their businesses; or
74
<PAGE>
(7) pursuant to an agreement or instrument (A) relating to any
Indebtedness permitted to be Incurred subsequent to the Issue Date pursuant
to the provisions of Section 407, if the Company determines that such
-----------
encumbrance or restriction will not cause the Issuers not to have the funds
necessary to pay the principal of or interest on the Notes, (B) relating to
any sale of receivables by a Foreign Subsidiary or (C) relating to
Indebtedness of or a Financing Disposition to or by any Receivables Entity.
Section 411 Limitation on Sales of Assets and Subsidiary Stock. (a)
--------------------------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary to, make
any Asset Disposition unless
(i) the Company or such Restricted Subsidiary receives
consideration (including by way of relief from, or by any other Person
assuming responsibility for, any liabilities, contingent or otherwise) at
the time of such Asset Disposition at least equal to the fair market value
of the shares and assets subject to such Asset Disposition, as such fair
market value may be determined (and shall be determined, to the extent such
Asset Disposition or any series of related Asset Dispositions involves
aggregate consideration in excess of $5.0 million) in good faith by the
Board of Directors, whose determination shall be conclusive (including as
to the value of all noncash consideration);
(ii) in the case of any Asset Disposition (or series of related
Asset Dispositions) having a fair market value of $2.5 million or more, at
least 75% of the consideration therefor (excluding any consideration by way
of relief from, or by any other Person assuming responsibility for, any
liabilities, contingent or otherwise, that are not Indebtedness) received
by the Company or such Restricted Subsidiary is in the form of cash, and
provided that this clause (ii) shall not apply to any Asset Disposition (or
--------
series of related Asset Dispositions), involving assets that accounted for
less than two percent of Consolidated EBITDA during the period of the most
recent four consecutive fiscal quarters ending prior to the date of such
Asset Disposition for which consolidated financial statements of the
Company are available; and
(iii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by the Company (or any Restricted Subsidiary,
as the case may be) as follows:
(A) first, either (x) to the extent the Issuers elect (or to the
-----
extent required by the terms of any Senior Indebtedness or any
Indebtedness of a Restricted Subsidiary), to prepay, repay or purchase
Senior Indebtedness or
75
<PAGE>
such Indebtedness of a Restricted Subsidiary (in each case other than
Indebtedness owed to the Company or a Restricted Subsidiary) within
365 days after the date of such Asset Disposition, or (y) to the
extent the Company or such Restricted Subsidiary elects, to reinvest
in Additional Assets (including by means of an investment in
Additional Assets by a Restricted Subsidiary with Net Available Cash
received by the Company or another Restricted Subsidiary) within 365
days from the date of such Asset Disposition or, if such reinvestment
in Additional Assets is a project that is authorized by the Board of
Directors and committed to by the Company or any Restricted Subsidiary
and will take longer than such 365 days to complete, the period of
time necessary to complete such project;
(B) second, to the extent of the balance of such Net Available
------
Cash after application in accordance with clause (A) above (such
balance, the "Excess Proceeds"), to make an offer (or to cause the
---------------
Issuers to make an offer) to purchase Notes and (to the extent the
Issuers elect, or to the extent required by the terms thereof) to
purchase, redeem or repay any other Senior Subordinated Indebtedness,
pursuant and subject to Section 411(b) and Section 411(c) and the
-------------- --------------
agreements governing such other Indebtedness; and
(C) third, to the extent of the balance of such Net Available
-----
Cash after application in accordance with clauses (A) and (B) above,
to fund (to the extent consistent with any other applicable provision
of this Indenture) any general corporate purpose (including the
repurchase, repayment or other acquisition or retirement of any
Subordinated Obligations);
provided, however, that in connection with any prepayment, repayment or purchase
- -------- -------
of Indebtedness pursuant to clause (A)(x) or (B) above, the Company or such
Restricted Subsidiary shall retire such Indebtedness and shall cause the related
loan commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this Section 411, the
-----------
Company and the Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance with this Section 411 except to the extent that the
-----------
aggregate Net Available Cash from all Asset Dispositions that is not applied in
accordance with this Section 411 exceeds $10.0 million. If the aggregate
-----------
principal amount of Notes and Senior Subordinated Indebtedness validly tendered
and not withdrawn (or otherwise subject to purchase, redemption or repayment) in
connection with an offer pursuant to clause (B) above exceeds the Excess
Proceeds, the Excess Proceeds will be apportioned between the Notes and such
Senior Subordinated Indebtedness,
76
<PAGE>
with the portion of the Excess Proceeds payable in respect of the Notes to equal
the lesser of (x) the Excess Proceeds amount multiplied by a fraction, the
numerator of which is the outstanding principal amount of the Notes and the
denominator of which is the sum of the outstanding principal amount of the Notes
and the outstanding principal amount of the relevant Senior Subordinated
Indebtedness, and (y) the aggregate principal amount of Notes validly tendered
and not withdrawn.
For the purposes of clause (ii) of paragraph (a) above, the following
are deemed to be cash: (1) Temporary Cash Investments and Cash Equivalents, (2)
the assumption of Indebtedness of the Company (other than Disqualified Stock of
the Company) or any Restricted Subsidiary and the release of the Company or such
Restricted Subsidiary from all liability on payment of the principal amount of
such Indebtedness in connection with such Asset Disposition, (3) Indebtedness of
any Restricted Subsidiary that is no longer a Restricted Subsidiary as a result
of such Asset Disposition, to the extent that the Company and each other
Restricted Subsidiary are released from any Guarantee of payment of the
principal amount of such Indebtedness in connection with such Asset Disposition,
(4) securities received by the Company or any Restricted Subsidiary from the
transferee that are converted by the Company or such Restricted Subsidiary into
cash and (5) consideration consisting of Indebtedness of the Company or any
Restricted Subsidiary.
(b) In the event of an Asset Disposition that requires the purchase
of Notes pursuant to Section 411(a)(iii)(B), the Issuers shall purchase (on a
----------------------
several basis in proportion to each Issuer's Several Share in respect of the
Notes) Notes tendered pursuant to an offer by the Issuers for the Notes (the
"Offer"), at a purchase price of 100% of their principal amount plus accrued and
-----
unpaid interest to the date of purchase, in accordance with the procedures
(including prorating in the event of oversubscription) set forth in Section
-------
411(c). If the aggregate purchase price of the Notes tendered pursuant to the
- ------
Offer is less than the Net Available Cash allotted to the purchase of Notes, the
remaining Net Available Cash will be available to the Company and its Restricted
Subsidiaries for use in accordance with Section 411(a)(iii)(B) (to repay Senior
----------------------
Subordinated Indebtedness) or Section 411(a)(iii)(C). The Issuers shall not be
----------------------
required to make an Offer for Notes pursuant to this Section 411 if the Net
-----------
Available Cash available therefor (after application of the proceeds as provided
in Section 411(a)(iii)(A)) is less than $10.0 million for any particular Asset
----------------------
Disposition (which lesser amounts shall be carried forward for purposes of
determining whether an Offer is required with respect to the Net Available Cash
from any subsequent Asset Disposition).
(c) The Issuers shall, not later than 45 days after the Issuers
become obligated to make an Offer pursuant to this Section 411, mail a notice to
-----------
each Holder with a copy to the Trustee stating: (1) that an Asset Disposition
that requires the purchase of a portion of the Notes has occurred and that such
Holder has the right (subject to the prorating described
77
<PAGE>
below) to require the Issuers, on a several basis in proportion to each Issuer's
Several Share in respect of the Notes, to purchase a portion of such Holder's
Notes at a purchase price in cash equal to 100% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the date of purchase (subject to
Section 307); (2) the circumstances and relevant facts and financial information
- ------------
regarding such Asset Disposition; (3) the repurchase date (which shall be no
earlier than 30 days nor later than 60 days from the date such notice is
mailed); (4) the instructions determined by the Issuers, consistent with this
Section 411, that a Holder must follow in order to have its Notes purchased; and
- -----------
(5) the amount of the Offer. If, upon the expiration of the period for which the
Offer remains open, the aggregate principal amount of Notes surrendered by
Holders exceeds the amount of the Offer, the Issuers shall select the Notes to
be purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Issuers so that only Notes in denominations of $1,000 or
integral multiples thereof, shall be purchased).
(d) The Issuers shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 411. To the extent that the provisions of any securities laws or
- -----------
regulations conflict with provisions of this Section 411, the Issuers shall
-----------
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Section 411 by virtue
-----------
thereof.
Section 412. Limitation on Transactions with Affiliates. (a) The
------------------------------------------
Company shall not, and shall not permit any Restricted Subsidiary to, directly
or indirectly, enter into or conduct any transaction or series of related
transactions (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of the Company (an "Affiliate
---------
Transaction") unless (i) the terms of such Affiliate Transaction are not
- -----------
materially less favorable to the Company or such Restricted Subsidiary, as the
case may be, than those that could be obtained at the time in a transaction with
a Person who is not such an Affiliate, and (ii) if such Affiliate Transaction
involves aggregate consideration in excess of $5.0 million, the terms of such
Affiliate Transaction have been approved by a majority of the Disinterested
Directors. For purposes of this Section 412(a) any Affiliate Transaction shall
--------------
be deemed to have satisfied the requirements set forth in this Section 412(a) if
--------------
(x) such Affiliate Transaction is approved by a majority of the Disinterested
Directors or (y) in the event there are no Disinterested Directors, a fairness
opinion is provided by a nationally recognized appraisal or investment banking
firm with respect to such Affiliate Transaction.
78
<PAGE>
(b) The provisions of Section 412(a) will not apply to:
--------------
(i) any Restricted Payment Transaction,
(ii) (1) the entering into, maintaining or performance of any
employment contract, collective bargaining agreement, benefit plan, program
or arrangement, related trust agreement or any other similar arrangement
for or with any employee, officer or director heretofore or hereafter
entered into in the ordinary course of business, including vacation,
health, insurance, deferred compensation, severance, retirement, savings or
other similar plans, programs or arrangements, (2) the payment of
compensation, performance of indemnification or contribution obligations,
or any issuance, grant or award of stock, options, other equity-related
interests or other securities, to employees, officers or directors in the
ordinary course of business, (3) the payment of fees to directors of the
Company or any of its Restricted Subsidiaries, (4) any transaction with an
officer or director in the ordinary course of business not involving more
than $100,000 in any one case, or (5) Management Advances and payments in
respect thereof,
(iii) any transaction with the Company, any Restricted Subsidiary or
any Receivables Entity,
(iv) any transaction arising out of agreements or instruments in
existence on the Issue Date, and any payments made pursuant thereto,
(v) execution, delivery and performance of the Management
Agreements, including (1) payment to CDR or any Affiliate of CDR of a fee
of $2.7 million plus out-of-pocket expenses in connection with the
Transactions, and (2) payment to CDR or any Affiliate of CDR of fees of up
to $1.0 million in any fiscal year plus all out-of-pocket expenses incurred
by CDR or any such Affiliate in connection with its performance of
management consulting, monitoring, financial advisory or other services
with respect to the Company and its Restricted Subsidiaries,
(vi) the Transactions, all transactions in connection therewith
(including the financing thereof), and, without duplication of clause (v)
above, all fees or expenses paid or payable in connection with the
Transactions,
(vii) any transaction in the ordinary course of business on terms not
materially less favorable to the Company or the relevant Restricted
Subsidiary than those that could be obtained at the time in a transaction
with a Person who is not an Affiliate of the Company, and
79
<PAGE>
(viii) any transaction in the ordinary course of business, or approved
by a majority of the Board of Directors, between the Company or any
Restricted Subsidiary and any Affiliate of the Company controlled by the
Company that is a joint venture or similar entity; provided, however, that
-------- -------
no other Affiliate of the Company (other than a Restricted Subsidiary) has
any Investment in such joint venture or similar entity.
Section 413. Limitation on Liens. The Company shall not, and shall
-------------------
not permit any Restricted Subsidiary to, directly or indirectly, create or
permit to exist any Lien (other than Permitted Liens) on any of its property or
assets (including Capital Stock of any other Person), whether owned on the Issue
Date or thereafter acquired, securing any Indebtedness of either Issuer or any
Note Guarantor that by its terms is expressly subordinated in right of payment
to or ranks pari passu in right of payment with the Notes or such Note
---- -----
Guarantor's Note Guarantee (the "Initial Lien"), unless contemporaneously
------------
therewith effective provision is made to secure the Indebtedness of such Issuer
or Note Guarantor due under this Indenture and the Notes or, in respect of Liens
on any Restricted Subsidiary's property or assets, any Note Guarantee of such
Restricted Subsidiary, equally and ratably with such obligation for so long as
such obligation is so secured by such Initial Lien. Any such Lien thereby
created in favor of the Notes or any such Note Guarantee will be automatically
and unconditionally released and discharged upon (i) the release and discharge
of the Initial Lien to which it relates, or (ii) any sale, exchange or transfer
to any Person not an Affiliate of the Company of the property or assets secured
by such Initial Lien, or of all of the Capital Stock held by the Company or any
Restricted Subsidiary in, or all or substantially all the assets of, any
Restricted Subsidiary creating such Lien.
Section 414. Future Note Guarantors. Except as described below, the
----------------------
Company shall cause each U.S. Subsidiary of JCI that is organized or acquired by
JCI after the Issue Date to execute and deliver to the Trustee a supplemental
indenture or other instrument pursuant to which such Subsidiary will guarantee
payment of the Guaranteed JCI Obligations, whereupon such Subsidiary will become
a Subsidiary Guarantor. The Company shall also cause each Restricted Subsidiary
of Jafra S.A. that is organized or acquired by Jafra S.A. after the Issue Date
to execute and deliver to the Trustee a supplemental indenture or other
instrument pursuant to which such Subsidiary will guarantee payment of the
Guaranteed Jafra S.A. Obligations, whereupon such Subsidiary will become a
Subsidiary Guarantor. The Company will not be required to cause any U.S.
Subsidiary of JCI to become a Subsidiary Guarantor unless and until such time as
such Subsidiary, together with any other U.S. Subsidiary of JCI that has not
then become a Subsidiary Guarantor, accounts for two percent or more of
Consolidated Total Assets. In addition, the Company may cause any Subsidiary
thereof that is not a Subsidiary Guarantor so to guarantee payment of the
Guaranteed Note Obligations of either Issuer and become a Subsidiary Guarantor.
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<PAGE>
Section 415. Purchase of Notes Upon a Change in Control. (a) Upon a
------------------------------------------
Change in Control Triggering Event, each Holder will have the right to require
the Issuers to repurchase, on a several basis in proportion to each Issuer's
Several Share in respect of the Notes, all or any part of such Holder's Notes at
a purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of repurchase (subject to
Section 307); provided, however, that the Issuers shall not be obligated to
- ----------- -------- -------
repurchase Notes pursuant to this Section 415 in the event that they have
-----------
exercised their right to redeem all the Notes as provided in Article 10.
----------
(b) In the event that, at the time of such Change of Control
Triggering Event, the terms of the Bank Indebtedness restrict or prohibit the
repurchase of Notes pursuant to this Section 415, then prior to the mailing of
-----------
the notice to Holders provided for in Section 415(c) but in any event not later
--------------
than 30 days following the date the Company obtains actual knowledge of any
Change of Control Triggering Event (unless the Issuers have exercised their
right to redeem all the Notes as provided in Article 10), the Issuers shall (i)
----------
repay in full all Bank Indebtedness or offer to repay in full all Bank
Indebtedness and repay the Bank Indebtedness of each lender who has accepted
such offer or (ii) obtain the requisite consent under the agreements governing
the Bank Indebtedness to permit the repurchase of the Notes as provided for in
Section 415(c). The Issuers shall first comply with the provisions of the
- --------------
immediately preceding sentence before they shall be required to repurchase Notes
pursuant to the provisions set forth below in this Section 415. The Issuers'
-----------
failure to comply with the provisions of this Section 415(b) or the provisions
--------------
of Section 415(c) shall constitute an Event of Default under Section 601(4) and
-------------- --------------
not Section 601(2).
--------------
(c) Unless the Issuers have exercised their right to redeem all the
Notes under Article 10, the Issuers shall, not later than 30 days following the
----------
date the Company obtains actual knowledge of any Change of Control Triggering
Event having occurred, mail a notice to each Holder with a copy to the Trustee
stating: (1) that a Change of Control Triggering Event has occurred or may
occur and that such Holder has, or upon such occurrence will have, the right to
require the Issuers, severally in proportion to their respective obligations in
respect of the Notes, to purchase such Holder's Notes at a purchase price in
cash equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of purchase (subject to the right of Holders of
record on a record date to receive interest on the relevant interest payment
date); (2) the circumstances and relevant facts and financial information
regarding such Change of Control; (3) the repurchase date (which shall be no
earlier than 30 days nor later than 60 days from the date such notice is
mailed); (4) the instructions determined by the Issuers, consistent with this
Section 415, that a Holder must follow in order to have its Notes purchased; and
- -----------
(5) if such notice is mailed prior to the occurrence of a Change of Control or
Change of Control Triggering Event, that such offer is conditioned on the
occurrence of such Change of Control Triggering Event.
81
<PAGE>
(d) The Issuers shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 415. To the extent that the provisions of any securities laws or
- -----------
regulations conflict with provisions of this Section 415, the Issuers shall
-----------
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Section 415 by virtue
-----------
thereof.
ARTICLE 5
SUCCESSORS
----------
Section 501 When the Company or an Issuer May Merge, etc. The
---------------------------------------------
Company shall not, and shall not permit either Issuer to, consolidate with or
merge with or into, or convey, transfer or lease all or substantially all its
assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor")
---------
will be a Person organized and existing under the laws of the United States
of America, any State thereof or the District of Columbia, or (in the case
of the Company only) the Cayman Islands, Luxembourg, Kingdom of the
Netherlands (including the Netherlands Antilles) or any other member of the
European Union, or (in the case of Jafra S.A. only) Mexico, and the
Successor (if not the Company or such Issuer) will expressly assume all the
obligations of the Company or such Issuer under the Company's Note
Guarantee (in the case of the Company) or the Notes (in the case of such
Issuer) and this Indenture by executing and delivering to the Trustee a
supplemental indenture or one or more other documents or instruments in
form reasonably satisfactory to the Trustee;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness that becomes an obligation of the Successor or
any Restricted Subsidiary as a result of such transaction as having been
Incurred by the Successor or such Restricted Subsidiary at the time of such
transaction), no Default will have occurred and be continuing;
(iii) immediately after giving effect to such transaction, either (A)
the Company (or, if applicable, its Successor) could Incur at least $1.00
of additional Indebtedness pursuant Section 407(a) or (B) the Consolidated
--------------
Coverage Ratio of the Company (or, if applicable, its Successor) would
equal or exceed the Consolidated Coverage Ratio of the Company immediately
prior to giving effect to such transaction;
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<PAGE>
(iv) each Note Guarantor (other than any party to any such
consolidation or merger) shall have delivered a supplemental indenture or
other document or instrument in form reasonably satisfactory to the
Trustee, confirming its Note Guarantee; and
(v) the Company will have delivered to the Trustee an Officer's
Certificate of the Company and an Opinion of Counsel, each to the effect
that such consolidation, merger or transfer complies with the provisions
described in this paragraph of this Section 501; provided that (x) in
----------- --------
giving such opinion such counsel may rely on an Officer's Certificate of
the Company as to compliance with the foregoing clauses (ii) and (iii) and
as to any matters of fact, and (y) no Opinion of Counsel will be required
for a consolidation, merger or transfer described in the last paragraph of
this Section 501.
-----------
Any Indebtedness that becomes an obligation of the Company or any
Restricted Subsidiary (or that is deemed to be Incurred by any Restricted
Subsidiary that becomes a Restricted Subsidiary) as a result of any such
transaction undertaken in compliance with this Section 501, and any Refinancing
-----------
Indebtedness with respect thereto, shall be deemed to have been Incurred in
compliance with Section 407.
-----------
Clauses (ii) and (iii) of the first paragraph of this Section 501 will
-----------
not apply to any transaction in which (1) any Restricted Subsidiary consolidates
with, merges into or transfers all or part of its properties and assets to the
Company or an Issuer or (2) the Company consolidates or merges with or into or
transfers all or substantially all its assets to (x) an Affiliate incorporated
or organized for the purpose of reincorporating or reorganizing the Company in
another jurisdiction in the United States of America, Cayman Islands, Luxembourg
or Kingdom of the Netherlands (including the Netherlands Antilles) or any other
member of the European Union, or changing its legal structure to a corporation
or other entity or (y) a Restricted Subsidiary of the Company so long as all
assets of the Company and the Restricted Subsidiaries immediately prior to such
transaction (other than Capital Stock of such Restricted Subsidiary) are owned
by such Restricted Subsidiary and its Restricted Subsidiaries immediately after
the consummation thereof. The first paragraph of this Section 501 will not
-----------
apply to the Mergers.
Section 502. Successor Substituted. Upon any transaction involving
---------------------
the Company or either Issuer in accordance with Section 501, in which the
-----------
Company or the relevant Issuer is not the Successor, the Successor will succeed
to, and be substituted for, and may exercise every right and power of, the
Company or the relevant Issuer under this Indenture, and thereafter the
predecessor Company or the relevant Issuer shall be relieved of all obligations
and covenants under this Indenture.
83
<PAGE>
ARTICLE 6
REMEDIES
--------
Section 601 Events of Default. An "Event of Default" occurs if:
-----------------
(1) the Issuers default in any payment of interest on any Note when
due, whether or not such payment shall be prohibited by Article 14, and
----------
such default continues for a period of 30 days;
(2) the Issuers default in the payment of the principal of any Note
when the same becomes due at its Stated Maturity, upon optional redemption,
upon required purchase, upon declaration of acceleration or otherwise,
whether or not such payment shall be prohibited by Article 14;
----------
(3) the Company or an Issuer fails to comply with Article 5;
---------
(4) the Company fails to comply with Section 407, 408, 409, 410, 411,
----------- --- --- --- ---
412, 413, 414 or 415 (other than a failure to purchase the Notes) and such
--- --- --- ---
failure continues for 30 days after the notice specified in the penultimate
paragraph of this Section 601;
-----------
(5) the Company fails to comply with any of its agreements in the
Notes or this Indenture (other than those referred to in (1), (2), (3) or
(4) above) and such failure continues for 60 days after the notice
specified in the penultimate paragraph of this Section 601;
(6) any Subsidiary Guarantor fails to comply with its obligations
under any Subsidiary Guarantee and such failure continues for 30 days after
the notice specified in the penultimate paragraph of this Section 601;
-----------
(7) the Company, either of the Issuers or any Significant Subsidiary
fails to pay any Indebtedness within any applicable grace period after
final maturity or the acceleration of any such Indebtedness by the holders
thereof because of a default if the total amount of such Indebtedness
unpaid or accelerated exceeds $10,000,000 or its foreign currency
equivalent;
(8) the Company, either of the Issuers or any Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
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<PAGE>
(B) consents to the entry of an order for relief against it in
an involuntary case;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
(9) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company, either of the Issuers or
any Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company, either of the Issuers
or any Significant Subsidiary or for any substantial part of its
property; or
(C) orders the winding up or liquidation of the Company, either
of the Issuers or any Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 days;
(10) the rendering of any judgment or decree for the payment of money
in an amount (net of any insurance or indemnity payments actually received
within 90 days from the entry thereof, or to be received in respect thereof
in the event any appeal thereof shall be unsuccessful) in excess of
$10,000,000 or its foreign currency equivalent against the Company, either
of the Issuers or any Significant Subsidiary by a court or other
adjudicatory authority of competent jurisdiction that is not discharged, or
bonded or insured by a third Person, if such judgment or decree remains
outstanding for a period of 90 days following such judgment or decree and
is not discharged, waived or stayed; or
(11) the failure of any Note Guarantee by the Company or by a
Subsidiary Guarantor that is a Significant Subsidiary to be in full force
and effect (except as contemplated by the terms thereof or of this
Indenture) or the denial or disaffirmation - in writing by the Company or
any Subsidiary Guarantor that is a Significant Subsidiary of its
obligations under its Note Guarantee (other than by reason of the
termination of this Indenture or such Note Guarantee or the release of such
Note Guarantee in accordance with such Note Guarantee of this Indenture),
if such Default continues for 10 days.
85
<PAGE>
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
-------------- ------------------
similar Federal, state or foreign law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
---------
similar official under any Bankruptcy Law.
A Default under clause (4), (5) or (6) is not an Event of Default
until the Trustee or the Holders of at least 25% in principal amount of the
Notes notify the Company (and the Trustee in the case of a notice by Holders) of
the Default and the Company does not cure such Default within the time specified
therein after receipt of such notice. Such notice must specify the Default,
demand that it be remedied and state that such notice is a "Notice of Default".
When a Default or an Event of Default is cured, it ceases.
The Issuers shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officer's Certificate of
any Event of Default under clause (7) or (10) and any event that with the giving
of notice or the lapse of time would become an Event of Default under clause
(4), (5) or (6), its status and what action the Issuers are taking or propose to
take with respect thereto.
Section 602 Acceleration of Maturity; Rescission and Annulment. If
--------------------------------------------------
an Event of Default (other than an Event of Default specified in Section 601(8)
--------------
or Section 601(9) with respect to an Issuer) occurs and is continuing, the
--------------
Trustee by notice to the Issuers, or the Holders of at least a majority in
principal amount of the outstanding Notes by notice to the Issuers and the
Trustee, in either case specifying in such notice the respective Event of
Default and that such notice is a "notice of acceleration," may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable, provided that so long as any Designated Senior Indebtedness of an
Issuer shall be outstanding, such acceleration shall not be effective until the
earlier to occur of (x) five Business Days following delivery of a written
notice of such acceleration of the Notes to the Issuers and the holders of all
such Designated Senior Indebtedness or each Representative thereof and (y) the
acceleration of any such Designated Senior Indebtedness. Upon the effectiveness
of such a declaration, such principal and interest will be due and payable
immediately. Notwithstanding the foregoing, if an Event of Default specified in
Section 601(8) or Section 601(9) with respect to an Issuer occurs and is
- -------------- --------------
continuing, then the principal of and any accrued interest on all the
Outstanding Notes will ipso facto become and be immediately due and payable
---- -----
without any declaration or other act on the part of the Trustee or any Holder.
The Holders of a majority in principal amount of the Outstanding Notes by notice
to the Company and the Trustee may rescind an acceleration and
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<PAGE>
its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
non-payment of principal or interest that has become due solely because of such
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
Notwithstanding the foregoing, in the event an Event of Default
specified in Section 601(7) shall have occurred and be continuing, such Event of
--------------
Default and all consequences thereof (including without limitation any
acceleration or resulting payment default) shall be annulled, waived and
rescinded automatically and without any action by the Trustee or the Holders and
be of no further effect if within 30 days after such Event of Default (x) the
Indebtedness that is the subject of such Event of Default has been discharged or
paid in full, or (y) the holders thereof have rescinded or waived the
acceleration, notice or action (as the case may be) giving rise to such Event of
Default, or (z) the default in respect of such Indebtedness that is the basis
for such Event of Default has been cured.
Section 603. Other Remedies; Collection Suit by Trustee. If an Event
------------------------------------------
of Default occurs and is continuing, the Trustee may, but is not obligated under
Section 603 to pursue any available remedy to collect the payment of principal
- -----------
of or interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture. If an Event of Default specified in Section 601(1)
--------------
or 601(2) occurs and is continuing, the Trustee may recover judgment in its own
------
name and as trustee of an express trust against each Issuer for its respective
Several Share of the whole amount then due and owing (together with interest on
any unpaid interest to the extent lawful with respect to such Several Share) and
the amounts provided for in Section 707.
-----------
Section 604. Trustee May File Proofs of Claim. The Trustee may file
--------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Holders allowed in
any judicial proceedings relative to either Issuer or any other obligor upon the
Notes, its creditors or its property and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 707.
-----------
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Notes or the rights of any Holder thereof
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<PAGE>
or to authorize the Trustee to vote in respect of the claim of any Holder in any
such proceeding.
Section 605. Trustee May Enforce Claims Without Possession of Notes.
------------------------------------------------------
All rights of action and claims under this Indenture or the Notes may be
prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the Holders
of the Notes in respect of which such judgment has been recovered.
Section 606. Application of Money Collected. Any money collected by
------------------------------
the Trustee pursuant to this Article 6 shall be applied in the following order,
---------
at the date or dates fixed by the Trustee and, in case of the distribution of
such money on account of principal (or premium, if any) or interest, upon
presentation of the Notes and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
First: To the payment of all amounts due the Trustee under Section
----- -------
707;
---
Second: To holders of Senior Indebtedness of the Issuers to the
------
extent required by Article 14.
----------
Third: To the payment of the amounts then due and unpaid upon the
-----
Notes for principal (and premium, if any) and interest, in respect of which
or for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Notes for principal (and premium, if any) and interest,
respectively; and
Fourth: to the Issuers.
------
Section 607. Limitation on Suits. No Holder may pursue any remedy
-------------------
with respect to this Indenture or the Notes unless:
(1) such Holder has previously given the Trustee written notice that
an Event of Default is continuing;
(2) Holders of at least 25% in principal amount of the Outstanding
Notes have requested the Trustee in writing to pursue the remedy;
(3) such Holder or Holders have offered to the Trustee reasonable
security or indemnity against any loss, liability or expense;
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<PAGE>
(4) the Trustee has not complied with the request within 60 days
after receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Outstanding
Notes have not given the Trustee a direction inconsistent with the request
during such 60-day period.
A Holder may not use this Indenture to affect, disturb or prejudice
the rights of another Holder, to obtain a preference or priority over another
Holder or to enforce any right under this Indenture except in the manner herein
provided and for the equal and ratable benefit of all Holders.
Section 608. Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium and Interest. Notwithstanding any other provision in this Indenture,
- --------------------
the Holder of any Note shall have the absolute and unconditional right to
receive payment of the principal of and all (subject to Section 307) interest on
-----------
such Note on the respective Stated Maturity or Interest Payment Dates expressed
in such Note and to institute suit for the enforcement of any such payment on or
after such respective Stated Maturity or Interest Payment Dates, and such right
shall not be impaired without the consent of such Holder.
Section 609. Restoration of Rights and Remedies. If the Trustee or
----------------------------------
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture or any Note and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case the Issuers, any other obligor upon the
Notes, the Trustee and the Holders shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
Section 610. Rights and Remedies Cumulative. No right or remedy
------------------------------
herein conferred upon or reserved to the Trustee or to the Holders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 611. Delay or Omission Not Waiver. No delay or omission of
----------------------------
the Trustee or of any Holder of any Note to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of
89
<PAGE>
Default or an acquiescence therein. Every right and remedy given by this Article
-------
6 or by law to the Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Holders, as
the case may be.
Section 612. Control by Holders. The Holders of not less than a
------------------
majority in aggregate principal amount of the Outstanding Notes shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or of exercising any trust or power conferred on
the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture or, subject to Section 701, that the Trustee
-----------
determines is unduly prejudicial to the rights of other Holders or would involve
the Trustee in personal liability; provided, however, that the Trustee may take
-------- -------
any other action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action under this Indenture, the Trustee shall
be entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action. This
Section 612 shall be in lieu of (S) 316(a)(1)(A) of the TIA, and such (S)
- -----------
316(a)(1)(A) of the TIA is hereby expressly excluded from this Indenture and the
Notes, as permitted by the TIA.
Section 613 Waiver of Past Defaults. The Holders of not less than a
-----------------------
majority in aggregate principal amount of the Outstanding Notes may on behalf of
the Holders of all the Notes waive any past Default hereunder and its
consequences, except a Default
(1) in the payment of the principal of (or premium, if any) or
interest on any Note (which may only be waived with the consent of each
Holder of Notes affected), or
(2) in respect of a covenant or provision hereof that pursuant to the
second paragraph of Section 902 cannot be modified or amended without the
-----------
consent of the Holder of each Outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of
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<PAGE>
Default or impair any right consequent thereon. In case of any such waiver, the
Issuers, any other obligor upon the Notes, the Trustee and the Holders shall be
restored to their former positions and rights hereunder and under the Notes,
respectively. This paragraph of this Section 613 shall be in lieu of (S)
-----------
316(a)(1)(B) of the TIA and such (S) 316(a)(1)(B) of the TIA is hereby expressly
excluded from this Indenture and the Notes, as permitted by the TIA.
Section 614. Undertaking for Costs. All parties to this Indenture
---------------------
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture or the Notes, or
in any suit against the Trustee for any action taken, suffered or omitted by it
as Trustee, the filing by any party litigant in such suit of an undertaking to
pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant. This Section 614 shall not
-----------
apply to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in principal
amount of the Outstanding Notes, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium, if any) or interest
on any Note on or after the respective Stated Maturity or Interest Payment Dates
expressed in such Note.
Section 615. Waiver of Stay, Extension or Usury Laws. Each of the
---------------------------------------
Issuers (to the extent that it may lawfully do so) shall not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law or any usury or other similar law
wherever enacted, now or at any time hereafter in force, that would prohibit or
forgive such Issuer from paying all or any portion of its respective portions of
the principal of (or premium, if any) or interest on the Notes contemplated
herein or in the Notes or that may affect the covenants or the performance of
this Indenture; and each of the Issuers (to the extent that it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law, and shall
not hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE 7
THE TRUSTEE
-----------
Section 701. Certain Duties and Responsibilities. (a) Except during
-----------------------------------
the continuance of an Event of Default,
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<PAGE>
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions that by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture, but need not verify the
contents thereof.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that (i) this paragraph does not
limit the effect of paragraph (a) of this Section 701; (ii) the Trustee shall
-----------
not be liable for any error of judgment made in good faith by a Trust Officer,
unless it is proved that the Trustee was negligent in ascertaining the pertinent
facts; and (iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction received by
it pursuant to Section 612.
-----------
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of
Sections 701 and 703 hereof.
- ---------------------------
Section 702. Notice of Defaults. Within 90 days after the occurrence
------------------
of any Default, the Trustee shall transmit by mail to all Holders, as their
names and addresses appear in the Note Register, notice of such Default
hereunder known to the Trustee unless such Default shall have been cured or
waived; provided, however, that, except in the case of a
-------- -------
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<PAGE>
Default in the payment of the principal of, premium, if any, or interest on any
Note, the Trustee shall be protected in withholding such notice if and so long
as the board of directors, the executive committee or a trust committee of
Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders.
Section 703. Certain Rights of Trustee. Subject to the provisions of
-------------------------
Section 701:
- -----------
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(2) any request or direction of the Company or the Issuers mentioned
herein shall be sufficiently evidenced by a Company Request or Company
Order thereof, and any resolution of any Person's board of directors shall
be sufficiently evidenced if certified by an Officer of such Person as
having been duly adopted and being in full force and effect on the date of
such certificate;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officer's Certificate of the Company or
an Issuer;
(4) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report,
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<PAGE>
notice, request, direction, consent, order, bond, note, other evidence of
indebtedness or other paper or document; and
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
Section 704. Not Responsible for Recitals or Issuance of Notes. The
-------------------------------------------------
recitals contained herein and in the Notes, except the Trustee's certificates of
authentication, shall be taken as the statements of the Company, the Issuers and
any Subsidiary Guarantors, and neither the Trustee nor any Authenticating Agent
assumes any responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes, except that the Trustee represents that it is duly authorized to execute
and deliver this Indenture, authenticate the Notes and perform its obligations
hereunder and that the statements made by it in a Statement of Eligibility and
Qualification on Form T-1 supplied to the Issuers and any other obligor upon the
Notes in connection with the registration of any Notes and any Note Guarantees
issued hereunder are and will be true and accurate subject to the qualifications
set forth therein. Neither the Trustee nor any Authenticating Agent shall be
accountable for the use or application by the Company of Notes or the proceeds
thereof.
Section 705. May Hold Notes. The Trustee, any Authenticating Agent,
--------------
any Paying Agent, any Note Registrar or any other agent of the Issuers, in its
individual or any other capacity, may become the owner or pledgee of Notes and,
subject to Section 708 and Section 713, may otherwise deal with an Issuer or its
----------- -----------
Affiliates with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Note Registrar or such other agent.
Section 706. Money Held in Trust. Money held by the Trustee in trust
-------------------
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the Issuers.
Section 707. Compensation and Reimbursement. Each Issuer severally
------------------------------
agrees,
(1) to pay to the Trustee from time to time such Issuer's Several
Share of reasonable compensation for all services rendered by the Trustee
hereunder (which compensation shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust);
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<PAGE>
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for such Issuer's Several Share of all reasonable
out-of-pocket expenses incurred by the Trustee in accordance with any
provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to its negligence
or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against,
such Issuer's Several Share of any loss, liability or expense incurred
without negligence or bad faith on the Trustee's part, arising out of or in
connection with the administration of the trust or trusts hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder.
An Issuer need not pay for any settlement made without its consent.
Section 708. Conflicting Interests. If the Trustee has or shall
---------------------
acquire a conflicting interest within the meaning of the TIA, the Trustee shall
either eliminate such interest or resign, to the extent and in the manner
provided by, and subject to the provisions of, the TIA and this Indenture. To
the extent permitted by such Act, the Trustee shall not be deemed to have a
conflicting interest by virtue of being a trustee under this Indenture with
respect to Original Notes and Additional Notes, or a trustee under any other
indenture between the Company and the Trustee.
Section 709. Corporate Trustee Required; Eligibility. There shall at
---------------------------------------
all times be one (and only one) Trustee hereunder. The Trustee shall be a
Person that is eligible pursuant to the TIA to act as such and has a combined
capital and surplus of at least $50,000,000. If any such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of its supervising or examining authority, then for the purposes of this Section
and to the extent permitted by the TIA, the combined capital and surplus of such
Person shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section
-------
709, it shall resign immediately in the manner and with the effect hereinafter
- ---
specified in this Article.
Section 710. Resignation and Removal; Appointment of Successor. No
-------------------------------------------------
resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 711.
-----------
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<PAGE>
The Trustee may resign at any time by giving written notice thereof to
the Issuers. If the instrument of acceptance by a successor Trustee required by
Section 711 shall not have been delivered to the Trustee within 30 days after
- -----------
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Notes, delivered to the Trustee
and to the Company.
If at any time:
(1) the Trustee shall fail to comply with Section 708 after written
-----------
request therefor by the Issuers or by any Holder who has been a bona fide
Holder of a Note for at least six months, or
(2) the Trustee shall cease to be eligible under Section 709 and
-----------
shall fail to resign after written request therefor by the Issuers or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
bankrupt or insolvent or a receiver of the Trustee or of its property shall
be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (A) the Issuers may remove the Trustee, or (B) subject
to Section 614, any Holder who has been a bona fide Holder of a Note for at
-----------
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee or Trustees.
If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the Issuers
shall promptly appoint a successor Trustee and shall comply with the applicable
requirements of Section 711. If, within one year after such resignation,
-----------
removal or incapability, or the occurrence of such vacancy, a successor Trustee
shall be appointed by Act of the Holders of a majority in principal amount of
the Outstanding Notes delivered to the Issuers and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 711,
-----------
become the successor Trustee and to that extent supersede the successor Trustee
appointed by the Issuers. If no successor Trustee shall have been so appointed
by the Issuers or the Holders and accepted appointment in the manner required by
Section 711, then, subject to Section 614, any Holder who has been a bona fide
- ----------- -----------
Holder of a Note for at least six months may, on behalf of himself and all
others
96
<PAGE>
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee to all Holders in the
manner provided in Section 110. Each notice shall include the name of the
-----------
successor Trustee and the address of its Corporate Trust Office.
Section 711. Acceptance of Appointment by Successor. In case of the
--------------------------------------
appointment hereunder of a successor Trustee, every such successor Trustee so
appointed shall execute, acknowledge and deliver to the Issuers and to the
retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee;
but, on the request of the Issuers or the successor Trustee, such retiring
Trustee shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder.
Upon request of any such successor Trustee, the Issuers shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to above.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article 7.
---------
Section 712. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business. Any corporation into which the Trustee may be merged or converted or
- --------
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article 7,
---------
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Notes shall have been authenticated, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Notes so authenticated with the same effect as if
such successor Trustee had itself authenticated such Notes.
97
<PAGE>
Section 713. Preferential Collection of Claims Against Issuers. If
-------------------------------------------------
and when the Trustee shall be or become a creditor of the Issuers (or any other
obligor upon the Notes), the Trustee shall be subject to the provisions of the
TIA regarding the collection of claims against the Issuers (or any such other
obligor).
Section 714. Appointment of Authenticating Agent. The Trustee may
-----------------------------------
appoint an Authenticating Agent acceptable to the Company to authenticate the
Notes. Any such appointment shall be evidenced by an instrument in writing
signed by a Trust Officer, a copy of which instrument shall be promptly
furnished to the Company. Unless limited by the terms of such appointment, an
Authenticating Agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication (or execution of a
certificate of authentication) by the Trustee includes authentication (or
execution of a certificate of authentication) by such Authenticating Agent. An
Authenticating Agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.
Section 715. Withholding Taxes. Notwithstanding any other provision
-----------------
of this Agreement, the Trustee, as agent for the Issuers and the Note
Guarantors, shall exclude and withhold from each payment of principal and
interest and other amounts due hereunder or under the Notes or the Note
Guarantees any and all withholding taxes applicable thereto as required by law.
The Trustee agrees to act as such withholding agent and, in connection
therewith, whenever any present or future taxes or similar charges are required
to be withheld with respect to any amounts payable in respect of the Notes or
the Note Guarantees, to withhold such amounts and timely pay the same to the
appropriate authority in the name of and on behalf of the Holders, that it will
furnish to the Holders such forms or certificates as are necessary or
appropriate to provide the certification, identification, information or
documentation described in Section 404(iii), that it will file any necessary
----------------
withholding tax returns or statements when due, and that, as promptly as
possible after the payment thereof, it will deliver to each Holder appropriate
documentation showing the payment thereof, together with such additional
documentary evidence as such Holders may reasonably request from time to time.
ARTICLE 8
HOLDERS' LISTS AND REPORTS BY
TRUSTEE AND ISSUERS
-----------------------------
Section 801. Issuers to Furnish Trustee Names and Addresses of
-------------------------------------------------
Holders. The Issuers will furnish or cause to be furnished to the Trustee
- -------
98
<PAGE>
(1) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date, and
(2) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Issuers of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Note
- -------- -------
Registrar, no such list need be furnished pursuant to this Section 801.
-----------
Section 802. Preservation of Information; Communications to Holders.
------------------------------------------------------
The Trustee shall preserve, in as current a form as is reasonably practicable,
the names and addresses of Holders contained in the most recent list, if any,
furnished to the Trustee as provided in Section 801 and the names and addresses
-----------
of Holders received by the Trustee in its capacity as Note Registrar; provided,
--------
however, that if and so long as the Trustee shall be the Note Registrar, the
- -------
Note Register shall satisfy the requirements relating to such list. None of the
Company, the Issuers, any Subsidiary Guarantor or the Trustee or any other
Person shall be under any responsibility with regard to the accuracy of such
list. The Trustee may destroy any list furnished to it as provided in Section
-------
801 upon receipt of a new list so furnished.
- ---
The rights of Holders to communicate with other Holders with respect
to their rights under this Indenture or under the Notes, and the corresponding
rights and privileges of the Trustee, shall be as provided by the TIA.
Every Holder of Notes, by receiving and holding the same, agrees with
the Issuers and the Trustee that neither the Issuers nor the Trustee nor any
agent of either of them shall be held accountable by reason of any disclosure of
information as to names and addresses of Holders made pursuant to the TIA.
Section 803. Reports by Trustee. The Trustee shall transmit to
------------------
Holders such reports concerning the Trustee and its actions under this Indenture
as may be required pursuant to the TIA at the times and in the manner provided
pursuant thereto. A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Notes are listed, with the SEC and with the Issuers. The Issuers will
notify the Trustee when any Notes are listed on any stock exchange.
99
<PAGE>
ARTICLE 9
AMENDMENT, SUPPLEMENT OR WAIVER
-------------------------------
Section 901. Without Consent of Holders. Without the consent of the
--------------------------
Holders of any Notes, the Company, the Issuers, the Trustee and (as applicable)
any Subsidiary Guarantor may enter into one or more indentures supplemental
hereto, for any of the following purposes:
(1) to cure any ambiguity, omission, defect or inconsistency,
(2) to provide for the assumption by a successor of the obligations
of the Company or an Issuer under the Indenture,
(3) to provide for uncertificated Notes in addition to or in place of
certificated Notes,
(4) to add Guarantees with respect to the Notes, to secure the Notes,
to confirm and evidence the release, termination or discharge of any
Guarantee or Lien with respect to or securing the Notes when such release,
termination or discharge is provided for under this Indenture,
(5) to add to the covenants of the Company or an Issuer for the
benefit of the Holders or to surrender any right or power conferred upon
the Company or an Issuer,
(6) to provide that any Indebtedness that becomes or will become an
obligation of a Successor or a Note Guarantor pursuant to a transaction
governed by Article 5 (and that is not a Subordinated Obligation) is Senior
---------
Subordinated Indebtedness for purposes of this Indenture,
(7) to make any change that does not adversely affect the rights of
any Holder under the Notes or this Indenture,
(8) to provide for or confirm the issuance of Additional Notes; or
(9) to comply with any requirement of the SEC in connection with the
qualification of the Indenture under the TIA or otherwise.
Notwithstanding the foregoing provisions of this Section 901 and
-----------
Section 902, on or after the date hereof (but after the execution and delivery
- -----------
of this Indenture and the
100
<PAGE>
issuance of the Notes and after or concurrently with consummation of the
Mergers), the Company, the Issuers, the Initial Jafra S.A. Subsidiaries and the
Trustee may execute and deliver the First Supplemental Indenture, in each case
without notice to or consent of any Holder.
Section 902. With Consent of Holders. Subject to Section 608, the
----------------------- -----------
Company, the Issuers, the Trustee and (if applicable) each Subsidiary Guarantor
may amend or supplement this Indenture or the Notes with the written consent of
the Holders of not less than a majority in aggregate principal amount of the
Outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes), and the Holders of not less than a majority in
aggregate principal amount of the Outstanding Notes by written notice to the
Trustee (including consents obtained in connection with a tender offer or
exchange offer for Notes) may waive any existing Default or Event of Default or
compliance by the Company or any Subsidiary Guarantor with any provision of this
Indenture, the Notes or any Subsidiary Guarantee.
Notwithstanding the provisions of this Section 902, without the
-----------
consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 613, may not:
-----------
(i) reduce the principal amount of the Notes whose Holders must
consent to an amendment or waiver;
(ii) reduce the rate of or extend the time for payment of interest
on any Notes;
(iii) reduce the principal or extend the Stated Maturity of any
Notes;
(iv) reduce the premium payable upon the redemption of any Note or
change the date on which any Note may be redeemed as described in Section
-------
1001;
----
(v) make any Note payable in money other than that stated in the
Notes;
(vi) make any change in Article 14 or Article 15 that adversely
---------- ----------
affects the rights of any Holder in any material respect;
(vii) impair the right of any Holder to receive payment of principal
of and interest on such Holder's Notes on or after the due dates therefor
or to institute suit for the enforcement of any payment on or with respect
to such Holder's Notes; or
101
<PAGE>
(viii) make any change in the amendment or waiver provisions
described in this sentence.
In addition, without the consent of the Holders of 75% in principal
amount of the Notes then Outstanding, no amendment may release the Company or
either Issuer from any of its obligations under its Note Guarantee, except in
compliance with the terms thereof or of this Indenture.
Notwithstanding Section 901 and the foregoing provisions of this
-----------
Section 902, no amendment to Article 14 or Article 15 of this Indenture or the
- ----------- ---------- ----------
definitions relating thereto that adversely affects the rights of any Holder of
Senior Indebtedness at the time outstanding (which Senior Indebtedness has been
previously designated in writing by the Company to the Trustee for this purpose)
may be made unless the holders of such Senior Indebtedness (or any group or
representative thereof authorized to give a consent) consent in writing to such
amendment.
It shall not be necessary for the consent of the Holders under this
Section 902 to approve the particular form of any proposed amendment, supplement
- -----------
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 902
-----------
becomes effective, the Issuers shall mail to the Holders of each Note affected
thereby, with a copy to the Trustee, a notice briefly describing the amendment,
supplement or waiver. Any failure of the Issuers to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any supplemental indenture or effectiveness of any such amendment, supplement or
waiver.
Section 903. Execution of Amendments, Supplements or Waivers. The
-----------------------------------------------
Trustee shall sign any amendment, supplement or waiver authorized pursuant to
this Article 9 if the amendment, supplement or waiver does not adversely affect
---------
the rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment, supplement or waiver, the Trustee shall be entitled to receive, and
shall be fully protected in relying upon, an Officer's Certificate and an
Opinion of Counsel to the effect that the execution of such amendment,
supplement or waiver has been duly authorized, executed and delivered by the
Issuers and that, subject to applicable bankruptcy, insolvency, fraudulent
transfer, fraudulent conveyance, reorganization, moratorium and other laws now
or hereinafter in effect affecting creditors' rights or remedies generally and
the general principles of equity (including standards of materiality, good
faith, fair dealing and reasonableness), whether considered in a proceeding at
law or at equity, such
102
<PAGE>
amendment, supplement or waiver is a valid and binding agreement of the Issuers,
enforceable against the Issuers in accordance with its terms.
Section 904. Revocation and Effect of Consents. Until an amendment,
---------------------------------
supplement or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of that Note or any
Note that evidences all or any part of the same debt as the consenting Holder's
Note, even if notation of the consent is not made on any Note. Subject to the
following paragraph of this Section 904, any such Holder or subsequent Holder
-----------
may revoke the consent as to such Holder's Note by notice to the Trustee or the
Issuers received by the Trustee or the Issuers, as the case may be, before the
date on which the Trustee receives an Officer's Certificate certifying that the
Holders of the requisite principal amount of Notes have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver. The
Issuers may, but shall not be obligated to, fix a record date for the purpose of
determining the Holders entitled to consent to any amendment, supplement or
waiver as set forth in Section 108.
-----------
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder of Notes, unless it makes a change described in any of clauses
(i) through (viii) of the second paragraph of Section 902. In that case, the
-----------
amendment, supplement or waiver shall bind each Holder of a Note who has
consented to it and every subsequent Holder of such Note or any Note that
evidences all or any part of the same debt as the consenting Holder's Note.
Section 905. Conformity with TIA. Every amendment or supplemental
-------------------
indenture executed pursuant to this Article shall conform to the requirements of
the TIA as then in effect.
Section 906. Notation on or Exchange of Notes. If an amendment,
--------------------------------
supplement or waiver changes the terms of a Note, the Trustee shall (if required
by the Issuers and in accordance with the specific direction of the Issuers)
request the Holder of the Note to deliver it to the Trustee. The Trustee shall
(if required by the Issuers and in accordance with the specific direction of the
Issuers) place an appropriate notation on the Note about the changed terms and
return it to the Holder. Alternatively, if the Issuers or the Trustee so
determines, the Issuers in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Failure to make
the appropriate notation or issue a new Note shall not affect the validity and
effect of such amendment, supplement or waiver.
103
<PAGE>
ARTICLE 10
REDEMPTION OF NOTES
-------------------
Section 1001. Right of Redemption. (a) Except as set forth in this
-------------------
Section 1001, the Notes will not be redeemable at the option of the Issuers
- ------------
prior to May 1, 2003. Thereafter, the Notes will be redeemable, at the Issuers'
option, in whole or in part, and from time to time on and after May 1, 2003 and
prior to maturity; provided, however, that any such optional redemption may only
-------- -------
be effected concurrently by both of the Issuers on a pro rata basis as between
their respective Portions, based on the relative proportions of the JCI Portion
and the Jafra S.A. Portion. Such redemption may be made upon notice mailed by
first-class mail to each Holder's registered address in accordance with Section
-------
1005. Any such redemption and notice may, in the Issuers' discretion, be
- ----
subject to the satisfaction of one or more conditions precedent. The Notes will
be so redeemable at the following Redemption Prices (expressed as a percentage
of principal amount), plus accrued interest, if any, to the relevant Redemption
Date (subject to Section 307), if redeemed during the 12-month period commencing
-----------
on May 1 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
------ ----------
<S> <C>
2003...................................... 105.875%
2004...................................... 103.917
2005...................................... 101.958
2006 and thereafter....................... 100.000
</TABLE>
(b) In addition, at any time and from time to time prior to May 1,
2001, the Issuers at their option may concurrently redeem the Notes, on a pro
rata basis as between their respective Portions (based on the relative
proportions of the JCI Portion and the Jafra S.A. Portion), in an aggregate
principal amount equal to up to 35% of the original aggregate principal amount
of the Notes (including the principal amount of any Additional Notes), with
funds in an aggregate amount (the "Redemption Amount") not exceeding the
-----------------
aggregate cash proceeds of one or more Equity Offerings, at a Redemption Price
(expressed as a percentage of principal amount thereof) of 111.75% plus accrued
interest, if any, to the Redemption Date (subject to Section 307); provided,
----------- --------
however, that an aggregate principal amount of the Notes equal to at least 65%
- -------
of the original aggregate principal amount of the Notes (including the principal
amount of any Additional Notes) must remain outstanding after each such
redemption. The Issuers may make such redemption upon notice mailed by first-
class mail to each Holder's registered address in accordance with Section 1005
------------
(but in no event more than 180 days after the completion of the related Equity
Offering). Any such notice may be given
104
<PAGE>
prior to the completion of the related Equity Offering, and any such redemption
or notice may, at the Issuers' discretion, be subject to the satisfaction of one
or more conditions precedent, including the completion of the related Equity
Offering.
(c) [Intentionally omitted]
(d) The Jafra S.A. Portion of the Notes may be redeemed, at the
option of Jafra S.A., at any time as a whole but not in part, on not less than
30 nor more than 60 days' notice in accordance with Section 1005, at a
------------
Redemption Price equal to 100% of the principal amount thereof, plus accrued and
unpaid interest (if any) to the date of redemption (subject to Section 307), in
-----------
the event Jafra S.A., any successor to Jafra S.A. or any current or future Note
Guarantor of such Jafra S.A. Portion has become or would become obligated to
pay, on the next date on which any amount would be payable with respect to the
Notes, and such obligation cannot be avoided by such Person's taking reasonable
measures available to it, any Additional Amounts in excess of Additional Amounts
that Jafra S.A., such successor or such Note Guarantor would be required to pay
if payments by Jafra S.A., such successor or such Note Guarantor were subject to
a 15% Mexican withholding tax as a result of a change in or an amendment to
applicable treaties or laws (including any regulations promulgated thereunder)
of Mexico (or any political subdivision or taxing authority thereof or therein),
or any change in or amendment to any official position regarding the application
or interpretation of such treaties, laws or regulations, which change or
amendment is announced or becomes effective on or after April 30, 1998
("Excessive Additional Amounts"); provided, however, that no such notice of
- ------------------------------ -------- -------
redemption may be given earlier than 60 days prior to the earliest date on which
Jafra S.A., such successor or such Note Guarantor would, but for such
redemption, be obligated to pay such Excessive Additional Amounts. Prior to the
publication of any notice of redemption pursuant to this provision, Jafra S.A.,
any successor to Jafra S.A. or any Note Guarantor will deliver to the Trustee
(a) a certificate duly signed by an officer of Jafra S.A., such successor or
such Note Guarantor stating that Jafra S.A., such successor or such Note
Guarantor is entitled to effect such redemption and setting forth a statement of
facts showing that the conditions precedent to the right of Jafra S.A., such
successor or such Note Guarantor so to redeem have occurred and (b) a written
opinion of Mexican legal counsel reasonably acceptable to the Trustee to the
effect that Jafra S.A., such successor or such Note Guarantor has or will become
obligated to pay such Excessive Additional Amounts as a result of an amendment
or change referred to in this provision.
Section 1002. Applicability of Article. Redemption or purchase of
------------------------
Notes as permitted by Section 1001 shall be made in accordance with this Article
------------ -------
10.
- --
Section 1003. Election to Redeem; Notice to Trustee. In case of any
-------------------------------------
redemption at the election of the Issuers of less than all of the Notes, the
Issuers shall, at least
105
<PAGE>
30 days prior to the Redemption Date initially fixed by the Issuers (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of Notes to be redeemed.
Section 1004. Selection by Trustee of Notes to Be Redeemed. In the
--------------------------------------------
case of any partial redemption, selection of the Notes for redemption will be
made not more than 60 days prior to the Redemption Date by the Trustee on a pro
rata basis, by lot or by such other method as the Trustee in its sole discretion
shall deem to be fair and appropriate, although no Note of $1,000 in original
principal amount or less will be redeemed in part.
The Trustee shall promptly notify the Issuers in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. On and after the
Redemption Date, interest will cease to accrue on Notes or portions thereof
called for redemption.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Notes shall relate, in
the case of any Note redeemed or to be redeemed only in part, to the portion of
the principal of such Note that has been or is to be redeemed.
Section 1005. Notice of Redemption. Notice of redemption or purchase
--------------------
as provided in Section 1001 shall be given by first class mail, postage prepaid,
------------
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Notes to be redeemed, at such Holder's address appearing in the
Note Register.
Any such notice shall state:
(1) the expected Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Notes are to be redeemed, the
identification (and, in the case of partial redemption, the respective
principal amounts) of the Notes to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Note, and that, unless the Issuers default in
making such redemption payment or the Paying Agent is prohibited from
making such payment pursuant to the terms of this Indenture, interest
thereon shall cease to accrue from and after said date, and
106
<PAGE>
(5) the place where such Notes are to be surrendered for payment of
the Redemption Price.
In addition, if such redemption, purchase or notice is subject to satisfaction
of one or more conditions precedent, as permitted by Section 1001, such notice
------------
shall describe each such condition, and if applicable, shall state that, in the
Issuers' discretion, the Redemption Date may be delayed until such time as any
or all such conditions shall be satisfied, or such redemption or purchase may
not occur and such notice may be rescinded in the event that any or all such
conditions shall not have been satisfied by the Redemption Date, or by the
Redemption Date as so delayed.
Notice of such redemption or purchase of Notes to be so redeemed or
purchased at the election of the Issuers shall be given by the Issuers or, at
the Issuers's request, by the Trustee in the name and at the several expense of
the Issuers.
The notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice to the Holder of any Note designated for redemption as a whole or in
part shall not affect the validity of the proceedings for the redemption of any
other Note.
Section 1006. Deposit of Redemption Price. On or prior to any
---------------------------
Redemption Date, the Issuers shall deposit with the Trustee or with a Paying
Agent (or, if either Issuer is acting as its own Paying Agent, such Issuer shall
segregate and hold in trust as provided in Section 403) an amount of money
-----------
sufficient to pay the Redemption Price of, and any accrued and unpaid interest
on, all the Notes or portions thereof which are to be redeemed on that date.
Section 1007. Notes Payable on Redemption Date. Notice of redemption
--------------------------------
having been given as provided in this Article 10, the Notes so to be redeemed
----------
shall, on the Redemption Date, become due and payable at the Redemption Price
herein specified and from and after such date (unless either of the Issuers
shall default in the payment of the Redemption Price or the Paying Agent is
prohibited from paying the Redemption Price pursuant to the terms of this
Indenture) such Notes shall cease to bear interest. Upon surrender of such
Notes for redemption in accordance with such notice, such Notes shall be paid by
the Issuers at the Redemption Price. Installments of interest whose Interest
Payment Date is on or prior to the Redemption Date shall be payable to the
Holders of such Notes registered as such on the relevant Regular Record Dates
according to their terms and the provisions of Section 307.
-----------
On and after any Redemption Date, if money sufficient to pay the
Redemption Price of and any accrued and unpaid interest on Notes called for
redemption shall have been
107
<PAGE>
made available in accordance with Section 1006, the Notes (or the portions
------------
thereof) called for redemption will cease to accrue interest and the only right
of the Holders of such Notes (or portions thereof) will be to receive payment of
the Redemption Price of and subject to the last sentence of the preceding
paragraph, any accrued and unpaid interest on such Notes (or portions thereof)
to the Redemption Date. If any Note (or portion thereof) called for redemption
shall not be so paid upon surrender thereof for redemption, the principal (and
premium, if any) shall, until paid, bear interest from the Redemption Date at
the rate borne by the Note (or portion thereof).
Section 1008. Notes Redeemed in Part. Any Note that is to be
----------------------
redeemed only in part shall be surrendered at the Place of Payment (with, if the
Issuers or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Issuers and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing) and the
Issuers shall execute and the Trustee shall authenticate and deliver to the
Holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such Holder in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Note so surrendered.
In the event of any partial redemption (other than a redemption under
Section 1001(d)), the several obligation of each Issuer for each Note that
- ---------------
remains outstanding shall continue in the same proportion as the relative
proportions of the JCI Portion and the Jafra S.A. Portion, respectively.
ARTICLE 11
SATISFACTION AND DISCHARGE
--------------------------
Section 1101. Satisfaction and Discharge of Indenture. This
---------------------------------------
Indenture shall cease to be of further effect (except as to any surviving rights
of conversion or transfer or exchange of Notes herein expressly provided for),
and the Trustee, on demand of and at the several expense of the Issuers, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture, when
(1) either
(A) all Notes theretofore authenticated and delivered (other than (i)
Notes that have been destroyed, lost or stolen and that have been replaced
or paid as provided in Section 306, and (ii) Notes for whose payment money
-----------
has theretofore been deposited in trust or segregated and held in trust by
the Issuers and thereafter repaid to the Issuers or
108
<PAGE>
discharged from such trust, as provided in Section 403) have been delivered
-----------
to the Trustee cancelled or for cancellation; or
(B) all such Notes not theretofore delivered to the Trustee cancelled
or for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements reasonably satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the several
expense, of the Issuers,
(2) the Issuers have deposited or caused to be deposited with the
Trustee an amount in United States dollars, U.S. Government Obligations, or
a combination thereof, sufficient to pay and discharge the entire
Indebtedness on such Notes not theretofore delivered to the Trustee
cancelled or for cancellation, for principal (and premium, if any) and
interest to the date of such deposit (in the case of Notes that have become
due and payable), or to the Stated Maturity or Redemption Date, as the case
may be;
(3) the Issuers have paid or caused to be paid all other sums then
payable hereunder by the Issuers; and
(4) the Issuers have delivered to the Trustee an Officer's
Certificate of the Issuers and an Opinion of Counsel each to the effect
that all conditions precedent provided for in this Section 1101 relating to
------------
the satisfaction and discharge of this Indenture have been complied with,
provided that any such counsel may rely on any Officer's Certificate as to
--------
matters of fact (including as to compliance with the foregoing clauses (1),
(2) and (3)).
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of each Issuer to the Trustee under Section 707 and, if money shall
-----------
have been deposited with the Trustee pursuant to subclause (2) of this Section
-------
1101, the obligations of the Trustee under Section 1102, shall survive.
- ---- ------------
Section 1102. Application of Trust Money. Subject to the provisions
-----------------------------------------
of the last paragraph of Section 403, all money deposited with the Trustee
-----------
pursuant to Section 1101 shall
------------
109
<PAGE>
be held in trust and applied by it, in accordance with the provisions of the
Notes and this Indenture, to the payment, either directly or through any Paying
Agent (including either Issuer acting as its own Paying Agent) as the Trustee
may determine, to the Persons entitled thereto, of the principal (and premium,
if any) and interest on the Notes; but such money need not be segregated from
other funds except to the extent required by law.
ARTICLE 12
DEFEASANCE OR COVENANT DEFEASANCE
---------------------------------
Section 1201. The Issuers' Option To Effect Defeasance or Covenant
----------------------------------------------------
Defeasance. The Issuers may, concurrently (and not separately) at their option,
- ----------
at any time, elect to have terminated the obligations of the Issuers with
respect to Outstanding Notes and to have terminated the obligations of any or
all Note Guarantors, with respect to the Note Guarantees, in each case, as set
forth in this Article 12, and elect to have either Section 1202 or Section 1203
---------- ------------ ------------
be applied to all of the Outstanding Notes (the "Defeased Notes"), upon
--------------
compliance with the conditions set forth below in Section 1204. Either Section
------------ -------
1202 or Section 1203 may be applied to the Defeased Notes to any Redemption Date
- ---- ------------
or the Stated Maturity of the Notes. Either option may be exercised to any
Redemption Date or to the Stated Maturity of the Notes.
Section 1202. Defeasance and Discharge. Upon the Issuers' exercise
------------------------
under Section 1201 of the option applicable to this Section 1202, the Issuers
------------ ------------
shall be deemed to have been released and discharged from their several
obligations with respect to the Defeased Notes on the date the relevant
conditions set forth in Section 1204 below are satisfied (hereinafter,
------------
"Defeasance"). For this purpose, such Defeasance means that the Issuers shall
- -----------
be deemed to have paid and discharged their respective Several Shares of the
entire indebtedness represented by the Defeased Notes, which shall thereafter be
deemed to be "Outstanding" only for the purposes of Section 1205 and the other
------------
Sections of this Indenture referred to in clauses (a) and (b) below, and the
Issuers and each of the Note Guarantors shall be deemed to have satisfied all
other obligations under such Notes and this Indenture insofar as such Notes are
concerned (and the Trustee, at the several expense of the Issuers, shall execute
proper instruments acknowledging the same), except for the following, which
shall survive until otherwise terminated or discharged hereunder: (a) the
rights of Holders of Defeased Notes to receive, solely from the trust fund
described in Section 1204 and as more fully set forth in such Section, payments
------------
in respect of the principal of and premium, if any, and interest on such Notes
when such payments are due, (b) the Issuers' obligations with respect to such
Defeased Notes under Sections 304, 305, 306, 402, 403 and 404, (c) the rights,
------------ --- --- --- --- ---
powers, trusts, duties and immunities of the Trustee hereunder, including the
Trustee's rights under Section 707, and
-----------
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<PAGE>
(d) this Article 12. Subject to compliance with this Article 12, the Issuers
---------- ----------
may, at their option and at any time, exercise their option under this Section
-------
1202 notwithstanding the prior exercise of their option under Section 1203 with
- ---- ------------
respect to the Notes.
Section 1203. Covenant Defeasance. Upon the Issuers' exercise under
-------------------
Section 1201 of the option applicable to this Section 1203, (a) the Issuers and
- ------------ ------------
the Note Guarantors shall be released from their respective obligations under
any covenant or provision contained in Section 405 and Sections 407 through 415
----------- ------------ ---
and the provisions of clauses (iii), (iv) and (v) of Section 501 shall not
-----------
apply, and (b) the occurrence of any event specified in clause (3) (with respect
to clauses (iii), (iv) and (v) of Section 501), (4) through (6) (with respect to
-----------
Section 405, Sections 407 through 415, inclusive, and any such covenants
- ----------- ------------------------
provided pursuant to Section 901(5)), inclusive, (7), (8) or (9) (with respect
--------------
to Subsidiaries), or (10) of Section 601 shall be deemed not to be or result in
-----------
an Event of Default, in each case with respect to the Defeased Notes on and
after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Notes shall thereafter be deemed not to be
-------------------
"Outstanding" for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with
such covenants or provisions, but shall continue to be deemed "Outstanding" for
all other purposes hereunder. For this purpose, such Covenant Defeasance means
that, with respect to the Outstanding Notes, the Company, the Issuers and the
Subsidiary Guarantors may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant or
provision, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or provision or by reason of any reference in any
such covenant or provision to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Section 601, but, except as specified above, the remainder of
-----------
this Indenture and such Outstanding Notes shall be unaffected thereby.
Section 1204. Conditions to Defeasance or Covenant Defeasance. The
-----------------------------------------------
following shall be the conditions to application of either Section 1202 or
------------
Section 1203 to the Outstanding Notes:
- ------------
(1) The Issuers shall have irrevocably deposited or caused to be
deposited with the Trustee in trust cash, in United States dollars, or U.S.
Government Obligations or a combination thereof, in amounts as will be
sufficient, in the opinion of a nationally recognized accounting or
investment banking firm expressed in a written certification thereof
delivered to the Trustee, to pay and discharge the principal of, and
premium, if any, and interest on the Defeased Notes on the Stated Maturity
or relevant Redemption Date in accordance with the terms of this Indenture
and the Notes;
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<PAGE>
(2) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as Section 601(8) or
--------------
601(9) is concerned, at any time during the period ending on the ninety-
------
first day after the date of such deposit;
(3) Such deposit shall not result in a breach or violation of, or
constitute a Default or Event of Default under, this Indenture or any other
material agreement or instrument to which either Issuer or the Company is a
party or by which it is bound;
(4) In the case of an election under Section 1202, the Issuers shall
------------
have delivered to the Trustee an Opinion of Counsel from Debevoise &
Plimpton or other counsel in the United States to the effect that (x) the
Company or the Issuers have received from, or there has been published by,
the Internal Revenue Service a ruling or (y) since the Issue Date, there
has been a change in the applicable Federal income tax law, in either case
to the effect that, and based thereon such opinion shall confirm to the
effect that, the Holders of the Outstanding Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such
Defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such Defeasance had not occurred;
(5) In the case of an election under Section 1203, the Issuers shall
------------
have delivered to the Trustee an Opinion of Counsel from Debevoise &
Plimpton or other counsel in the United States to the effect that the
Holders of the Outstanding Notes will not recognize income, gain or loss
for Federal income tax purposes as a result of such Covenant Defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; and
(6) The Issuers shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each to the effect that all
conditions precedent provided for in this Section 1204 relating to either
------------
the Defeasance under Section 1202 or the Covenant Defeasance under Section
------------ -------
1203, as the case may be, have been complied with. In rendering such
----
Opinion of Counsel, counsel may rely on any Officer's Certificate as to
compliance with the foregoing clauses (1), (2) and (3) of this Section 1204
------------
or as to any matters of fact.
From and after the time of any deposit pursuant to clause (1) of the
first paragraph of this Section 1204, the money or U.S. Government Obligations
------------
so deposited shall not be subject to the rights of the holders of Senior
Indebtedness of the Issuers pursuant to the subordination provisions of Article
-------
14 or Article 15.
- -- ----------
112
<PAGE>
Section 1205. Deposited Money and U.S. Government Obligations To Be
-----------------------------------------------------
Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the
- ---------------------------------------------
last paragraph of Section 403, all money and U.S. Government Obligations
-----------
(including the proceeds thereof) deposited with the Trustee (or such other
Person that would qualify to act as successor trustee under Article 7,
---------
collectively and solely for purposes of this Section 1205, Section 1412 and
------------ ------------
Section 1512, the "Trustee") pursuant to Section 1204 in respect of the Defeased
- ------------ ------- ------------
Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including either Issuer acting as its own Paying
Agent) as the Trustee may determine, to the Holders of such Notes of all sums
due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Issuers shall pay and indemnify the Trustee and its agents and
hold them harmless against any tax, fee or other charge imposed on or assessed
against the U.S. Government Obligations deposited pursuant to Section 1204 or
------------
the principal, premium, if any, and interest received in respect thereof, other
than any such tax, fee or other charge that by law is for the account of the
Holders of the Defeased Notes.
Anything in this Article 12 to the contrary notwithstanding, the
----------
Trustee shall deliver to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 1204
------------
hereof that, in the opinion of a nationally recognized accounting or investment
banking firm expressed in a written certification thereof to the Trustee, are in
excess of the amount thereof that would then be required to be deposited to
effect an equivalent Defeasance or Covenant Defeasance. Subject to Article 7,
---------
the Trustee shall not incur any liability to any Person by relying on such
opinion.
Section 1206. Reinstatement. If the Trustee or Paying Agent is unable
-------------
to apply any money or U.S. Government Obligations in accordance with Section
-------
1202 or 1203, as the case may be, by reason of any order or judgment of any
- ---- ----
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the obligations of the Issuers and each of the Note
Guarantors under this Indenture, the Notes and the Note Guarantees shall be
revived and reinstated as though no deposit had occurred pursuant to Section
-------
1202 or 1203, as the case may be, until such time as the Trustee or Paying Agent
- ---- ----
is permitted to apply all such money and U.S. Government Obligations in
accordance with Section 1202 or 1203, as the case may be; provided, however,
------------ ---- -------- -------
that if either Issuer or any Note Guarantor makes any payment of principal,
premium, if any, or interest on any Note following the reinstatement of its
obligations, such Issuer or Note Guarantor, as the case may be, shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money and U.S. Government Obligations held by the Trustee or Paying
Agent.
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<PAGE>
Section 1207. Repayment to Issuers. The Trustee shall pay to the
--------------------
Issuers upon Company Request any money held by it for the payment of principal
or interest that remains unclaimed for two years. After payment to the Issuers,
Holders entitled to money must look to the Issuers for payment as general
creditors unless an applicable abandoned property law designates another Person
and all liability of the Trustee or Paying Agent with respect to such money
shall thereupon cease.
ARTICLE 13
NOTE GUARANTEES
---------------
Section 1301. Guarantees Generally. (a) Guarantee of the Company.
-------------------- ------------------------
The Company, as primary obligor and not merely as surety, hereby irrevocably and
fully and unconditionally Guarantees, on a senior subordinated basis, the
punctual payment when due, whether at Stated Maturity, by acceleration or
otherwise, of all monetary obligations of each Issuer under this Indenture and
the Notes, whether for principal of or interest on the Notes, expenses,
indemnification or otherwise (all such obligations of each Issuer being herein
called the "Guaranteed Note Obligations").
---------------------------
(b) Guarantee of Each Issuer. JCI, as primary obligor and not merely
------------------------
as surety, hereby Guarantees, on a senior subordinated basis, the punctual
payment when due, whether at Stated Maturity, by acceleration or otherwise, of
all Guaranteed Note Obligations of Jafra S.A. under this Indenture and the Notes
with respect to the Jafra S.A. Portion. Jafra S.A., as primary obligor and not
merely as surety, hereby Guarantees, on a senior subordinated basis, the
punctual payment when due, whether at Stated Maturity, by acceleration or
otherwise, of all Guaranteed Note Obligations of JCI under this Indenture and
the Notes with respect to the JCI Portion. Proceedings or other actions to
enforce either such Note Guarantee of either Issuer may not be initiated or
taken until the earlier of (i) 30 days after written demand for payment has been
made thereunder by the Trustee or the Holders in accordance with the terms of
this Indenture and (ii) the occurrence of an event specified in Section 601(8)
--------------
or 601(9) with respect to such Issuer.
------
(c) Guarantee of Each Subsidiary Guarantor. Any U.S. Subsidiary
--------------------------------------
Guarantor from time to time party hereto, as primary obligor and not merely as
surety, hereby jointly and severally, irrevocably and fully and unconditionally
Guarantees, on a senior subordinated basis, the punctual payment when due,
whether at Stated Maturity, by acceleration or otherwise, of all Guaranteed Note
Obligations of JCI under this Indenture and the Notes (all such Guaranteed Note
Obligations being herein called the "Guaranteed JCI Obligations"). Each Jafra
--------------------------
S.A. Subsidiary Guarantor from time to time party hereto, as primary obligor and
114
<PAGE>
not merely as surety, hereby jointly and severally, irrevocably and fully and
unconditionally Guarantees, on a senior subordinated basis, the punctual payment
when due, whether at Stated Maturity, by acceleration or otherwise, of all
Guaranteed Note Obligations of Jafra S.A. under this Indenture and the Notes
(all such Guaranteed Note Obligations being herein called the "Guaranteed Jafra
----------------
S.A. Obligations").
- ----------------
Any term or provision of this Indenture notwithstanding, each
Subsidiary Guarantee shall not exceed the maximum amount that can be guaranteed
by the applicable Subsidiary Guarantor without rendering the Subsidiary
Guarantee, as it relates to such Subsidiary Guarantor, voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
For the avoidance of doubt, notwithstanding any other provision of
this Indenture, Grupo Jafra shall not be required to enter into a Note
Guarantee.
(d) Further Agreements of Each Note Guarantor. (i) Each Note
-----------------------------------------
Guarantor hereby agrees that (to the fullest extent permitted by law) its
obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of this Indenture, the Notes or the obligations of
the Issuers or any other Note Guarantor to the Holders or the Trustee hereunder
or thereunder, the absence of any action to enforce the same, any waiver or
consent by any Holder with respect to any provisions hereof or thereof, any
release of any other Note Guarantor, the recovery of any judgment against the
Issuers, any action to enforce the same, whether or not a notation concerning
its Note Guarantee is made on any particular Note, or any other circumstance
that might otherwise constitute a legal or equitable discharge or defense of a
guarantor.
(ii) Each Note Guarantor hereby waives (to the fullest extent
permitted by law) the benefit of diligence, presentment, demand of payment,
filing of claims with a court in the event of insolvency or bankruptcy of the
Issuers, any right to require a proceeding first against the Issuers, protest,
notice and all demands whatsoever and covenants that (except as otherwise
provided in Section 1303) its Note Guarantee will not be discharged except by
------------
complete performance of the obligations contained in the Notes, this Indenture
and this Note Guarantee. Such Note Guarantee is a guarantee of payment and not
of collection. Each Note Guarantor further agrees (to the fullest extent
permitted by law) that, as between it, on the one hand, and the Holders of Notes
and the Trustee, on the other hand, subject to this Article 13 and Article 15,
---------- ----------
(1) the maturity of the obligations guaranteed by its Note Guarantee may be
accelerated as and to the extent provided in Article 6 for the purposes of such
---------
Note Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed by such
Note Guarantee, and (2) in the event of any acceleration of such obligations as
provided in Article 6, such obligations (whether or not due
---------
115
<PAGE>
and payable) shall forthwith become due and payable by such Note Guarantor in
accordance with the terms of this Section 1301 for the purpose of such Note
------------
Guarantee. Neither the Trustee nor any other Person shall have any obligation to
enforce or exhaust any rights or remedies or to take any other steps under any
security for the Guaranteed Note Obligations or against the Issuers or any other
Person or any property of the Issuers or any other Person before the Trustee is
entitled to demand payment and performance by any or all Note Guarantors of
their obligations under their respective Note Guarantees or under this
Indenture.
(iii) Until terminated in accordance with Section 1303, each Note
------------
Guarantee shall remain in full force and effect and continue to be effective
should any petition be filed by or against the relevant Issuer for liquidation
or reorganization, should the relevant Issuer become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the relevant Issuer's assets, and
shall, to the fullest extent permitted by law, continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Notes are, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee on such Notes, whether as a
"voidable preference," "fraudulent transfer" or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, the Notes shall, to
the fullest extent permitted by law, be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
(e) Each Note Guarantor that makes a payment or distribution under
its Note Guarantee shall have the right to seek contribution from the relevant
non-paying Issuer or any non-paying Note Guarantor that has also Guaranteed the
relevant Guaranteed Note Obligations in respect of which such payment or
distribution is made, so long as the exercise of such right does not impair the
rights of the Holders under this Note Guarantee.
(f) Each Note Guarantor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by this Indenture
and that its Note Guarantee, and the waiver set forth in Section 1305 is
------------
knowingly made in contemplation of such benefits.
(g) Each Note Guarantor also hereby agrees to pay any and all
reasonable out-of-pocket expenses (including reasonable counsel fees and
expenses) incurred by the Trustee or the Holders in enforcing any rights under
its Note Guarantee.
Section 1302. Continuing Guarantees. Each Note Guarantee shall be a
---------------------
continuing Guarantee and shall (i) remain in full force and effect until payment
in full of the principal amount of all outstanding Notes (whether by payment at
maturity, purchase,
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<PAGE>
redemption, defeasance, retirement or other acquisition) and all other relevant
Guaranteed Note Obligations then due and owing, unless earlier terminated as
provided in Section 1303, (ii) be binding upon such Note Guarantor and (iii)
------------
inure to the benefit of and be enforceable by the Trustee, the Holders and their
permitted successors, transferees and assigns.
Section 1303. Release of Note Guarantees. Notwithstanding the
--------------------------
provisions of Section 1302, Note Guarantees will be subject to termination and
------------
discharge under the circumstances described in this Section 1303:
------------
(1) The Company will automatically and unconditionally be released
from all obligations under its Note Guarantee, and such Note Guarantee
shall thereupon terminate and be discharged and of no further force or
effect, (i) with respect to the predecessor Company, as and when provided
in Section 502, (ii) pursuant to the terms of its Note Guarantee, (iii)
-----------
upon Defeasance or Covenant Defeasance of the relevant Issuer's
obligations, or satisfaction and discharge of this Indenture, as provided
in Article 11 or Article 12, and (iv) subject to Section 1301(d)(iii), upon
---------- ---------- --------------------
payment in full of the aggregate principal amount of all Notes then
outstanding for which the relevant Issuer is liable and all other
Guaranteed Note Obligations of such Issuer then due and owing.
(2) An Issuer will automatically and unconditionally be released from
all obligations under its Note Guarantee with respect to an Issuer or the
Issuers, as the case may be and such Note Guarantee shall thereupon
terminate and be discharged and of no further force or effect, (i) with
respect to the relevant predecessor Issuer, as and when provided in Section
-------
502, (ii) pursuant to the terms of its Note Guarantee, (iii) upon
---
Defeasance or Covenant Defeasance of the other Issuer's obligations, or
satisfaction and discharge of this Indenture, as provided in Article 11 or
----------
Article 12, and (iv) subject to Section 1301(d)(iii), upon payment in full
---------- --------------------
of the aggregate principal amount of all Notes then outstanding for which
the other Issuer is liable and all other Guaranteed Note Obligations of the
other Issuer then due and owing.
(3) Any Subsidiary Guarantor will automatically and unconditionally
be released from all obligations under its Subsidiary Guarantee, and such
Subsidiary Guarantee shall thereupon terminate and be discharged and of no
further force or effect, (i) concurrently with any sale or disposition (by
merger or otherwise) of any Subsidiary Guarantor or any interest therein in
accordance with the terms of this Indenture (including Section 411) by the
-----------
Company or a Restricted Subsidiary, following which such Subsidiary
Guarantor is no longer a Restricted Subsidiary of the Company, (ii)
pursuant to the terms of its Subsidiary Guarantee, (iii) at any time that
such Subsidiary Guarantor is released from all its obligations under all
its Guarantees of
117
<PAGE>
payment by the relevant Issuer of Indebtedness (other than Bank
Indebtedness) of such Issuer, (iv) upon the merger or consolidation of such
Subsidiary Guarantor with and into the Company, an Issuer or another
Subsidiary Guarantor that is the surviving Person in such merger or
consolidation, (v) upon Defeasance or Covenant Defeasance of the relevant
Issuer's obligations, or satisfaction and discharge of this Indenture, as
provided in Article 11 or Article 12, and (vi) subject to Section
---------- ---------- -------
1301(d)(iii), upon payment in full of the aggregate principal amount of all
------------
Notes then outstanding for which the relevant Issuer is liable and all
other Guaranteed Note Obligations of such Issuer then due and owing.
Upon any such occurrence specified in this Section 1303, the Trustee shall
------------
execute any documents reasonably required in order to evidence such release,
discharge and termination in respect of such Note Guarantee.
Section 1304. Agreement to Subordinate. Each Note Guarantee is, to
------------------------
the extent and in the manner set forth in Article 15, subordinated and subject
----------
in right of payment to the prior payment in full of all Senior Indebtedness of
the Note Guarantor giving such Note Guarantee and each Note Guarantee is made
subject to such provisions of this Indenture.
Section 1305. Waiver of Subrogation. Each Note Guarantor hereby
---------------------
irrevocably waives any claim or other rights that it may now or hereafter
acquire against either Issuer that arise from the existence, payment,
performance or enforcement of such Issuer's obligations under the Notes and this
Indenture or such Note Guarantor's obligations under its Note Guarantee and this
Indenture, including any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Holder of Notes against the Company, whether or not such claim, remedy or right
arises in equity, or under contract, statute or common law, until this Indenture
is discharged and all of the Notes are discharged and paid in full. If any
amount shall be paid to any Note Guarantor in violation of the preceding
sentence and the Notes shall not have been paid in full, such amount shall have
been deemed to have been paid to such Note Guarantor for the benefit of, and
held in trust for the benefit of, the Holders of the Notes, and shall forthwith
be paid to the Trustee for the benefit of such Holders to be credited and
applied upon the Notes, whether matured or unmatured, in accordance with the
terms of this Indenture.
Section 1306. Notation Not Required. Neither the Issuers nor any Note
---------------------
Guarantor shall be required to make a notation on the Notes to reflect any Note
Guarantee or any such release, termination or discharge thereof.
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<PAGE>
Section 1307. Successors and Assigns of Note Guarantors. All
-----------------------------------------
covenants and agreements in this Indenture by each Note Guarantor shall bind its
respective successors and assigns, whether so expressed or not.
Section 1308. Execution and Delivery of Subsidiary Guarantees. (a)
-----------------------------------------------
The Company shall cause each Initial Jafra S.A. Subsidiary, promptly upon
becoming a Restricted Subsidiary of Jafra S.A. on the Issue Date, to execute and
deliver to the Trustee the First Supplemental Indenture substantially in the
form set forth in Exhibit E to this Indenture, providing for its Subsidiary
---------
Guarantee.
(b) The Company shall cause each Restricted Subsidiary that is
required to become a Subsidiary Guarantor pursuant to Section 414, and each
-----------
Subsidiary of the Company that the Company causes to become a Subsidiary
Guarantor pursuant to Section 414, to promptly execute and deliver to the
-----------
Trustee a supplemental indenture substantially in the form set forth in Exhibit
-------
B to this Indenture, or otherwise in form and substance reasonably satisfactory
- -
to the Trustee, evidencing its Subsidiary Guarantee on substantially the terms
set forth in this Article 13. Concurrently therewith, the Company shall deliver
----------
to the Trustee an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee to the effect that such supplemental indenture has
been duly authorized, executed and delivered by such Restricted Subsidiary and
that, subject to the applicable bankruptcy, insolvency, fraudulent transfer,
fraudulent conveyance, reorganization, moratorium and other laws now or
hereafter in effect affecting creditors' rights or remedies generally and the
general principles of equity (including standards of materiality, good faith,
fair dealing and reasonableness), whether considered in a proceeding at law or
at equity such supplemental indenture is a valid and binding agreement of such
Restricted Subsidiary, enforceable against such Restricted Subsidiary in
accordance with its terms.
Section 1309. Notices. Notice to any Note Guarantor shall be
-------
sufficient if addressed to such Note Guarantor care of the Company at the
address, place and manner provided in Section 109.
-----------
ARTICLE 14
SUBORDINATION
-------------
Section 1401. Agreement To Subordinate. The Issuers agree, and each
------------------------
Noteholder by accepting a Note agrees, that the Indebtedness evidenced by the
Notes is subordinated in right of payment, to the extent and in the manner
provided in this Article 14, to the prior payment in full (when due) of all
----------
existing and future Senior Indebtedness of the
119
<PAGE>
Issuers and that the subordination is for the benefit of and enforceable by the
holders of Senior Indebtedness of the Issuers. The Notes shall in all respects
rank pari passu with all other Senior Subordinated Indebtedness of the Issuers
---- -----
and only Indebtedness of the Issuers that is Senior Indebtedness shall rank
senior to the Notes in accordance with the provisions set forth herein. All
provisions of this Article 14 shall be subject to Section 1412.
---------- ------------
Section 1402. Liquidation, Dissolution, Bankruptcy. Upon any payment
------------------------------------
or distribution of the assets of an Issuer upon a total or partial liquidation
or dissolution or reorganization of or similar proceeding relating to such
Issuer or its property, or in a bankruptcy, insolvency, receivership or similar
proceeding relating to such Issuer or its property,
(i) the holders of Senior Indebtedness of such Issuer will be
entitled to receive payment in full of such Senior Indebtedness before the
Noteholders are entitled to receive any payment from such Issuer, and
(ii) until the Senior Indebtedness of such Issuer is paid in full,
any payment or distribution from such Issuer to which Noteholders would be
entitled but for this Article 14 will be made to holders of such Senior
----------
Indebtedness as their interests may appear except that Noteholders may
receive shares of stock and any debt securities that are subordinated to
such Senior Indebtedness to at least the same extent as the Notes.
Section 1403. Default on Senior Indebtedness. Neither Issuer may pay
------------------------------
principal of, or premium (if any) or interest on, the Notes or make any deposit
pursuant to the provisions of Article 12 and may not otherwise purchase, redeem
----------
or otherwise retire any Notes (collectively, "pay the Notes") if (i) any Senior
-------------
Indebtedness of such Issuer is not paid when due or (ii) any other default on
Senior Indebtedness of such Issuer occurs and the maturity of such Senior
Indebtedness is accelerated in accordance with its terms (either such event, a
"Payment Default") unless, in either case, (x) the Payment Default has been
---------------
cured or waived and any such acceleration has been rescinded in writing or (y)
such Senior Indebtedness has been paid in full; provided, however, an Issuer may
-------- -------
pay the Notes without regard to the foregoing if such Issuer and the Trustee
receive written notice approving such payment from the Representative for the
Designated Senior Indebtedness with respect to which the Payment Default has
occurred and is continuing.
In addition, during the continuance of any default (other than a
Payment Default) with respect to any Designated Senior Indebtedness of an Issuer
pursuant to which the maturity thereof may be accelerated immediately without
further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace period (a "Non-payment
-----------
Default"), such Issuer may not pay the Notes for the period specified as follows
- -------
120
<PAGE>
(a "Payment Blockage Period"). The Payment Blockage Period shall commence upon
-----------------------
the receipt by the Trustee (with a copy to such Issuer) of written notice (a
"Blockage Notice") of such Non-payment Default from the Representative for such
---------------
Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and shall end on the earliest to occur of the following events:
(i) 179 days shall have elapsed since such receipt of such Blockage Notice, (ii)
the Non-payment Default giving rise to such Blockage Notice is no longer
continuing (and no other Payment Default or Non-payment Default is then
continuing), (iii) such Designated Senior Indebtedness shall have been
discharged or repaid in full or (iv) such Payment Blockage Period shall have
been terminated by written notice to the Trustee and such Issuer from the Person
or Persons who gave such Blockage Notice. An Issuer shall promptly resume
payments on the Notes, including any missed payments, after such Payment
Blockage Period ends, unless the holders of such Designated Senior Indebtedness
or the Representative of such holders have accelerated the maturity of such
Designated Senior Indebtedness, or any Payment Default otherwise exists. Not
more than one Blockage Notice to the Issuers in the aggregate may be given in
any 360 consecutive day period, irrespective of the number of defaults with
respect to Designated Senior Indebtedness during such period, except that if any
Blockage Notice within such 360-day period is given by or on behalf of any
holders of Designated Senior Indebtedness other than Bank Indebtedness, a
Representative of holders of Bank Indebtedness may give another Blockage Notice
within such period. In no event may the total number of days during which any
Payment Blockage Period is in effect extend beyond 179 days from the date of
receipt by the Trustee of the relevant Blockage Notice, and there must be a 181
consecutive day period during any 360 consecutive day period during which no
Payment Blockage Period is in effect.
Section 1404. Acceleration of Payment of Notes. If payment of the
--------------------------------
Notes is accelerated because of an Event of Default, the Issuers or the Trustee
shall promptly notify the holders of the Designated Senior Indebtedness of the
Issuers (or the Representative of such holders) of the acceleration. If any
Designated Senior Indebtedness of an Issuer is outstanding, such acceleration
will not be effective with respect to such Issuer until the time specified in
Section 602, and such Issuer may not pay the Notes until five Business Days
- -----------
after such holders or the Representative of each Designated Senior Indebtedness
of such Issuer receive notice of such acceleration and, thereafter, such Issuer
may pay the Notes only if this Article 14 otherwise permits payment at that
----------
time.
Section 1405. When a Distribution Must Be Paid Over. If a
-------------------------------------
distribution from an Issuer is made to Holders that because of the provisions of
this Article 14 should not have been made to them, the Holders who receive the
----------
distribution shall hold it in trust for holders of Senior Indebtedness of such
Issuer and pay it over to them as their interests may appear.
121
<PAGE>
Section 1406. Subrogation. After all Senior Indebtedness of an Issuer
-----------
is paid in full and until the Notes are paid in full, Holders shall be
subrogated to the rights of holders of Senior Indebtedness of such Issuer to
receive distributions applicable to such Senior Indebtedness. For purposes of
such subrogation, a distribution made under this Article 14 to holders of Senior
----------
Indebtedness of an Issuer that otherwise would have been made to Holders is not,
as between such Issuer, its creditors other than the holders of such Senior
Indebtedness and Holders, a payment by such Issuer on such Senior Indebtedness,
it being understood that the provisions of this Article 14 are and are intended
----------
solely for the purpose of defining the relative rights of the Holders, on the
one hand, and the holders of Senior Indebtedness of the Issuers, on the other
hand.
Section 1407. Relative Rights. This Article 14 defines the relative
--------------- ----------
rights of Holders and holders of Senior Indebtedness. Nothing in this Indenture
shall:
(i) impair, as between the Issuers and Holders, the obligation of the
Issuers which is absolute and unconditional, to pay principal of and
interest on the Notes in accordance with their terms; or
(ii) prevent the Trustee or any Holder from exercising its available
remedies upon a Default, subject to the rights of holders of Senior
Indebtedness to receive distributions otherwise payable to Holders.
Section 1408. Subordination May Not Be Impaired by Issuers. No right
--------------------------------------------
of any holder of Senior Indebtedness of an Issuer to enforce the subordination
of the Indebtedness evidenced by the Notes shall be impaired by any act or
failure to act by either Issuer or by its failure to comply with this Indenture.
Section 1409. Rights of Trustee and Paying Agent. The Issuers shall
----------------------------------
give prompt written notice to the Trustee of any fact known to the Issuers that
would prohibit the making of any payment to or by the Trustee in respect of the
Notes. Failure to give such notice shall not affect the subordination of the
Notes to Senior Indebtedness of the Issuers. Notwithstanding Section 1403, the
------------
Trustee or Paying Agent may continue to make payments on the Notes and shall not
be charged with knowledge of the existence of facts that would prohibit the
making of any such payments unless, not less than two Business Days prior to the
date of such payment, a Trust Officer of the Trustee receives notice
satisfactory to it that payments may not be made under this Article 14. The
----------
Issuers, the Registrar or co-registrar, the Paying Agent, a Representative or a
holder of Senior Indebtedness may give the notice; provided, however, that, if
-------- -------
an issue of Senior Indebtedness has a Representative, only the Representative
may give the notice. The Trustee shall be entitled to rely on the delivery to
it of a written notice by a Person representing himself or itself to be a holder
of any Senior
122
<PAGE>
Indebtedness (or a Representative of such holder) to establish that such notice
has been given by a holder of such Senior Indebtedness or Representative
thereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. The
Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 14 with respect to any Senior Indebtedness that may at any time be held
- ----------
by it, to the same extent as any other holder of Senior Indebtedness; and
nothing in Article 7 shall deprive the Trustee of any of its rights as such
---------
holder. Nothing in this Article 14 shall apply to claims of, or payments to,
----------
the Trustee under or pursuant to Section 707.
-----------
Section 1410. Distribution or Notice to Representative. Whenever a
----------------------------------------
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their Representative (if
any).
Section 1411. Article 14 Not To Prevent Events of Default or Limit
----------------------------------------------------
Right To Accelerate. The failure to make a payment pursuant to the Notes by
- -------------------
reason of any provision in this Article 14 shall not be construed as preventing
----------
the occurrence of a Default. Subject to Section 1404, nothing in this Article
------------ -------
14 shall have any effect on the right of the Holders or the Trustee to
- --
accelerate the maturity of the Notes.
Section 1412. Trust Moneys Not Subordinated. Notwithstanding anything
-----------------------------
contained herein to the contrary, payments from money or the proceeds of U.S.
Government Obligations held in trust under Article 12 by the Trustee for the
----------
payment of principal of and premium, if any, and interest on the Notes shall not
be subordinated to the prior payment of any Senior Indebtedness of the Issuers
or subject to the restrictions set forth in this Article 14, and none of the
----------
Holders shall be obligated to pay over any such amount to either Issuer or any
holder of Senior Indebtedness of either Issuer or any other creditor of either
Issuer.
Section 1413. Trustee Entitled To Rely. Upon any payment or
------------------------
distribution pursuant to this Article 14, the Trustee and the Holders shall be
----------
entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 1402
------------
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Holders or (iii) upon the Representatives for the holders of Senior Indebtedness
for the purpose of ascertaining the Persons entitled to participate in such
payment or distribution, the holders of the Senior Indebtedness and other
Indebtedness of the Issuers, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article 14. In the event that the Trustee determines, in good faith,
----------
that evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to
123
<PAGE>
participate in any payment or distribution pursuant to this Article 14, the
----------
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and other facts pertinent to the rights of such Person
under this Article 14, and, if such evidence is not furnished, the Trustee may
----------
defer any payment to such Person pending judicial determination as to the right
of such Person to receive such payment. The provisions of Sections 701 and 703
------------ ---
shall be applicable to all actions or omissions of actions by the Trustee
pursuant to this Article 14.
----------
Section 1414. Trustee To Effectuate Subordination. Each Holder by
-----------------------------------
accepting a Note authorizes and directs the Trustee on such Holder's behalf to
take such action as may be necessary or appropriate to acknowledge or effectuate
the subordination between the Holders and the holders of Senior Indebtedness of
the Issuers as provided in this Article 14 and appoints the Trustee as attorney-
----------
in-fact for any and all such purposes.
Section 1415. Trustee Not Fiduciary for Holders of Senior
-------------------------------------------
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
- ------------
holders of Senior Indebtedness of the Issuers and shall not be liable to any
such holders if it shall mistakenly pay over or distribute to Holders or the
Issuers or any other Person, money or assets to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article 14 or otherwise. With
----------
respect to the holders of Senior Indebtedness of the Issuers, the Trustee
undertakes to perform or to observe only such of its covenants or obligations as
are specifically set forth in this Article 14 or Article 15 and no implied
---------- ----------
covenants or obligations with respect to holders of Senior Indebtedness of the
Issuers shall be read into this Indenture against the Trustee.
Section 1416. Reliance by Holders of Senior Indebtedness on
---------------------------------------------
Subordination Provisions. Each Holder by accepting a Note acknowledges and
- ------------------------
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to each holder of any Senior Indebtedness of
the Issuers, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Notes, to acquire and continue to hold, or to continue
to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall
be deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior
Indebtedness.
Section 1417. Trustee's Compensation Not Prejudiced. Nothing in this
-------------------------------------
Article 14 shall apply to amounts due to the Trustee pursuant to other Sections
- ----------
of this Indenture.
124
<PAGE>
ARTICLE 15
SUBORDINATION OF NOTE GUARANTEES
--------------------------------
Section 1501. Agreement To Subordinate. Each Note Guarantor agrees,
------------------------
and each Noteholder by accepting a Note agrees, that all payments pursuant to
such Note Guarantor's Note Guarantee made by or on behalf of such Note Guarantor
are subordinated in right of payment, to the extent and in the manner provided
in this Article 15, to the prior payment in full (when due) of all existing and
----------
future Senior Indebtedness of such Note Guarantor and that the subordination is
for the benefit of and enforceable by the holders of Senior Indebtedness of such
Note Guarantor. Such Note Guarantee shall in all respects rank pari passu with
---- -----
all other Senior Subordinated Indebtedness of such Note Guarantor and only
Indebtedness of such Note Guarantor that is Senior Indebtedness shall rank
senior to such Note Guarantee in accordance with the provisions set forth
herein. All provisions of this Article 15 shall be subject to Section 1512.
---------- ------------
Section 1502. Liquidation, Dissolution, Bankruptcy. Upon any payment
------------------------------------
or distribution of the assets of a Note Guarantor upon a total or partial
liquidation or dissolution or reorganization of or similar proceeding relating
to such Note Guarantor or its property, or in a bankruptcy, insolvency,
receivership or similar proceeding relating to such Note Guarantor or its
property,
(i) the holders of Senior Indebtedness of such Note Guarantor will be
entitled to receive payment in full of such Senior Indebtedness before the
Noteholders are entitled to receive any payment from such Note Guarantor;
and
(ii) until the Senior Indebtedness of such Note Guarantor is paid in
full, any payment or distribution from such Note Guarantor to which
Noteholders would be entitled but for this Article 15 will be made to
----------
holders of such Senior Indebtedness as their interests may appear except
that Noteholders may receive shares of stock and any debt securities that
are subordinated to such Senior Indebtedness to at least the same extent as
the Note Guarantee of such Note Guarantor.
Section 1503. Default on Senior Indebtedness. No Note Guarantor may
------------------------------
make any payment pursuant to its Note Guarantee and may not otherwise purchase,
redeem or otherwise retire or defease any Notes (collectively, "pay its Note
------------
Guarantee") if (i) any Senior Indebtedness of such Note Guarantor is not paid
- ---------
when due or (ii) any other default on Senior Indebtedness of such Note Guarantor
occurs and the maturity of such Senior Indebtedness is accelerated in accordance
with its terms (either such event, a "Guarantor Payment Default") unless, in
-------------------------
either case, (x) the Guarantor Payment Default has been cured or waived and any
125
<PAGE>
such acceleration has been rescinded in writing or (y) such Senior Indebtedness
has been paid in full; provided, however, a Note Guarantor may pay its Note
-------- -------
Guarantee without regard to the foregoing if such Note Guarantor and the Trustee
receive written notice approving such payment from the Representative for the
Designated Senior Indebtedness with respect to which the Guarantor Payment
Default has occurred and is continuing.
In addition, no Note Guarantor may pay its Note Guarantee during the
continuance of a Payment Blockage Period after receipt by the Issuers and the
Trustee of a Blockage Notice under Section 1403. Notwithstanding the provisions
------------
described in the immediately preceding sentence (but subject to the provisions
of the first paragraph of this Section 1503), a Note Guarantor shall promptly
------------
resume payments, if any are required, pursuant to its Note Guarantee, including
any missed payments, after such Payment Blockage Period ends, unless the holders
of such Designated Senior Indebtedness or the Representative of such holders
have accelerated the maturity of such Designated Senior Indebtedness, or any
Payment Default otherwise exists.
In addition, during the continuance of any default (other than a
Guarantor Payment Default) with respect to any Designated Senior Indebtedness of
a Note Guarantor pursuant to which the maturity thereof may be accelerated
immediately without further notice except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace period (a
"Guarantor Non-payment Default"), such Note Guarantor may not pay its Note
-----------------------------
Guarantee for the period specified as follows (a "Guarantor Payment Blockage
--------------------------
Period"). The Guarantor Payment Blockage Period shall commence upon the receipt
- ------
by the Trustee (with copy to such Note Guarantor) of written notice (a
"Guarantor Blockage Notice") of such Guarantor Non-payment Default from the
-------------------------
Representative for such Designated Senior Indebtedness specifying an election to
effect a Guarantor Payment Blockage Period and shall end on the earliest to
occur of the following events: (i) 179 days shall have elapsed since such
receipt of such Guarantor Blockage Notice, (ii) the Guarantor Non-payment
Default giving rise to such Blockage Notice is no longer continuing (and no
other Guarantor Payment Default or Guarantor Non-payment Default is then
continuing), (iii) such Designated Senior Indebtedness shall have been
discharged or repaid in full or (iv) such Guarantor Payment Blockage Period
shall have been terminated by written notice to the Trustee and such Note
Guarantor from the Person or Persons who gave such Guarantor Blockage Notice. A
Note Guarantor may pay its Note Guarantee, after such Guarantor Payment Blockage
Period ends, unless the holders of such Designated Senior Indebtedness or the
Representative of such holders have accelerated the maturity of such Designated
Senior Indebtedness, or any Guarantor Payment Default otherwise exists. Not
more than one Guarantor Blockage Notice to a Note Guarantor in the aggregate may
be given in any 360 consecutive day period, irrespective of the number of
defaults with respect to Designated Senior Indebtedness of such Note Guarantor
during such period, except that if any Guarantor Blockage Notice within such
360-day period is given by or on behalf of
126
<PAGE>
EXHIBIT 4.2
CONFORMED COPY
FIRST SUPPLEMENTAL INDENTURE dated as of April 30 (this "Supplemental
------------
Indenture"), among Consultoria Jafra, S.A. de C.V., Distribuidora Venus, S.A. de
- ---------
C.V., Dirsamex, S.A. de C.V., Reday, S.A. de C.V., Qualifax, S.A. de C.V., and
Jafra Cosmetics, S.R.L., each a corporation organized under the laws of Mexico,
(each a "Jafra S.A. Subsidiary Guarantor" and, collectively, the "Jafra S.A.
------------------------------- ----------
Subsidiary Guarantors"), CDRJ Acquisition Corporation (to be renamed Jafra
- ---------------------
Cosmetics International, Inc.), a corporation duly organized and existing under
the laws of the State of Delaware, and Jafra Cosmetics International, S.A. de
C.V., a corporation organized under the laws of Mexico (together with their
respective successors and assigns, the "Issuers"), each other then existing Note
-------
Guarantor under the Indenture referred to below (the "Existing Guarantors"), and
-------------------
State Street Bank and Trust Company, as Trustee under the Indenture referred to
below.
W I T N E S S E T H:
WHEREAS, the Issuers, the Existing Guarantors and the Trustee have
heretofore become parties to an Indenture, dated as of April 30, 1998, as
amended (as amended, supplemented, waived or otherwise modified, the
"Indenture"), providing for the issuance of 11 3/4% Senior Subordinated Notes
---------
Due 2008 of the Issuers (the "Notes");
-----
WHEREAS, Section 1308 of the Indenture provides that the Issuers are
required to or may cause certain Subsidiary Guarantors to execute and deliver to
the Trustee a supplemental indenture pursuant to which such Subsidiary
Guarantors shall guarantee their relevant parent Issuer's obligations under the
Notes pursuant to a Note Guarantee on the terms and conditions set forth herein
and in Article Thirteen of the Indenture;
WHEREAS, each Subsidiary Guarantor hereto desires to enter into such
supplemental indenture for good and valuable consideration, including but not
limited to substantial economic benefit in that the financial performance and
condition of such Subsidiary Guarantor is dependent on the financial performance
and condition of the relevant Issuer, the obligations hereunder of which such
Subsidiary Guarantor has guaranteed, and on such Subsidiary Guarantor's access
to working capital through such Issuer's access to revolving credit borrowings
under the Senior Credit Agreement; and
WHEREAS, pursuant to Section 901 of the Indenture, the parties hereto
are authorized to execute and deliver this Supplemental Indenture to amend the
Indenture, without the consent of any Holder;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
<PAGE>
Subsidiary Guarantors, the Issuers, the Existing Guarantors and the Trustee
mutually covenant and agree for the benefit of the Holders of the Notes as
follows:
1. Defined Terms. As used in this Supplemental Indenture, terms
-------------
defined in the Indenture or in the preamble or recitals hereto are used herein
as therein defined. The words "herein," "hereof" and "hereby" and other words of
similar import used in this Supplemental Indenture refer to this Supplemental
Indenture as a whole and not to any particular section hereof.
2. Agreement to Guarantee. Each Jafra S.A. Subsidiary Guarantor
----------------------
hereby agrees, jointly and severally with all other Jafra S.A. Subsidiary
Guarantors and fully and unconditionally, to guarantee, on a senior subordinated
basis, the Guaranteed Jafra S.A. Obligations under the Indenture and the Notes
on the terms and subject to the conditions set forth in Article Thirteen of the
Indenture and to be bound by (and shall be entitled to the benefits of) all
other applicable provisions of the Indenture as a Note Guarantor. The Note
Guarantee of each Jafra S.A. Subsidiary Guarantor is subject to the subordinate
provisions of the Indenture.
3. Termination, Release and Discharge. Each Jafra S.A. Subsidiary
----------------------------------
Guarantor's Note Guarantee shall terminate and be of no further force or effect,
and such Jafra S.A. Subsidiary Guarantor shall be released and discharged from
all obligations in respect of such Note Guarantee, as and when provided in
Section 1303 of the Indenture.
4. Parties. Nothing in this Supplemental Indenture is intended or
-------
shall be construed to give any Person, other than the Holders and the Trustee,
any legal or equitable right, remedy or claim under or in respect of each Note
Guarantor's Note Guarantee hereunder or any provision contained herein or in
Article Thirteen of the Indenture.
5. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY
-------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PRINCIPLES OF CONFLICT OF LAWS TO THE EXTENT THAT THE
APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. THE
TRUSTEE, THE ISSUERS, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND (BY THEIR
ACCEPTANCE OF THE NOTES) THE HOLDERS AGREE TO SUBMIT TO THE JURISDICTION OF ANY
UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE
CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
SUPPLEMENTAL INDENTURE.
2
<PAGE>
6. Ratification of Indenture; Supplemental Indentures Part of
----------------------------------------------------------
Indenture. Except as expressly amended hereby, the Indenture is in all respects
- ---------
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every Holder of Notes heretofore or
hereafter authenticated and delivered shall be bound hereby. The Trustee makes
no representation or warranty as to the validity or sufficiency of this
Supplemental Indenture.
7. Counterparts. The parties hereto may sign one or more copies of
------------
this Supplemental Indenture in counterparts, all of which together shall
constitute one and the same agreement.
8. Headings. The section headings herein are for convenience of
--------
reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
CONSULTORIA JAFRA, S.A. de C.V., as Jafra S.A.
Subsidiary Guarantor
By: /s/ Thomas E. Ireland
-----------------------------------------------
Name: Thomas E. Ireland
Title: Attorney In Fact
DISTRIBUIDORA VENUS, S.A. de C.V., as Jafra S.A.
Subsidiary Guarantor
By: /s/ Ralph S. Mason III
-----------------------------------------------
Name: Ralph S. Mason III
Title: Vice Chairman, Executive Vice
President and General Counsel
DIRSAMEX, S.A. de C.V., as Jafra S.A. Subsidiary
Guarantor
By: /s/ Ralph S. Mason III
-----------------------------------------------
Name: Ralph S. Mason III
Title: Vice Chairman, Executive Vice
President, General Counsel
REDAY, S.A. de C.V., as Jafra S.A. Subsidiary
Guarantor
By: /s/ Thomas E. Ireland
-----------------------------------------------
Name: Thomas E. Ireland
Title: Attorney In Fact
4
<PAGE>
QUALIFAX, S.A. de C.V., as Jafra S.A. Subsidiary
Guarantor
By: /s/ Ralph S. Mason III
-----------------------------------------------
Name: Ralph S. Mason III
Title: Vice Chairman, Executive Vice
President, General Counsel
JAFRA COSMETICS, S.R.L., as Jafra S.A. Subsidiary
Guarantor
By: /s/ Thomas E. Ireland
-----------------------------------------------
Name: Thomas E. Ireland
Title: Attorney In Fact
CDRJ ACQUISITION CORPORATION,
as Issuer on a several, and not joint, basis and
as an Existing Guarantor
By: /s/ Ronald B. Clark
-----------------------------------------------
Name: Ronald B. Clark
Title: Chairman and CEO
JAFRA COSMETICS INTERNATIONAL S.A. de C.V., as
Issuer on a several, and not joint, basis, and as
an Existing Guarantor
By: /s/ Ralph S. Mason III
-----------------------------------------------
Name: Ralph S. Mason III
Title: Vice Chairman, Executive Vice
President and General Counsel
CDRJ INVESTMENTS (LUX) S.A., as an Existing
Guarantor
By: /s/ Thomas E. Ireland
-----------------------------------------------
Name: Thomas E. Ireland
Title: Treasurer and Director
5
<PAGE>
STATE STREET BANK AND TRUST COMPANY, as Trustee
By: /s/ P.G. Kane, Jr.
-----------------------------------------------
Name: P.G. Kane, Jr.
Title: Vice President
6
<PAGE>
EXHIBIT 4.3
CONFORMED COPY
$100,000,000
JAFRA
COSMETICS INTERNATIONAL
11 3/4% SENIOR SUBORDINATED NOTES DUE 2008
PURCHASE AGREEMENT
------------------
April 28, 1998
Credit Suisse First Boston Corporation
Chase Securities Inc.
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. CDRJ Acquisition Corporation, a company incorporated
under the laws of Delaware ("Acquisition Co."), and Jafra Cosmetics
International, S.A. de C.V., a company established under the laws of Mexico
("Jafra S.A."), propose, subject to the terms and conditions stated herein, to
severally issue and sell to the several initial purchasers named in Schedule A
hereto (the "Purchasers") U.S.$100,000,000 principal amount of their 11 3/4%
Senior Subordinated Notes Due 2008 (the "Offered Securities") to be issued under
an Indenture to be dated as of April 30, 1998 (the "Indenture"), among
Acquisition Co., Jafra S.A., CDRJ Investments (Lux) S.A., a Luxembourg company
("Parent"), and State Street Bank and Trust Company, as Trustee. The Subsidiary
Note Guarantors named in Schedule B hereto (the "Subsidiary Guarantors" and,
together with Parent, the "Guarantors") will execute and deliver a supplement to
the Indenture, whereby they will guarantee the Notes (the "Indenture
Supplement").
The net proceeds of the offering will be used to finance the acquisition
by Parent of the worldwide Jafra cosmetics business from The Gillette Company
(such business, the "Acquired Business," and such acquisition, the
"Acquisition"). At the time of the Acquisition, Acquisition Co. will merge with
Jafra Cosmetics International, Inc., a company organized under the laws of
California ("JCI"), with Acquisition Co. or JCI as the surviving entity (the
"U.S. Surviving Company"). In connection with the Acquisition, Jafra S.A. will
acquire the stock of Grupo Jafra, S.A. de C.V., a company established under the
laws of Mexico ("Grupo Jafra"), which will thereafter merge into Jafra S.A.,
with Jafra S.A. as the surviving entity. Unless otherwise indicated or unless
context otherwise requires, the term "U.S. Issuer" refers to (i) for the period
prior to the Acquisition, Acquisition Co. and (ii) for the period after the
Acquisition, the U.S. Surviving Company. Such U.S. Issuer and Jafra S.A. are
herein referred to as the "Issuers." Each Issuer will be an indirect, wholly
owned subsidiary of Parent.
Parent will fully and unconditionally guarantee the Offered Securities on
a senior subordinated basis on the terms provided in the Indenture (the "Parent
Guarantee"). The U.S. Issuer's obligations with respect to the Offered
Securities will also be guaranteed by Jafra S.A. (the "Jafra S.A. Cross
Guarantee") and by each subsequently acquired or organized U.S. subsidiary of
the U.S. Issuer, subject to certain exceptions. Jafra
<PAGE>
S.A.'s obligations with respect to the Offered Securities will also be
guaranteed by the U.S. Issuer (the "U.S. Issuer Cross Guarantee") and each
existing and subsequently acquired or organized subsidiary of Jafra S.A.
(together with the U.S. subsidiary guarantees, the "Subsidiary Guarantees"). The
Parent Guarantee, the Jafra S.A. Cross Guarantee, the U.S. Issuer Cross
Guarantee and the Subsidiary Guarantees are herein referred to collectively as
the "Guarantees."
The Offered Securities will be offered and sold to the Purchasers
without being registered under the Securities Act of 1933 (the "Securities
Act"), in reliance upon an exemption therefrom. Holders of the Offered
Securities (including the Purchasers and their direct and indirect transferees)
will be entitled to the benefits of a Registration Rights Agreement (the
"Registration Rights Agreement"), pursuant to which the Issuers and the
Guarantors will agree to use reasonable best efforts to file with the Securities
and Exchange Commission (the "Commission") (i) a registration statement under
the Securities Act (the "Exchange Offer Registration Statement") registering an
issue of senior subordinated notes of each of the U.S. Issuer and Jafra S.A.
(the "Exchange Securities"), which will be identical in all material respects to
the Offered Securities (except that the Exchange Securities will not contain
terms with respect to transfer restrictions or with respect to additional
interest) and (ii) under certain circumstances, a shelf registration statement
pursuant to Rule 415 under the Securities Act (the "Shelf Registration
Statement").
Each Issuer and Parent hereby agrees with the several Purchasers as
follows:
2. Representations and Warranties of Each Issuer and Parent. Each Issuer
and Parent, jointly and severally, represents and warrants to the several
Purchasers that:
(a) A preliminary offering circular and an offering circular
relating to the Offered Securities to be reoffered by the Purchasers have been
prepared by the Issuers and Parent. Such preliminary offering circular and
offering circular, as supplemented as of the date of this Agreement, are
hereinafter collectively referred to as the "Offering Document." On the date of
this Agreement, the Offering Document does not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The preceding sentence does not apply to statements in or
omissions from the Offering Document based upon written information furnished to
the Issuers by any Purchaser through Credit Suisse First Boston Corporation
("CSFBC") specifically for use therein, it being understood and agreed that the
only such information is that described as such in Section 7(b).
(b) Acquisition Co. has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware; JCI has
been duly incorporated and is an existing corporation in good standing under the
laws of the State of California; Jafra S.A. and Grupo Jafra have been duly
incorporated and each is an existing corporation under the laws of Mexico; and
Parent has been duly incorporated and is an existing corporation under the laws
of Luxembourg; each with corporate power and authority to own its properties and
conduct its business as described in the Offering Document; and each of
Acquisition Co. and JCI is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which its ownership
or lease of property or the conduct of its business requires such qualification,
except in such jurisdiction in which the failure to so qualify would not
reasonably be expected to have a material adverse effect on the business,
properties, results of operations or condition (financial and other) of Parent
and Parent's consolidated subsidiaries taken as a whole (a "Material Adverse
Effect").
(c) On the Closing Date, each subsidiary of Parent will have been
duly incorporated and be an existing corporation under the laws of the
jurisdiction of its incorporation, with corporate power and authority to own its
properties and conduct its business as described in the Offering Document
(except as would not reasonably be expected to have a Material Adverse Effect);
and each subsidiary of Parent will have been duly qualified to do business as a
foreign corporation in all other jurisdictions in which its ownership or lease
of property or the conduct of its business requires such qualification; all of
the issued and outstanding capital stock of each subsidiary of Parent, including
those of the U.S. Issuer and Jafra S.A., will have been duly authorized and
validly issued and be fully paid and nonassessable; and the capital stock of
each subsidiary owned by Parent, including those of the U.S. Issuer and Jafra
S.A., directly or through subsidiaries, will be owned free from liens,
encumbrances and defects, except for such liens, encumbrances or defects as (i)
would not reasonably be expected to have a Material Adverse Effect or (ii) may
arise pursuant to the Senior Credit
2
<PAGE>
Agreement (as defined in the Offering Document) in connection with the
transactions contemplated thereunder.
(d) When the Offered Securities are delivered and paid for
pursuant to this Agreement on the Closing Date (as defined below), the Indenture
will have been duly authorized, executed and delivered by the Issuers, such
Offered Securities will have been duly authorized, executed, issued and
delivered by the Issuers and will conform to the description thereof contained
in the Offering Document in all material respects and the Indenture and such
Offered Securities will constitute valid and legally binding obligations of each
Issuer, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(e) On the Closing Date, each Guarantee will have been duly
authorized, and the Indenture and Indenture Supplement providing therefor shall
have been duly authorized, executed and delivered, by the relevant Guarantor
and, upon such execution and delivery, each such Guarantee and the Indenture or
Indenture Supplement, as appropriate, will constitute valid and legally binding
obligations of the relevant Guarantor, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(f) This Agreement has been duly authorized, executed and
delivered by Acquisition Co., Jafra S.A., and Parent and, on the Closing Date,
following the consummation of the Acquisition, one or more agreements or
instruments by which JCI (if the U.S. Surviving Company) and each of the
Subsidiary Guarantors will become a party to this Agreement will be duly
authorized, executed and delivered by each of them.
(g) On the Closing Date, the Registration Rights Agreement will
have been duly authorized, executed and delivered by each Issuer and Guarantor
and, upon such execution and delivery, will constitute valid and legally binding
obligations of each Issuer and Guarantor, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(h) There are no contracts, agreements or understandings between
any Issuer or Guarantor and any person that would give rise to a valid claim
against any Purchaser for any brokerage commission, finders fee or other like
payment in connection with the transactions contemplated in this Agreement, and
any such payment by any Issuer or Guarantor will not have a Material Adverse
Effect.
(i) Except for (i) such consents, approvals, authorizations,
orders of filings as may be required to be obtained or made under the Securities
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and
applicable state securities laws as provided in the Registration Rights
Agreement, (ii) such consents, approvals, authorizations, orders or filings as
have been made or obtained, or (iii) as disclosed in the Offering Document, no
consent, approval, authorization, or order of, or filing with, any governmental
agency or body or any court is required to be made or obtained by any of the
Issuers or the Guarantors for the consummation of the transactions contemplated
by this Agreement in connection with the issuance and sale of the Offered
Securities by the Issuers or the enforceability of the Guarantees issued in
connection therewith.
(j) The execution, delivery and performance of the Indenture, the
Guarantees and this Agreement, and the issuance and sale of the Offered
Securities and compliance with the terms and provisions thereof will not result
in a breach or violation of any of the terms and provisions of, or constitute a
default under, any statute, binding upon, or any rule, regulation or order of
any governmental agency or body or any court, domestic or foreign, having
jurisdiction over Parent or any subsidiary of Parent, including the U.S. Issuer
and Jafra S.A., or any of their properties, or any agreement or instrument to
which Parent or any such subsidiary is a party or by which Parent or any such
subsidiary is bound or to which any of the properties of Parent or any such
subsidiary is subject, or the charter or by-laws, or equivalent constituent
documents, of Parent or any such subsidiary, except where such breach, violation
or default would not reasonably be expected to have a Material Adverse Effect;
and on the Closing Date each of the Issuers and the Guarantors
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<PAGE>
will have full corporate power and authority to authorize and to issue and sell
(in the case of the Issuers) or to guarantee (in the case of Guarantors) the
Offered Securities as contemplated by this Agreement.
(k) Except as disclosed in the Offering Document, on the Closing
Date after giving effect to the consummation of the Acquisition, Parent and its
subsidiaries, including the U.S. Issuer and Jafra S.A., will have good and
marketable title to all real properties and good and valid title all other
properties and assets owned by them or necessary to conduct the Acquired
Business as it has been operated, in each case free from liens, encumbrances and
defects not permitted by the Indenture, except for such failures to have such
title and such liens, encumbrances and defects as would not reasonably be
expected to have a Material Adverse Effect; and except as disclosed in the
Offering Document, Parent and each of its subsidiaries hold any leased real or
personal property under valid and enforceable leases, except as would not
reasonably be expected to have a Material Adverse Effect.
(l) On the Closing Date after giving effect to the consummation
of the Acquisition, Parent and its subsidiaries, including the U.S. Issuer and
Jafra S.A., will possess adequate certificates, authorizations or permits issued
by appropriate governmental agencies or bodies necessary to conduct the business
now operated by them or necessary to conduct the Acquired Business as it has
been operated, except for any that must be transferred or reapplied for as a
result of the Acquisition, and except as would not reasonably be expected to
have a Material Adverse Effect, and have not received any notice of proceedings
relating to the revocation or modification of any such certificate, authority or
permit that individually or in the aggregate reasonably be expected to have a
Material Adverse Effect.
(m) No labor dispute with the employees of Parent or any of its
subsidiaries, including the U.S. Issuer and Jafra S.A., exists or, to the
knowledge of either Issuer or Parent, is imminent, that would reasonably be
expected to have a Material Adverse Effect or have a material adverse effect on
the condition (financial or other), business, properties or results of
operations of the Acquired Business.
(n) Except as disclosed in the Offering Document, Parent and its
subsidiaries, including the U.S. Issuer and Jafra S.A., (i) own, possess or can
acquire on reasonable terms, adequate trademarks, trade names, know-how,
patents, copyrights, technology and processes (collectively, "intellectual
property rights") necessary to conduct the business now operated by them or
presently employed by them, except as would not reasonably be expected to have a
Material Adverse Effect or have a material adverse effect on the condition
(financial or other), business, properties or results of operations of the
Acquired Business, and (ii) no claim has been asserted and is pending claiming
that the intellectual property rights infringe on or conflict with asserted
rights of others, that would individually or in the aggregate reasonably be
expected to have a Material Adverse Effect or have a material adverse effect on
the condition (financial or other), business, properties or results of
operations of the Acquired Business.
(o) Neither Parent nor any of its subsidiaries, including the
U.S. Issuer and Jafra S.A., is in violation of any statute, or any rule,
regulation, decision or order of any governmental agency or body or any court,
domestic or foreign, relating to the use, disposal or release of hazardous or
toxic substances or relating to the protection or restoration of the environment
or human exposure to hazardous or toxic substances (collectively, "environmental
laws"), owns or operates any real property contaminated with any substance that
is subject to any environmental laws, is liable for any off-site disposal or
contamination pursuant to any environmental laws, or is subject to any claim
relating to any environmental laws, which violation, contamination, liability or
claim would individually or in the aggregate reasonably be expected to have a
Material Adverse Effect or have a material adverse effect on the condition
(financial or other), business, properties or results of operations of the
Acquired Business.
(p) There are no pending actions, suits or proceedings against or
affecting Parent, any of its subsidiaries, including the U.S. Issuer and Jafra
S.A., or any of their respective properties that would individually or in the
aggregate reasonably be expected to have a Material Adverse Effect, would
reasonably be expected to materially and adversely affect the ability of any
Issuer or Guarantor to perform its obligations under the Indenture, Indenture
Supplement or under this Agreement or would reasonably be expected to have a
material adverse effect on the condition (financial or other), business,
properties or results of operations of the Acquired Business.
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<PAGE>
(q) The historical combined financial statements, together with
the related notes, included in the Offering Document present fairly in all
material respects the financial position of Jafra Cosmetics International (as
defined in footnote 1 to such financial statements), which includes, among other
entities, JCI and Grupo Jafra, as of the dates shown and their results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with the generally accepted accounting
principles in the United States applied on a consistent basis, except as
disclosed in the notes thereto; the assumptions used in preparing the pro forma
financial statements included in the Offering Document provide a reasonable
basis for presenting the estimated effects of the transactions or events
described therein; and the related pro forma adjustments give appropriate effect
to those assumptions, and the pro forma columns therein reflect the proper
application of those adjustments to the corresponding historical financial
statement amounts.
(r) Except as disclosed in the Offering Document, since the date
of the latest audited financial statements included in the Offering Document
there has been no material adverse change in, nor any development or event that
would reasonably be expected to have a Material Adverse Effect or have a
material adverse effect on, the condition (financial or other), business,
properties or results of operations of the Acquired Business. Except as
disclosed in or contemplated by the Offering Document, there has been no
dividend or distribution of any kind declared, paid or made by Parent on any
class of its capital stock.
(s) None of the Issuers and the Guarantors is an open-end
investment company, unit investment trust or face-amount certificate company
that is required to be registered under Section 8 of the United States
Investment Company Act of 1940 (the "Investment Company Act"), and none of the
Issuers and the Guarantors is and, after giving effect to the offering and sale
of the Offered Securities and the application of the proceeds thereof as
described in the Offering Document, will be an "investment company" as defined
in the Investment Company Act that is required to be registered as such
thereunder.
(t) No securities of the Issuers of the same class (within the
meaning of Rule 144A(d)(3) under the Securities Act) as the Offered Securities
are listed on any national securities exchange registered under Section 6 of the
Exchange Act or quoted in a U.S. automated inter-dealer quotation system.
(u) The offer and sale of the Offered Securities in the manner
contemplated by this Agreement will be exempt from the registration requirements
of the Securities Act by reason of Section 4(2) thereof and Regulation S
thereunder ("Regulation S"); and it is not necessary to qualify the Indenture
under the Trust Indenture Act; provided that the foregoing representation and
warranty assumes the accuracy of the representations, warranties and agreements
of the Purchasers contained in Section 4 hereof.
(v) None of the Issuers, Parent, any of their affiliates and any
person acting on their behalf (i) has, within the six-month period prior to the
date hereof, offered or sold in the United States or to any U.S. person (as such
terms are defined in Regulation S) the Offered Securities or any security of the
same class or series as the Offered Securities or (ii) has offered or will offer
or sell the Offered Securities (A) in the United States by means of any form of
general solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act or (B) with respect to any such securities sold in
reliance on Rule 903 of Regulation S, by means of any directed selling efforts
within the meaning of Rule 902(c) of Regulation S. Each of the Issuers, Parent,
any of their affiliates and any person acting on their behalf has complied and
will comply with the offering restrictions requirement of Regulation S. The
Issuers and Parent have not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered Securities except
for this Agreement prior to its termination.
(w) Other than in connection with the Acquisition, the proceeds
to Issuers from the offering of the Offered Securities will not be used to
purchase or carry any security.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Issuers agree to sell to the
Purchasers. and the Purchasers agree, severally and not jointly, to purchase
from the Issuers, at a purchase price of (x) 97% of the aggregate principal
amount thereof plus (y) accrued interest, if any, from April 30, 1998, to the
Closing Date, the respective principal amounts set forth opposite the names of
the several Purchasers in Schedule A hereto.
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The Purchasers acknowledge that the U.S. Issuer will be severally
obligated with respect to the payment of $60.0 million of principal of the
Offered Securities, together with interest thereon (the "JCI Portion"), and that
Jafra S.A. will be severally obligated with respect to the payment of $40.0
million of principal of the Offered Securities, together with interest thereon
(the "Jafra S.A. Portion"). The Purchasers agree to purchase the Offered
Securities from the Issuers on a several basis as between the Issuers, in the
relative proportions of the JCI Portion and the Jafra S.A. Portion,
respectively, and agree that the net proceeds of the sale of the Offered
Securities and the net purchase price will be paid to each of the Issuers in
that ratio.
The Issuers will deliver the Offered Securities to CSFBC for the accounts
of the Purchasers, against payment of the purchase price in Federal (same day)
funds by wire transfer to an account at a bank acceptable to CSFBC drawn to such
order as the Issuers may direct, at the office of Debevoise & Plimpton, at 10:00
A.M., New York time, on April 30, 1998, or at such other time not later than
seven full business days thereafter as CSFBC and the Issuers determine, such
time being herein referred to as the "Closing Date." The Offered Securities so
to be delivered will be in definitive fully registered form, in such
denominations and registered in such names as CSFBC reasonably requests and will
be made available for checking and packaging at the offices of Debevoise &
Plimpton on the Closing Date.
4. Representations by Purchasers; Resale by Purchasers. (a) Each
Purchaser severally represents and warrants to the Issuers that it is an
"accredited investor" within the meaning of Regulation D under the Securities
Act.
(b) Each Purchaser severally acknowledges that the Offered
Securities have not been registered under the Securities Act and may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except in accordance with Regulation S or pursuant to an
exemption from the registration requirements of the Securities Act. Each
Purchaser severally represents and agrees that it has offered and sold the
Offered Securities, and will offer and sell the Offered Securities only in
accordance with Rule 903 or Rule 144A under the Securities Act ("Rule 144A").
Accordingly, neither such Purchaser nor its affiliates, nor any persons acting
on its or their behalf, has engaged or will engage in any directed selling
efforts with respect to the Offered Securities, and such Purchaser, its
affiliates and all persons acting on its or their behalf have complied and will
comply with the offering restrictions requirement of Regulation S. Each
Purchaser severally agrees that, at or prior to confirmation of sale of the
Offered Securities, other than a sale pursuant to Rule 144A, such Purchaser will
have sent to each distributor, dealer or person receiving a selling concession,
fee or other remuneration that purchases the Offered Securities from it during
the restricted period a confirmation or notice to substantially the following
effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be offered or
sold within the United States or to, or for the account or benefit of, U.S.
persons, except in either case in accordance with Regulation S (or Rule 144A if
available) under the Securities Act. Terms used above have the meanings given to
them by Regulation S."
Terms used in this subsection (b) have the meanings given to them
by Regulation S.
(c) Each Purchaser severally agrees that it and each of its
affiliates have not entered and will not enter into any contractual arrangement
with respect to the distribution of the Offered Securities except for any such
arrangements with the other Purchasers or affiliates of the other Purchasers or
with the prior written consent of the Issuers.
(d) Each Purchaser severally agrees that it and each of its
affiliates will not offer or sell the Offered Securities in the United States by
means of any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the Securities Act, including but not limited to
(i) any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. Each Purchaser severally agrees, with
respect to resales made in reliance on Rule 144A of any of the Offered
Securities, to deliver either with the confirmation of such resale or otherwise
prior to settlement of such resale a notice to the effect that the resale of
such Offered Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.
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(e) Prior to or simultaneously with any confirmation of sale to
any purchaser in the initial resale, each Purchaser will deliver to each such
purchaser of the Offered Securities in connection with its original distribution
of the Offered Securities, a copy of the Offering Document, as amended and
supplemented at the date of such delivery.
(f) Each of the Purchasers severally represents and agrees that
(i) it has not offered or sold and prior to the date six months after the date
of issue of the Offered Securities will not offer or sell any Offered Securities
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Offered Securities in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issue of the Offered Securities to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such document may
otherwise lawfully be issued or passed on.
(g) Each of the Purchasers severally represents and agrees that
it has not publicly offered or sold and will not publicly offer or sell the
Offered Securities in Mexico.
5. Certain Agreements of the Issuers and Parent. Each Issuer and Parent,
jointly and severally, agrees with the several Purchasers that:
(a) The Issuers and Parent will advise CSFBC promptly of any
proposal to amend or supplement the Offering Document and will not effect such
amendment or supplementation without CSFBC's consent (which consent will not
be unreasonably withheld). If, at any time prior to the completion of the resale
of the Offered Securities by the Purchasers, any event occurs as a result of
which the Offering Document as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, the Issuers and Parent promptly will
notify CSFBC of such event and promptly will prepare, at their own expense, an
amendment or supplement which will correct such statement or omission or effect
such compliance. Neither CSFBC's consent to, nor the Purchasers' delivery to
offerees or investors of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6.
(b) The Issuers will furnish to CSFBC copies of the Offering
Document and all amendments and supplements to such documents, in each case as
soon as available and in such quantities as CSFBC reasonably requests. At any
time when the Offered Securities are outstanding and are "restricted securities"
within the meaning of Rule 144(a)(3) under the Securities Act and the Issuers
are not subject to Section 13 or 15(d) of the Exchange Act and are not exempt
from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, the Issuers
will furnish or cause to be furnished to CSFBC (and, upon request, to each of
the other Purchasers) and, upon request of holders and prospective purchasers of
the Offered Securities, to such holders and purchasers, copies of the
information required to be delivered to holders and prospective purchasers of
the Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act (or
any successor provision thereto) in order to permit compliance with Rule 144A in
connection with resales by such holders of the Offered Securities. The Issuers
will pay the expenses of printing and distributing to the Purchasers all such
documents.
(c) The Issuers will arrange for the qualification of the Offered
Securities for sale and the determination of their eligibility for investment
under the laws of such jurisdictions in the United States and Canada as CSFBC
reasonably designates and will continue such qualifications in effect so long as
reasonably required for the initial resale of the Offered Securities by the
Purchasers; provided that the Issuers and the Guarantors will not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any such state or other jurisdiction or to subject themselves to
taxation in respect of doing business in any state or other jurisdiction in
which they are not otherwise so subject.
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(d) During the period prior to the effectiveness of the Exchange
Offer Registration Statement or a Shelf Registration Statement, as the case may
be, Parent will provide or cause to be provided to CSFBC and, upon request, to
each of the other Purchasers, information substantially equivalent to the
information that would be contained in the reports that would be filed by Parent
with the Securities and Exchange Commission as provided in the Indenture if
Parent were then subject to the reporting requirements of Section 13(a) or 15(d)
of the Exchange Act, in each case within 15 days after the respective date on
which such report would have been required to be so filed.
(e) During the period of two years after the Closing Date, the
Issuers and the Guarantors will, upon request, make available to each of the
other Purchasers and any holder of Offered Securities a copy of the restrictions
on transfer applicable to the Offered Securities.
(f) During the period of two years after the Closing Date, the
Issuers will not, and will not permit any of its affiliates (as defined in Rule
144 under the Securities Act) to, resell any of the Offered Securities that have
been reacquired by any of them, except for Offered Securities purchased by the
Issuers or any of their affiliates and resold in a transaction registered under
the Securities Act.
(g) The Issuers will pay all reasonable expenses (together with
VAT where applicable) incidental to the performance of their obligations under
this Agreement and the Indenture, including (i) the fees and expenses of the
Trustee and its professional advisers; (ii) all expenses in connection with the
execution, issue, authentication, packaging and initial delivery of the Offered
Securities, the preparation and printing of this Agreement, the Offered
Securities, the Indenture, the Offering Document and all amendments and
supplements thereto, and any other document relating to the issuance, offer,
sale and delivery of the Offered Securities; (iii) the cost of qualifying the
Offered Securities for trading in The Portal Market (PORTAL) and any expenses
incidental thereto; (iv) the cost of any advertising approved by Issuers in
connection with the issue of the Offered Securities; (v) for any expenses
(including reasonable fees and disbursements of counsel) incurred in connection
with qualification of the Offered Securities for sale under the laws of such
jurisdictions in the United States and Canada as CSFBC reasonably designates and
the printing of memoranda relating thereto; (vi) for any fees charged by
investment rating agencies for the rating of the Offered Securities; and (vii)
for expenses incurred in distributing preliminary offering circulars and the
Offering Document (including any amendments and supplements thereto) to the
Purchasers; provided, however,that except as provided in the next sentence of
-------- -------
this Section 5(g) and Section 9, the Purchasers shall pay their own costs and
expenses, including the costs and expenses of their counsel, any taxes on the
Offered Securities which they may sell and the expenses of advertising and
offering of the Offered Securities made by the Purchasers. The Issuers will also
pay or reimburse the Purchasers (to the extent incurred by them prior to the
Closing Date) for all reasonable travel expenses of the Purchasers and the
Issuers' officers and employees and any other reasonable expenses of the
Purchasers and the Issuers in connection with attending or hosting meetings with
prospective purchasers of the Offered Securities from the Purchasers.
(h) In connection with the initial offering, until the earlier of
(i) such time as CSFBC shall have notified the Issuers and the other Purchasers
of the completion by the Purchasers of the initial resale of the Offered
Securities and (ii) 180 days after the Closing Date, none of the Issuers, the
Guarantors and their affiliates has or will, either alone or with one or more
other persons, bid for or purchase, for any account in which it has a beneficial
interest, any Offered Securities or attempt to induce any person to purchase any
Offered Securities; and none of the Issuers, the Guarantors and their affiliates
will make bids or purchases, in any such case for the purpose of creating
actual, or apparent, active trading in, or of raising the price of, the Offered
Securities. CSFBC agrees to give such notice promptly upon such completion.
(i) For a period of 180 days after the Closing Date (if the sale
of the Offered Securities by the Issuers to the Purchasers shall have occurred),
none of the Issuers will offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, any United States dollar-denominated debt
securities issued by the Issuers and having a maturity of more than one year
from the date of issue, except (i) promissory notes or other debt securities
issued or guaranteed in immaterial amounts in the ordinary course of business
and (ii) issuances of Exchange Securities pursuant to the Registration Rights
Agreement. Except following the effectiveness of the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may be, the Issuers
will not offer, sell, contract to sell, pledge or otherwise dispose of, directly
or indirectly, any securities under circumstances where such offer, sale,
pledge, contract or disposition would cause the
8
<PAGE>
exemption afforded by Section 4(2) of the Securities Act or the safe harbor of
Regulation S thereunder to cease to be applicable to the offer and sale of the
Offered Securities.
(j) The Issuers and Parent will indemnify and hold harmless the
Purchasers against any non-U.S. documentary, stamp or similar issuance tax,
including any interest and penalties, on the creation, issuance and sale of the
Offered Securities by the Issuers to the Purchasers and on the execution and
delivery of this Agreement. All payments to be made by either Issuer or Parent
hereunder shall be made without withholding or deduction for or on account of
any present or future non-U.S. taxes, duties or governmental charges whatsoever
unless either Issuer or Parent, as appropriate, is compelled by law to deduct or
withhold such taxes, duties or charges. In that event, the Issuers and Parent
shall pay such additional amounts as may be necessary in order that the net
amounts received after such withholding or deduction shall equal the amounts
that would have been received if no withholding or deduction had been made,
except to the extent such taxes arise because of some connection between any
Purchaser and the foreign jurisdiction imposing such tax, other than the
purchase of the Offered Securities.
(k) The Issuers and the Guarantors will use their reasonable best
efforts to have the Offered Securities admitted to trading in the Private
Offering, Resale and Trading through Automated Linkages (PORTAL) Market of the
Nasdaq Stock Market, Inc.
(l) On or before the Closing Date, (i) JCI (if the U.S. Surviving
Company) and each of the Subsidiary Guarantors will authorize, and following the
consummation of the Acquisition, execute and deliver one or more agreements or
instruments, in form and substance reasonably satisfactory to the Purchasers, by
which JCI (if the U.S. Surviving Company) and each of the Subsidiary Guarantors
will become parties to this Agreement and (ii) each of the Issuers and the
Guarantors will duly authorize, and following the consummation of the
Acquisition (in the case of the Subsidiary Guarantors), execute and deliver the
Registration Rights Agreement.
6. Conditions of the Obligations of the Purchasers. The obligations of
the several Purchasers to purchase and pay for the Offered Securities will be
subject to the accuracy of the representations and warranties on the part of
each Issuer and Guarantor herein, to the accuracy of the statements of officers
of each Issuer and Guarantor made pursuant to the provisions hereof, to the
performance by each Issuer and Guarantor of its obligations hereunder, and to
the following additional conditions precedent:
(a) The Purchasers shall have received a letter, dated the date
of this Agreement, of KPMG Peat Marwick LLP confirming that they are independent
public accountants within the meaning of the Securities Act and the applicable
published rules and regulations thereunder ("Rules and Regulations") and
substantially in the form of Exhibit D hereto, or otherwise in form and
substance reasonably satisfactory to the Purchasers.
(b) Subsequent to the execution of this Agreement, there shall
not have occurred (i) any change, or any development or event that would
reasonably be expected to result in a change, in the condition (financial or
other), business, properties or results of operations of any Issuer or Guarantor
which, in the reasonable judgment of the Purchasers, is material and adverse and
makes it impracticable to proceed with the completion of the offering
contemplated herein or the resale of and payment for the Offered Securities;
(ii) any suspension or limitation of trading in securities generally on the New
York Stock Exchange, or any setting of minimum prices for trading on such
exchange or in the over-the-counter market; (iii) any banking moratorium
declared by U.S. Federal or New York authorities or Mexican authorities; (iv)
any outbreak or escalation of major hostilities in which the United States or
Mexico is involved, any declaration of war by Congress or any other substantial
national or international calamity or emergency if, in the reasonable judgment
of the Purchasers, the effect of any such outbreak, escalation, declaration,
calamity or emergency makes it impracticable to proceed with completion of the
offering contemplated herein or the resale of or payment for the Offered
Securities; (v) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of any court or other
governmental authority, which in the reasonable opinion of the Purchasers
materially and adversely affects, or will materially and adversely affect, the
business or operations of Parent and its subsidiaries taken as a whole and the
Acquired Business; or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which
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<PAGE>
in the reasonable opinion of the Purchasers has a material adverse effect on the
financial markets in the United States or in Mexico.
(c) The Purchasers shall have received an opinion, dated the Closing
Date, of Debevoise & Plimpton, the special New York counsel for the Issuers and
Parent, substantially in the form of Exhibit A hereto, or otherwise in form and
substance reasonably satisfactory to the Purchasers. In rendering such opinion,
Debevoise & Plimpton may, as to matters governed by Mexican law and the laws of
Luxembourg, rely upon or assume accuracy of the opinion of Ritch, Heather y
Mueller, S.C. and Bonn & Schmitt, respectively. In addition, if JCI is the U.S.
Surviving Company, the Purchasers shall have received an opinion, dated the
Closing Date, of Loeb & Loeb or other California counsel reasonably satisfactory
to the Purchasers, concerning JCI's corporate existence, corporate power and
authority, and due authorization of the Indenture Supplement, Registration
Rights Agreement and agreement or instrument by which JCI becomes a party
hereto.
(d) The Purchasers shall have received an opinion, dated the Closing
Date, of Ritch, Heather y Mueller, S.C., special counsel for Jafra S.A. and its
subsidiaries, substantially to the form of Exhibit B hereto, or otherwise in
form and substance reasonably satisfactory to the Purchasers.
(e) The Purchasers shall have received an opinion, dated the Closing
date, of Bonn & Schmitt, special Luxembourg counsel for Parent, substantially in
the form of Exhibit C hereto, or otherwise in form and substance reasonably
satisfactory to the Purchasers.
(f) The Purchasers shall have received from Cravath, Swaine and
Moore, counsel for the Purchasers, such opinion or opinions, dated the Closing
Date, with respect to the incorporation of the U.S. Issuer, the validity of the
Offered Securities and the Offering Document, the exemption from registration
for the offer and sale of the Offered Securities by the Issuers to the several
Purchasers and the resales by the several Purchasers as contemplated hereby and
other related matters as CSFBC may reasonably require, and each Issuer and
Parent shall have furnished to such counsel such documents as they may
reasonably request for the purpose of enabling them to pass upon such matters.
In rendering such opinion, Cravath, Swaine and Moore may rely as to all matters
governed by Mexican law and the laws of Luxembourg upon the opinion of Ritch,
Heather y Mueller, S.C. and Bonn & Schmitt, respectively.
(g) The Purchasers shall have received from the Issuers and Parent
certificates dated the Closing Date of the President or any Vice President and a
principal financial or accounting officer in which such officers, to the best of
their knowledge after reasonable investigation, shall state that, as of the
Closing Date, the representations and warranties of the such Issuer or Parent,
as appropriate, in this Agreement are true and correct (in the case of any such
representation or warranty to the extent subject to a materiality qualification)
or true and correct in all material respects (in the case of any such
representation or warranty to the extent not subject to a materiality
qualification), that such Issuer or Parent, as appropriate, has in all material
respects complied with all agreements and satisfied all conditions on its part
to be performed or satisfied hereunder at or prior to the Closing Date, and
that, subsequent to the date of the most recent financial statements contained
in the Offering Document, there has been no material adverse change, nor any
development or event that, in his reasonable judgment, would reasonably be
expected to result in material adverse change, in the condition (financial or
other), business, properties or results of operations of the Parent and its
subsidiaries taken as a whole, except as set forth in or contemplated by the
Offering Document or as described in such certificate.
(h) The Purchasers shall have received from KPMG Peat Marwick LLP a
letter dated the Closing Date bringing down to three days before the Closing
Date the information set forth in its letter referred to in Section 6(a).
(i) The Acquisition and related financings and transactions shall
have been consummated substantially as described in the Offering Document.
Each Issuer and Parent will furnish the several Purchasers with such
conformed copies of such opinions, certificates, letters and documents as the
Purchasers reasonably request. CSFBC may in its
10
<PAGE>
reasonable discretion waive on behalf of the several Purchasers compliance with
any conditions to the obligations of the Purchasers hereunder, whether in
respect of the Closing Date or otherwise.
7. Indemnification and Contribution. (a) Each Issuer and Parent, jointly
and severally, will indemnify and hold harmless each Purchaser against any
losses, claims, damages or liabilities, joint or several, to which such
Purchaser may become subject, under the Securities Act or the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of any untrue statement or alleged untrue statement
of any material fact contained in the Offering Document, or any amendment or
supplement thereto, or any related preliminary offering circular, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and will reimburse
each Purchaser for any legal or other expenses reasonably incurred by such
Purchaser in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that none of the Issuers or
-------- -------
Parent will be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with written information furnished
to the Issuers or Parent by any Purchaser through CSFBC specifically for use
therein, it being understood and agreed that the only such information consists
of the information described as such in subsection (b) below; and provided
further, that the foregoing indemnity with respect to the preliminary offering
circular shall not inure to the benefit of any Purchaser from whom the person
asserting any such losses, claims, damages or liabilities purchased Offered
Securities, to the extent that any such losses, claims, damages or liabilities
of such Purchaser result from a fact that such Purchaser sold Offered Securities
to a person in an initial resale to whom there was not sent or given at or prior
to the written confirmation of the sale of such Offered Securities, a copy of
the final offering circular (as amended and supplemented), if the Issuers had
previously furnished such amendments or supplements to such Purchaser prior to
confirmation of the sale of such Offered Securities to such person by such
Purchaser and the losses, claims, damages or liabilities of such Purchaser
result from an untrue statement or omission of a material fact contained in the
preliminary offering circular, which was corrected in the final offering
circular.
(b) Each Purchaser will severally and not jointly indemnify and hold
harmless the Issuers and the Guarantors, as appropriate, against any losses,
claims, damages or liabilities to which any of the Issuers and the Guarantors
may become subject, under the Securities Act or the Exchange Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Offering Document, or any
amendment or supplement thereto, or any related preliminary offering circular,
or arise out of or are based upon the omission or the alleged omission to state
therein a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Issuers or the
Guarantors by such Purchaser or through CSFBC specifically for use therein, and
will reimburse any legal or other expenses reasonably incurred by the Issuers or
the Guarantors in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred, it being
understood and agreed that the only such information furnished by any Purchaser
consists of the following information in the Offering Document furnished on
behalf of each Purchaser: the last paragraph at the bottom of the cover page
concerning the terms of the offering by the Purchasers; the legend concerning
over-allotments and stabilizing on page (iii); and paragraph four, the second
and third sentences of paragraph six and paragraphs seven to nine under the
caption "Plan of Distribution."
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party (if such counsel is counsel to the indemnifying party and
the
11
<PAGE>
representation of the indemnified party would present such counsel with a
conflict of interest, the indemnified party will have the right to employ
separate counsel, and the indemnifying party will bear the reasonable fees,
costs and expenses of only one such separate counsel for all indemnified
parties), and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened action in which any
indemnified party is a party to the extent such settlement is binding upon such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on any claims that are the subject
matter of such action.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Issuers and the Guarantors on the one hand and the Purchasers on the other
from the offering of the Offered Securities or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Issuers and the Guarantors on the one
hand and the Purchasers on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities as well
as any other relevant equitable considerations. The relative benefits received
by the Issuers and the Guarantors on the one hand and the Purchasers on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Issuers and the
Guarantors bear to the total discounts and commissions received by the
Purchasers from the Issuers and the Guarantors in the offering. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Issuers
or the Guarantors or the Purchasers and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid by an indemnified party as a result of
the losses, claims, damages or liabilities referred to in the first sentence of
this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any action or claim which is the subject of this subsection (d).
Notwithstanding the provisions of this subsection (d), no Purchaser shall be
required to contribute any amount in excess of the amount by which the total
price at which the Offered Securities purchased by it were resold exceeds the
amount of any damages which such Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. The Purchasers' obligations in this subsection (d) to contribute are
several in proportion to their respective purchase obligations and not joint.
(e) The obligations of each Issuer and Parent, as appropriate, under
this Section shall be in addition to any liability which each Issuer or Parent
may otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls such Issuer or Parent, as appropriate, within the
meaning of the Securities Act or the Exchange Act; and the obligations of the
Purchasers under this Section shall be in addition to any liability which the
respective Purchasers may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls any Purchaser within the
meaning of the Securities Act or the Exchange Act.
(f) No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Default of Purchasers. If any Purchaser or Purchasers default in their
obligations to purchase Offered Securities hereunder and the aggregate principal
amount of Offered Securities that such defaulting Purchaser or Purchasers agreed
but failed to purchase does not exceed 10% of the total principal amount of
Offered Securities, CSFBC may make arrangements satisfactory to the Issuers for
the purchase of such Offered Securities by other persons, including any of the
Purchasers, but if no such arrangements are made by such Closing Date, the non-
defaulting Purchasers shall be obligated severally, in proportion to their
respective
12
<PAGE>
commitments hereunder, to purchase the Offered Securities that such defaulting
Purchasers agreed but failed to purchase. If any Purchaser or Purchasers so
default and the aggregate principal amount of Offered Securities with respect to
which such default or defaults occur exceeds 10% of the total principal amount
of Offered Securities and arrangements satisfactory to CSFBC and the Issuers for
the purchase of such Offered Securities by other persons are not made within 36
hours after such default, this Agreement will terminate without liability on the
part of any non-defaulting Purchaser or the Issuers, except as provided in
Section 9. As used in this Agreement, the term "Purchaser" includes any person
substituted for a Purchaser under this Section. Nothing herein will relieve a
defaulting Purchaser from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of
each Issuer, Parent or their officers and of the several Purchasers set forth in
or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation, or statement as to the results thereof, made by
or on behalf of any Purchaser, Issuer, Parent or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the Offered Securities. If this Agreement
is terminated pursuant to Section 8 or if for any reason the purchase of the
Offered Securities by the Purchasers is not consummated, the Issuers and Parent
shall remain responsible for the expenses to be paid or reimbursed by it
pursuant to Section 5 and the respective obligations of the Issuers and Parent
and the Purchaser pursuant to Section 7 shall remain in effect. If the purchase
of the Offered Securities by the Purchasers is not consummated for any reason
other than solely because of the termination of this Agreement pursuant to
Section 8 or the occurrence of any event specified in Section 6(b), the Issuers
and Parent will reimburse the Purchaser for all reasonable out-of-pocket
expenses (including fees and disbursements of counsel) reasonably incurred by
them in connection with the offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Purchasers will be mailed, delivered or telegraphed and confirmed to
the Purchasers, c/o Credit Suisse First Boston Corporation, Eleven Madison
Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking Department
Transactions Advisory Group, or, if sent to the Issuers or the Parent, will be
mailed, delivered or telegraphed and confirmed to it at Jafra Cosmetics
International, 2451 Townsgate Road, Westlake Village, CA 91361, Attention:
Corporate Secretary; provided, however, that any notice to a Purchaser pursuant
-------- -------
to Section 7 will be mailed, delivered or telegraphed and confirmed to such
Purchaser.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
controlling persons referred to in Section 7(e), and no other person will have
any right or obligation hereunder, except that holders of Offered Securities
shall be entitled to enforce the agreements for their benefit contained in the
second sentence of Section 5(b) hereof against the Issuers and Parent as if such
holders were parties thereto.
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
13. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
Each party hereto hereby submits to the jurisdiction of the Federal and
state courts in the Borough of Manhattan in The City of New York in any suit or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. Each of Parent and Jafra S.A. irrevocably appoints the
U.S. Issuer as its authorized agent upon which process may be served in any such
suit or proceeding, and agrees that service of process upon such agent, and
written notice of said service to Jafra S.A. by the person serving the same to
the address provided in Section 10, shall be deemed in every respect effective
service of process upon Jafra S.A. in any such suit or proceeding. Each of
Parent and Jafra S.A. further agrees to take any and all action as may be
necessary to maintain such designation and appointment of such agent in full
force and effect for a period of three years from the date of this Agreement.
The obligation of Parent and Jafra S.A. in respect of any sum due to any
Purchaser shall, notwithstanding any judgment in a currency other than United
States dollars, not be discharged until the first
13
<PAGE>
business day, following receipt by such Purchaser of any sum adjudged to be so
due in such other currency, on which (and only to the extent that) such
Purchaser may in accordance with normal banking procedures purchase United
States dollars with such other currency; if the United States dollars so
purchased are less than the sum originally due to such Purchaser hereunder,
Jafra S.A. agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify such Purchaser against such loss. If the United States
dollars so purchased are greater than the sum originally due to such Purchaser
hereunder, such Purchaser agrees to pay to Jafra S.A. an amount equal to the
excess of the dollars so purchased over the sum originally due to such Purchaser
hereunder.
14
<PAGE>
If the foregoing is in accordance with the Purchasers' understanding of
our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement among Parent, each Issuer and the
several Purchasers in accordance with its terms.
Very truly yours.
CDRJ Acquisition Corporation,
By /s/ Donald J. Gogel
-------------------------------------------
Name: Donald J. Gogel
Title: President
Jafra Cosmetics International, S.A. de C.V.,
By /s/ Donald J. Gogel
-------------------------------------------
Name: Donald J. Gogel
Title: President
CDRJ Investments (Lux) S.A.,
By /s/ Donald J. Gogel
-------------------------------------------
Name: Donald J. Gogel
Title: President
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
Credit Suisse First Boston Corporation
Chase Securities Inc.
By: Credit Suisse First Boston Corporation
By ____________________________________
Name:
Title:
15
<PAGE>
If the foregoing is in accordance with the Purchasers' understanding of
our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement among Parent, each Issuer and the
several Purchasers in accordance with its terms.
Very truly yours.
CDRJ Acquisition Corporation,
By__________________________________________
Name:
Title:
Jafra Cosmetics International, S.A. de C.V.,
By__________________________________________
Name:
Title:
CDRJ Investments (Lux) S.A.,
By__________________________________________
Name:
Title:
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
Credit Suisse First Boston Corporation
Chase Securities Inc.
By: Credit Suisse First Boston Corporation
By /s/ M. Rod Rivera
-----------------------
Name: Director
Title: M. Rod Rivera
16
<PAGE>
SCHEDULE A
PURCHASERS PRINCIPAL AMOUNT OF
---------- OFFERED SECURITIES
-------------------
Credit Suisse First Boston Corporation $ 70,000,000
Chase Securities Inc. $ 30,000,000
------------
Total $100,000,000
============
17
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SCHEDULE B
Reday, S.A. de C.V.
Distribuidora Venus, S.A. de C.V.
Dirsamex, S.A. de C.V.
Qualifax, S.A. de C.V.
Jafra Cosmetics, S. de R.L. de C.V.
Consultoria Jafra, S.A. de C.V.
18
<PAGE>
EXHIBIT A
Form of Opinion of Debevoise & Plimpton
[NOT INCLUDED]
19
<PAGE>
EXHIBIT B
Form of Opinion of Ritch, Heather y Mueller, S.C.
April 30, 1998
Credit Suisse First Boston Corporation
and Chase Securities, Inc.
As Purchasers under the
Purchase Agreement
referred to below
Ladies and Gentlemen:
We have acted as special Mexican counsel to Jafra Cosmetics International,
S.A. de C.V. ("Jafra S.A.") in connection with the issuance and sale thereby of
----------
U.S.$100,000,000 11 3/4% Senior Subordinated Notes Due 2008 (the "Notes")
-----
severally with CDRJ Acquisition Corporation (the "U.S. Issuer"), a Delaware
-----------
Corporation. The obligations of each such issuer under the Notes will be
guaranteed by the other issuer on a senior subordinated basis, Jafra S.A.'s
obligations under the Notes will be guaranteed by each of its existing and
future subsidiaries, the U.S. Issuer's obligations under the Notes will be
guaranteed by each of its existing and future subsidiaries and the obligations
of both issuers will be guaranteed hy CDRJ Investments (Lux) S.A. (the
"Parent"). Terms used herein which are not otherwise defined shall have the
------
respective meanings assigned thereto in the Purchase Agreement dated as of April
28, 1998 (the "Purchase Agreement") among Jafra S.A., the U.S. Issuer, the
------------------
Parent and the Purchasers relating to the issuance and sale of the Notes. This
opinion is furnished to you pursuant to Section 6(d) of the Purchase Agreement.
We have relied on originals or copies, certified or otherwise identified
to our satisfaction, of all such records of Jafra S.A. and the Subsidiary
Guarantors and such other instruments and other certificates of public
officials, officers and representatives of Jafra S.A. and the Subsidiary
Guarantors and have made such investigations of law as we have deemed necessary
or appropriate as a basis for the opinion expressed below.
<PAGE>
2
In rendering this opinion, we have assumed, without any independent
investigation or verification or any kind, (i) the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to authentic original documents of all documents submitted to us
as certified, conformed or photostatic copies, (ii) the due authority of the
parties (other than Jafra S.A. and the Subsidiary Guarantors) executing each of
the Purchase Agreement, as amended, the Registration Rights Agreement and the
Indenture (including any supplement thereto), (iii) the validity, binding effect
and enforceability of each of the Purchase Agreement, as amended, the Indenture
(including any supplement thereto), the Registration Rights Agreement and the
Notes under the laws of the State of New York, and (iv) that the Notes, when
duly executed, authenticated, issued and delivered, will conform to the
specimens thereof examined by us.
We have made no independent investigation of the laws of the United States
of America, as a basis for the opinion stated herein and have assumed that there
is nothing in any such laws that affects our opinion.
Based upon the foregoing, and subject to the qualifications set forth
below, we are of the opinion that:
1. Jafra, S.A. and Grupo Jafra have been duly incorporated and are
existing sociedades anonimas de capital variable under the laws of Mexico, with
corporate power and authority to own properties and conduct their business as
described in the Offering Document.
2. Each of the Subsidiary Guarantors has been duly incorporated and is an
existing corporation under the laws of Mexico with power and authority
(corporate and other) to own its properties and conduct its business as
described in the Offering Document; based upon the stockholders' registry book
of each such company, all of the issued and outstanding capital stock of Jafra
S.A., Grupo Jafra and each Subsidiary Guarantor has been duly authorized and
validly issued and is fully paid and non-assessable and the capital stock of
Jafra
<PAGE>
3
S.A. and each Grupo Jafra is owned free from liens, encumbrances and defects
except for the liens created under the Senior Credit Agreement and related
security documents described in the Offering Document.
3. Each of the Indenture (including any supplement thereto) and the
Registration Rights Agreement has been duly authorized, executed and delivered
by Jafra S.A. and each Subsidiary Guarantor; the Notes have been duly
authorized, executed, authenticated, issued and delivered by Jafra S.A. and each
Subsidiary Guarantor and conform to the description thereof contained in the
Offering Document.
4. The Jafra S.A. Cross Guarantee and the Subsidiary Guarantees have been
duly authorized, executed, authenticated, issued and delivered, as appropriate
by Jafra S.A. and each Subsidiary Guarantor, respectively.
5. The Purchase Agreement, as amended, has been duly authorized, executed
and delivered by Jafra S.A. and each Subsidiary Guarantor.
6. No consent, approval, authorization or order of, or filing with, any
Mexican governmental agency or body or court is required for the consummation of
the transactions contemplated by the Purchase Agreement, as amended, in
connection with the issuance and sale of the Notes by Jafra S.A., or the
enforceability of the guarantees issued by Jafra S.A. and the Subsidiary
Guarantors in connection thereto, except for the registration of the Notes with
the Special Section of the National Registry of Securities and Intermediaries
(Registro Nacional de Valores e Intermediarios) maintained by the Mexican
- ----------------------------------------------
National Banking and Securities Commission (Comision Nacional Bancaria y de
-------------------------------
Valores), approval for which registration has been obtained and is in full force
- -------
and effect and which registration will be completed upon the filing of certain
documents therein.
7. The execution, delivery and performance by Jafra S.A. and the
Subsidiary Guarantors of the Indenture (including any supplement thereto), the
Guarantees and the Purchase Agreement, as amended, and the issuance and sale of
the Notes and compliance with the terms and provisions thereof will not result
in a breach or violation of any of
<PAGE>
4
the terms or provisions of, or constitute a default under, any statute, any rule
or regulation of any Mexican governmental agency, or to our knowledge, of any
agreement or instrument to which Jafra S.A. or any Subsidiary Guarantor is
subject, or the estatutos sociales of Jafra S.A. and Subsidiary Guarantor and
------------------
Jafra S.A. has full power and authority to authorize, issue, sell and guarantee
the Notes as contemplated by the Purchase Agreement, as amended.
8. To our knowledge, neither Jafra, S.A. or any Subsidiary Guarantor is in
violation of any Mexican statute, rule or regulation relating to the use,
disposal or release of hazardous or toxic substances or relating to the
protection of the environment or human exposure to hazardous or toxic substances
(collectively, the "Environmental Laws") or is subject to any claim relating to
------------------
any Environmental Laws, which violation or claim would individually or in the
aggregate have a material adverse effect on Jafra, S.A. or its subsidiaries
taken as a whole.
9. To our knowledge, there are no pending actions, suits or proceedings
against or affecting Jafra S.A. and/or the Subsidiary Guarantors, or any of
their respective properties that, if determined adversely to Jafra S.A. and/or
the Subsidiary Guarantors would individually or in the aggregate have a material
adverse effect on the condition (financial or other), business, properties or
results of operations of Jafra S.A. and the Subsidiary Guarantors taken as a
whole or would materially and adversely affect the ability of Jafra S.A. or any
Subsidiary Guarantor to perform its obligations under the Indenture (including
any supplement thereto), the Registration Rights Agreement or under the Purchase
Agreement, as amended, or which are otherwise material in the context of the
sale of the Notes and, to the best of our knowledge, no such actions, suits or
proceedings are threatened.
10. The choice of law provisions set forth in Section 13 of the Purchase
Agreement will be recognized by the courts of Mexico; Jafra S.A. and each
Subsidiary Guarantor can sue and be sued in their own name under the laws of
Mexico; under the laws of Mexico, the submission of Jafra S.A. and the
Subsidiary Guarantors to the jurisdiction of federal and state courts in the
Borough of Manhattan in The City of New
<PAGE>
5
York (each a "New York Court" and collectively the "New York Courts") is legal,
valid and binding; any judgment obtained in a New York Court arising out of or
in relation to the obligations of Jafra S.A. and any of the Subsidiary
Guarantors under the Purchase Agreement, as amended, the Indenture (including
any supplements thereto), the Jafra S.A. Guarantee, the Subsidiary Guarantees,
the Registration Rights Agreement or the transactions contemplated thereby will
be recognized in Mexico; provided that any judgment obtained against Jafra S.A.
or any Subsidiary Guarantor in any of the New York Courts in respect of any sum
payable by it under the Purchase Agreement, as amended, the Indenture (including
any supplement thereto), the Notes, the Registration Rights Agreement and the
Guarantees would be recognized and enforced by the courts of Mexico without re-
examination of the issues pursuant to Articles 569 and 571 of the Federal Code
of Civil Procedure and Article 1347A of the Commerce Code, which provide, inter
alia, that any judgment rendered outside Mexico may be enforced by Mexican
courts, provided that:
--------
(i) such judgment is obtained in compliance with legal
requirements of the jurisdiction of the court rendering
such judgment and in compliance with all legal
requirements of the Purchase Agreement, the Indenture,
the Guarantees, the Registration Rights Agreement or the
Notes, as the case may be;
(ii) such judgment is strictly for the payment of a certain
sum of money and has been rendered in an in personam
-----------
action as opposed to an in rem action;
------
(iii) service of process is made personally on Jafra S.A. or on
the Subsidiary Guarantors or on a duly appointed process
agent;
(iv) such judgment does not contravene Mexican law, public
policy of Mexico,
<PAGE>
6
international treaties or agreements binding upon
Mexico or generally accepted principles of
international law;
(v) the applicable procedural requirements under the laws
of Mexico with respect to the enforcement of foreign
judgments (including the issuance of letters rogatory
by the competent authority of such jurisdiction
requesting enforcement of such judgment and the
certification of such judgment as authentic by the
corresponding authorities of such jurisdiction in
accordance with the laws thereof) are complied with;
(vi) such judgment in the jurisdiction where obtained;
(vii) the action in respect of which such judgment is
rendered is not the subject matter of a lawsuit among
the same parties, pending before a Mexican court; and
(viii) the courts of such jurisdiction recognize the
principles of reciprocity in connection with the
enforcement of Mexican judgments in such jurisdiction.
Subject to qualification (g) below, service of process effected in the
manner set forth in Section 13 of the Purchase Agreement will be effective, in
so far as the laws of Mexico is concerned, to confer valid personal jurisdiction
over Jafra S.A. and the Subsidiary Guarantors and Jafra S.A. and the Subsidiary
Guarantors have validly appointed the U.S. Issuer as their agent for the purpose
described in Section 13 of the Purchase Agreement.
<PAGE>
7
11. The statements set forth in the Offering Document under the captions
"Service of Process and Enforcement of Civil Liabilities," "Risk Factors-
Judgements in Foreign Currencies," and "Taxation-Mexican Taxation" in each case,
insofar as such statements constitute summaries of documents, and insofar as
such statements purport to summarize or relate to provisions of Mexican laws and
regulations, are accurate, complete and fair; and our opinion set forth in the
Offering Document under the caption "Service of Process and Enforcement of the
Civil Liabilities" is confirmed as of the date hereof.
12. The indemnification and contribution provisions set forth in Section
8 of the Purchase Agreement do not contravene the public policy or laws of
Mexico.
13. To ensure the legality, validity, enforceability or admissibility
into evidence of the Purchase Agreement, as amended, the Indenture (including
any supplement thereto), the Notes or the Guarantees, it is not necessary that
any of them or any other document be filed, registered or recorded with, or
executed or notarized before, any court or other authority in Mexico, or that
any registration charge or stamp tax paid on or in respect of the Purchase
Agreement, as amended, the Indenture (including any supplement thereto), the
Notes, the Registration Rights Agreement or the Guarantees, or any other
documents.
14. The Purchase Agreement, as amended, the Indenture (including any
supplement thereto), the Notes and the Guarantees are in proper legal form under
the laws of Mexico for the enforcement thereof against Jafra S.A. and the
Subsidiary Guarantors under the laws of Mexico.
The foregoing opinion is subject to the following qualifications:
(a) enforcement of the Purchase Agreement, as amended, the Indenture
(including any supplement thereto), the Registration Rights Agreement and the
Notes may be limited by bankruptcy, insolvency, suspension of payments,
liquidation, reorganization, moratorium and other laws of general application
<PAGE>
8
relating to or affecting the rights of creditors generally;
(b) in any proceedings brought to the courts of Mexico for the enforcement
of the Purchase Agreement, as amended, the Indenture (including any
supplement thereto), the Registration Rights Agreement and the Notes, or any
judgment related thereto obtained in a foreign jurisdiction against Jafra,
S.A. or the Subsidiary Guarantors, a Mexican court would apply Mexican
procedural law in such proceedings;
(c) in the event that proceedings are brought in Mexico seeking
performance of Jafra S.A.'s or any of the Subsidiary Guarantors' obligations
in Mexico, Jafra S.A. and the Subsidiary Guarantors may discharge their
respective obligations by paying any sums due in a currency other than
Mexican currency, in Mexican currency at the rate of exchange prevailing in
Mexico on the date when payment is made and, therefore, any currency
indemnity provisions of the Purchase Agreement, as amended, the Indenture
(including any supplement thereto), the Guarantee and the Registration Rights
Agreement may not be enforceable under the laws of Mexico;
(d) provisions of the Purchase Agreement, as amended, the Registration
Rights Agreement or the Indenture (including any supplement thereto) granting
discretionary authority to the Purchasers or the Trustee, cannot be exercised
in a manner inconsistent with relevant facts nor defeat any requirements from
a competent authority to produce satisfactory evidence as to the basis of any
determination; in addition, under Mexican law, Jafra S.A. and the Subsidiary
Guarantors will have the right to contest in court any notice or certificate
of any such Purchaser or the Trustee purporting to be conclusive and binding;
(e) in the event that any legal proceedings are brought to the courts of
Mexico, a Spanish translation of the documents required in such proceedings
prepared by a court-approved translator would have to be approved by the
court after the defendant had been given an
<PAGE>
9
opportunity to be heard with respect to the accuracy of the translation, and
proceedings would thereafter be based upon the translated documents;
(f) under the laws of Mexico labor claims, claims of tax authorities for
unpaid taxes, Social Security quotas and Workers' Housing Fund quotas, will
have priority over claims of holders of the Notes;
(g) with respect to provisions contained in the Purchase Agreement, as
amended, the Registration Rights Agreement and the Indenture (including any
supplement thereto) in connection with service of process, it should be noted
that service of process by mail does not constitute personal service of
process under Mexican law and, since such service is considered to be a basic
procedural requirement, if for purposes of proceedings outside Mexico service
of process is made by mail, a final judgment based on such process would not
be enforced by the courts of Mexico; and
(h) we note that a Mexican court could hold that the consent to
jurisdiction provision contained in the Registration Rights Agreement does
not comply with Mexican legal requirements to be considered valid and,
therefore, a Mexican court could deny the enforcement in Mexico of a foreign
judgment issued against the Jafra, S.A. or any Subsidiary Guarantor under the
Registration Rights Agreement.
We express no opinion as to any laws other than the laws of Mexico.
This opinion is addressed to you solely for your benefit in connection
with the issue and sale of the Notes. It is not to be transmitted to anyone
else nor is it to be relied upon by anyone else or for any other purpose or
quoted or referred to in any public document or filed with anyone without our
express written consent.
Very truly yours,
RITCH, HEATHER Y MUELLER, S.C.
<PAGE>
EXHIBIT C
Form of Opinion of Bonn & Schmitt
_____________________________________________
FORM OF OPINION OF BONN & SCHMITT TO BE
DELIVERED PURSUANT TO SECTION 6(e)
CREDIT SUISSE FIRST BOSTON
CORPORATION
CHASE SECURITIES INC.
C/O CREDIT SUISSE FIRST BOSTON
CORPORATION
Eleven Madison Avenue
USA - NEW YORK, NY 10010-3629
------------------------------
Luxembourg, April 30, 1998
RE.: JAFRA - USD 100,000,000 % SENIOR SUBORDINATED NOTES DUE 2008
-------------------------------------------------------------------
We have acted as counsel to CDRJ Investments (Lux) S.A., a Luxembourg
societe anonyme (the "PARENT") in connection with the execution and delivery
today of, and the consummation of the transactions contemplated by, the Purchase
Agreement dated as of April 28, 1998 (the "PURCHASE AGREEMENT"), among the
Parent, CDRJ Acquisition Corporation, Jafra Cosmetics International, S.A. de
C.V., and the financial institutions party thereto as purchasers (the
"PURCHASERS"). Capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Purchase Agreement. This opinion is
being delivered to you pursuant to Section 6(e) of the Purchase Agreement.
We have examined the following:
1. the Purchase Agreement and the LETTER AGREEMENT related thereto (the
"Letter Agreement");
<PAGE>
2. the INDENTURE AND INDENTURE SUPPLEMENT;
3. the REGISTRATION RIGHTS AGREEMENT;
4. the PARENT GUARANTEE as set forth in the Indenture;
5. an offering circular in relation with the issue of the Offered
Securities (the "OFFERING CIRCULAR");
6. a resolution by the board of directors and of the shareholders of
the Parent dated ;
7. the articles of incorporation of the Parent; and
8. such other documents as we have deemed necessary.
The Purchase Agreement, the Indenture, the Registration Rights
Agreement and the Parent Guarantee are together referred to as the "ISSUE
DOCUMENTS".
For the purposes of this opinion, we have assumed:
(a) that the execution and delivery of the Issue Documents are within the
capacity, power and authority of the parties thereto, other than
Parent, and that these Issue Documents have been duly authorized,
executed and delivered by, and are binding upon, all such parties,
other than Parent;
(b) the genuineness of all signatures on all documents and the
completeness, and the conformity to original documents, of all copies
submitted to us;
(c) that all authorizations and consents of any public authority of any
country other than the Grand-Duchy of Luxembourg which may be required
in connection with the execution and delivery of the Issue Documents
and the issue of the Offered Securities have been or will be obtained;
(d) that the documents are substantially in the form of the drafts or
copies we have examined;
2
<PAGE>
(e) the legality, validity and enforceability of the Issue Documents and
all other documents related to this transaction under their governing
laws (other than the laws of Luxembourg).
On the basis of the foregoing and subject to the qualifications listed
below, we are, as of the date hereof, of the opinion that:
(i) Parent has been duly incorporated and is an existing corporation
under the laws of Luxembourg, with the corporate power and authority to own
properties and conduct its businesses as described in the Offering Circular;
(ii) The Issue Documents have been duly authorized, executed and
delivered by Parent;
(iii) No consent, approval, authorization or order of, or filing with,
any Luxembourg governmental agency or any court is required for the consummation
of the transactions contemplated by the Issue Documents;
(iv) The execution, delivery and performance of the Issue Documents
and the issuance and sale of the Offered Securities and compliance with the
terms and provisions thereof will not result in a breach or violation of any of
the terms and provisions of, or constitute a default under, any statute, rule or
regulation or order of any Luxembourg governmental agency or, to our knowledge,
any agreement or instrument to which Parent is a party or by which Parent is
bound or to which any of the properties of Parent is subject, or the articles of
incorporation of Parent, except for breaches, violations or defaults that would
not reasonably be expected to have a material adverse effect on the earnings,
financial condition or business of Parent and its subsidiaries taken a whole;
and Parent has full corporate power and authority to guarantee the Offered
Securities as contemplated by the Issue Documents;
(v) The choice of law provisions set forth in Section 13 of the
Purchase Agreement will be recognized by the courts of Luxembourg; Parent may
sue or be sued in its own name under the laws of Luxembourg; under the laws of
Luxembourg the submission of Parent to the jurisdiction of federal and state
courts in the Borough of Manhattan in the City of New York (each a "New York
Court" and collectively the "New York Courts") is legal, valid and binding; any
judgment obtained in a New York Court arising out of or in relation to the
obligations of Parent under the Issue Documents or the transactions contemplated
hereby will be recognized in
3
<PAGE>
Luxembourg, subject to and in accordance with applicable rule on enforcement of
foreign judgment; service of process effected in the manner set forth in Section
13 of the Purchase Agreement will be effective, in so far as the laws of
Luxembourg are concerned, to confer valid personal jurisdiction over Parent; and
Parent has validly appointed the Authorized Agent as its agent for the purpose
described in the Section 13;
(vi) The statements set forth in the Preliminary Offering Circular
under the captions "Service of Process and Enforcement of Civil Liabilities" and
"Taxation Luxembourg Taxation", insofar as such statements constitute summaries
of documents, and insofar as such statements purport to summarize or relate to
provisions of the laws the Luxembourg and regulations, are accurate, complete
and fair, and such counsel's option set forth in the Offering Circular under the
caption "Service of Process and Enforcement of the Civil Liabilities" is
confined as of the date hereof;
(vii) Except as described in the Offering Circular, no stamp or other
issuance or transfer taxes or duties and no capital gains, income, withholding
or other taxes are payable to Luxembourg or any political subdivision or taxing
authority thereof or therein by or on behalf of the Purchasers that are not
residents of Luxembourg nor are engaged in trade or business through a permanent
establishment in Luxembourg for purposes of Luxembourg taxation in connection
with (A) the authorization, issuance, sale and delivery by each Issuer and the
Guarantors of the Offered Securities to the Purchasers, (B) the sale and
delivery outside Luxembourg by the Purchasers of the Offered Securities to the
initial purchases thereof or (C) on or virtue of execution, delivery or
enforcement of the Issue Documents or the Offered Securities, save that
registration may be ordered and a registration fee of 0,24 per cent on the total
amount involved might become payable if the Issue Documents were to be exhibited
before a Luxembourg Court or a Luxembourg official authority (autorite
constituee); in practice, the registration is very rarely
ordered;
(viii) The indemnification and contribution provisions set forth in
Section 8 of the Purchase Agreement do not contravene the public policy or
laws of Luxembourg; and
(ix) No Luxembourg governmental authorization is required to effect
payments of principal, premium, if any, and interest (including any Additional
Amounts due and payable thereon) on the Offered Securities or any payment in
respect of the Parent Guarantee.
4
<PAGE>
The opinions expressed herein are subject to the following
qualifications:
(a) the obligations of Parent under the Issue Documents and the Offered
Securities and the enforceability of the Issue Documents and the
Offered Securities will be subject to and may be limited by any
applicable bankruptcy, liquidation, insolvency or other laws of
similar effect relating to or affecting the enforcement of creditors'
rights generally;
(b) the enforcement of the Issue Documents and the rights and obligations
of the parties thereto will be subject to the general statutory
principles of Luxembourg law and no opinion is given herein as to the
availability of any specific performance remedy, other than monetary
damages, for the enforcement of any obligation of Parent and this
opinion should not be taken to imply that a Luxembourg Court will
necessarily grant any remedy, in particular, orders for specific
performance and injunctions will not be available;
(c) where any obligations are to be performed or observed or are based
upon a matter arising in a jurisdiction outside Luxembourg they may
not be enforceable under Luxembourg law if and to the extent such
performance or observance would be unlawful, unenforceable, or
contrary to public policy under the laws of such jurisdiction;
(d) a Luxembourg Court may refuse to give effect to a purported
contractual obligation to pay costs imposed upon another party in
respect of the costs of any unsuccessful litigation brought against
that party before a Luxembourg Court and a Luxembourg Court may not
award by way of costs all of the expenditure incurred by a successful
litigant in proceedings brought before the Court;
(e) whilst, in the event of any proceedings being brought in a Luxembourg
Court in respect of a monetary obligation expressed to be payable in a
currency other than Luxembourg francs, a Luxembourg Court would have
power to give judgment expressed as an order to pay a currency other
than Luxembourg francs, enforcement of the judgement against the
Parent in Luxembourg would be available only in Luxembourg francs and
for such purposes all claims or debts are converted into Luxembourg
francs normally at the prevailing
5
<PAGE>
exchange rate on the date of payment;
(f) claims may become barred under the statutory limitation period rules
or may be or become subject to defenses of set-off or counterclaims;
(g) any determination or certificates made or given pursuant to the
provisions of the Issue Documents which provide for such determination
or certificate to be final, conclusive or binding might not
necessarily be held under Luxembourg law to be final, conclusive or
binding;
(h) we express no opinion as to whether any provision in the Issue
Documents conferring a right of set-off or similar right would be
effective against a bankruptcy receiver, liquidator or a creditor;
(i) a contractual provision conferring or imposing a remedy, an obligation
or penalty consequent upon default may not be fully enforceable if it
were construed by a Luxembourg Court as constituting an excessive
pecuniary remedy;
(j) as regards jurisdiction, a Luxembourg Court may stay proceedings if
concurrent proceedings based on the same grounds and between the same
parties have been brought previously before another Court;
(k) a contractual provision allowing the service of process against the
Parent to a service agent would not preclude the Luxembourg statutory
provisions allowing the valid servicing of process against the Parent
at its domicile;
(l) apart from that given in paragraphs (vi) and (vii) no opinion is given
as to the taxation consequences of the transactions contemplated by
the Agreements.
This opinion is strictly limited to the matters of Luxembourg law
stated herein and is not to be read as extending by implication to any
other matters. It is addressed to you only and for your sole benefit.
This opinion is governed by Luxembourg law and the Luxembourg Courts
have exclusive jurisdiction in respect thereto.
6
<PAGE>
EXHIBIT D
Form of Comfort Letter from KPMG Peat Marwick LLP
April 27, 1998
Clayton, Dubilier & Rice
Fund V Limited Partnership
1043 Foulk Road, Suite 106
Wilmington, Delaware 19803
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010
Chase Securities Inc.
270 Park Avenue
New York, New York 10017
Dear Sirs:
We have audited the combined balance sheets of Jafra Cosmetics International
(the "Company") as of December 31, 1997 and 1996, and the combined statements of
operations, shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1997, included in the Confidential
Preliminary Offering Circular issued by the Company under Rule 144A of the
Securities Act of 1933 (the "Act"); our reports with respect thereto are also
included in that Confidential Preliminary Offering Circular. The Confidential
Offering Circular, dated April 27, 1998, is herein referred to as the Offering
Circular.
In connection with the Offering Circular:
<PAGE>
[LOGO of KPMG Peat Marwick]
Jafra Cosmetics International
Credit Suisse First Boston Corporation
Chase Securities Inc.
April 27, 1998
Page 2
1. We are independent certified public accountants with respect to the Company
within the meaning of the Act and the applicable published rules and
regulations thereunder adopted by the SEC.
2. In our opinion, the combined financial statements audited by us and
included in the Offering Circular comply as to form in all material
respects with the applicable accounting requirements of the Act and the
related published rules and regulations.
3. We have not audited any combined financial statements of the Company as of
any date or for any period subsequent to December 31, 1997; although we
have conducted an audit of the Company's combined financial statements for
the year December 31, 1997, the purpose and therefore the scope of the
audit was to enable us to express our opinion on the combined financial
statements as of December 31, 1997, and for the year then ended, but not on
the combined financial statements for any interim period within that year.
Therefore, we are unable to and do not express any opinion on the unaudited
combined statement of operations data for the three-month periods ended
March 31, 1998 and 1997, included in the Offering Circular, or on the
financial position, results of operations, or cash flows as of any date or
for any period subsequent to December 31, 1997.
4. For purposes of this letter, we have read the minutes of the meetings of
the shareholders and the board of directors of the Company as set forth in
the minute books at April 15, 1998, officials of the Company having advised
us that the minutes of all such meetings through that date were set forth
therein; we have carried out other procedures to April 24, 1998, as follows
(our work did not extend to the period from April 25, 1998 to April 27,
1998):
(a) With respect to the period from January 1, 1998, to March 31, 1998,
we have -
(i) Read the unaudited combined financial statements of the Company
as of and for the three-month periods ended March 1998 and 1997
furnished us by the Company, officials of the Company having
advised us that no such financial statements as
<PAGE>
[LOGO of KPMG Peat Marwick]
Jafra Cosmetics International
Credit Suisse First Boston Corporation
Chase Securities Inc.
April 27, 1998
Page 3
of any date or for any period subsequent to March 31, 1998, were
available.
(ii) Inquired of certain officials of the Company who have
responsibility for financial and accounting matters whether the
unaudited combined financial statements referred to in (a)(i)
are stated on a basis substantially consistent with that of the
audited combined financial statements included in the Offering
Circular.
The foregoing procedures do not constitute an audit conducted in accordance
with generally accepted auditing standards. Also, they would not
necessarily reveal matters of significance with respect to the comments in
the following paragraph. Accordingly, we make no representations regarding
the sufficiency of the foregoing procedures for your purposes.
5. Nothing came to our attention as a result of the procedures noted in 4a,
however, that caused us to believe that -
(i) At March 31, 1998, there was any change in the capital stock, increase
in long-term debt, or decrease in combined net current assets or
divisional equity of the combined companies as compared with amounts
shown in the December 31, 1997 combined balance sheet included in the
Offering Circular, or
(ii) for the period from January 1, 1998 to March 31, 1998, there were any
decreases, as compared to the corresponding period in the preceding
year, in combined net sales or in net income.
6. As mentioned in 4a, Company officials have advised us that no combined
financial statements as of any date or for any period subsequent to March
31, 1998 are available; accordingly, the procedures carried out by us with
respect to changes in financial statement items after March 31, 1998 have,
of necessity, been even more limited than those with respect to the periods
referred to in 4. We have inquired of certain officials of the Company who
have responsibility for financial and accounting matters whether (a) at
April 26, 1998, there was any change in the capital stock, increase in
long-term debt or any decreases in
<PAGE>
[LOGO of KPMG Peat Marwick]
Jafra Cosmetics International
Credit Suisse First Boston Corporation
Chase Securities Inc.
April 27, 1998
Page 4
combined net current assets or divisional equity of the combined companies
as compared with amounts shown on the December 31, 1997 combined balance
sheet included in the Offering Circular or (b) for the period from April 1,
1998 to April 26, 1998, there were any decreases, as compared with the
corresponding period in the preceding year, in combined net sales or in net
income. On the basis of these inquires and our reading of the minutes as
described in 4, nothing came to our attention that caused us to believe
that there was any such change, increase, or decrease.
7. At your request, we also performed the following procedures:
a. Read the unaudited pro forma combined balance sheet as of December 31,
1997, and the unaudited pro forma combined statement of operations for
the year ended December 31, 1997, included in the Offering Circular.
b. Inquired of certain officials of the Company who have responsibility
for financial and accounting matters as to whether all significant
assumptions regarding (i) the Acquisition of the worldwide Jafra
business by Parent and its subsidiaries; (ii) the receipt of proceeds
for the offering of the Notes and the initial borrowings under the
Senior Credit Agreement; and (iii) the payment of fees and expenses
related to the Acquisition and aforementioned financings, had been
reflected in the pro forma adjustments and whether the unaudited pro
forma combined financial statements referred to in 7a comply as to
form in all material respects with the applicable accounting
requirements of the rule 11-02 of Regulation S-X.
Those officials referred to above stated, in response to our
inquiries, that all significant assumptions regarding the acquisition
had been reflected in the pro forma adjustments and that the unaudited
pro forma combined financial statements referred to in a comply as to
form in all material respects with the applicable accounting
requirements of rule 11-02 of the Regulation S-X.
c. Compared the historical financial information for the Company included
on pages 26 and 30 of the Offering Circular with the historical
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Credit Suisse First Boston Corporation
Chase Securities Inc.
April 27, 1998
Page 5
information to the audited combined financial statements of the
Company, included elsewhere in the Offering Circular, and found them
to be in agreement.
d. Proved the arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts in the unaudited pro forma
combined financial statements.
The foregoing procedures are less in scope than an examination, the
objective of which is the expression of an opinion on management's
assumption, the pro forma adjustments, and the application of those
adjustments to historical financial information. Accordingly, we do
not express such an opinion. We make no representation about the
sufficiency of the foregoing procedures for your purposes.
Nothing came to our attention as a result of the procedures above,
however, that caused us to believe that the unaudited pro forma
combined financial statements referred to in 7a included in the
Offering Circular do not comply as to form in all material respects
with the applicable accounting requirements of Rule 11-02 of
Regulation S-X and that the pro forma adjustments have not been
properly applied to the historical financial amounts in the
compilation of those statements. Had we performed additional
procedures or had we made an examination of the pro forma combined
financial statements, other matters might have come to our attention
that would have been reported to you.
8. For purposes of this letter, we have also read the items identified by you
on the attached copy of the Offering Circular, and have performed the
following procedures, which were applied as indicated with respect to the
letters explained below:
A Compared the amount with the Company's audited combined financial
statements or amounts derived from the Company's audited combined
financial statements included in the Offering Circular for the period
indicated and found them to be in agreement.
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Credit Suisse First Boston Corporation
Chase Securities Inc.
April 27, 1998
Page 6
B Compared the amount or percentage to a schedule or report prepared by
the Company, as rounded, and found them to be in agreement. Compared
the amounts on the schedule or report to corresponding amounts
contained in or derived from the Company's accounting records and
found them to be in agreement. We also recalculated the percentages
based upon information contained within the schedule or report
prepared by the Company.
C Not used.
D Recalculated amount or percentage based on amounts derived from the
Company's audited combined financial statements and found them to be
in agreement.
E Agreed to the Company's worldwide consolidated financial statements
(adjusted for combining entries) prepared in conjunction with the
Gillette worldwide financial statements, and found them to be in
agreement. In addition, we recalculated the amounts of "EBITDA" and
"ratio of earnings to fixed charges" included in Selected Historical
Combined Financial Data on page 32, and found them to be in agreement.
F Agreed to the Company's consolidated financial statements (adjusted
for combining entries) as of and for the three-month periods ended
March 31, 1998 and 1997, and found them to be in agreement. See
paragraph 4.
G Compared the amount or the percentage to a schedule or report prepared
by the Company, as rounded, and found them to be in agreement. We also
recalculated the percentages based upon information contained within
the schedule or report prepared by the Company.
H Compared amount to a schedule or report prepared by the Company, as
rounded, and found them to be in agreement.
I Compared amount to a schedule or report prepared by the Company, as
rounded, and found them to be in agreement. We make no representation
as to what constitutes a sales representative or that the individuals
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Credit Suisse First Boston Corporation
Chase Securities Inc.
April 27, 1998
Page 7
included on such a schedule are sales representatives. We also
recalculated the percentages based upon information contained within
the schedule or report prepared by the Company.
J Compared amount to a schedule or report prepared by the Company, as
rounded, and found them to be in agreement. We make no representation
as to what constitutes new product introductions or that the products
included on the schedule were introduced during the periods
represented.
K Compared amount to a schedule or report prepared by the Company, as
rounded, and found them to be in agreement. We make no representation
as what comprises capital expenditures for "infrastructure" or that
the description noted on the schedule represents an expenditure for
"infrastructure."
L Compared amount to a schedule or report prepared by the Company, as
rounded, and found them to be in agreement. We make no representation
as what constitutes an employee or that the individuals included on
the schedule were employees of the Company.
9. Our audit of the combined financial statements for the periods referred to
in the introductory paragraph of this letter comprised audit tests and
procedures deemed necessary for the purpose of expressing an opinion on
such financial statements taken as a whole. For none of the periods
referred to therein, or any other period, did we perform audit tests for
the purpose of expressing an opinion on individual balances of accounts or
summaries of selected transactions such as those included in the attached
Offering Circular, and, accordingly, we express no opinion thereon.
10. It should be understood that we make no representations regarding questions
of legal interpretation or regarding the sufficiency for your purposes of
the procedures enumerated in the preceding paragraphs; also, such
procedures would not necessarily reveal any material misstatement of the
amounts or percentages referred to in paragraph 8 above. Further, we have
addressed ourselves solely to the foregoing data as set forth in the
Offering Circular and make no
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Credit Suisse First Boston Corporation
Chase Securities Inc.
April 27, 1998
Page 8
representations regarding the adequacy of disclosure or regarding whether
any material facts have been omitted.
11. This letter is solely for the information of the addressees and to assist
the underwriters in conducting and documenting their investigation of the
affairs of the Company in connection with the offering of the senior
subordinated notes covered by the Offering Circular, and it is not to be
used, circulated, quoted, or otherwise referred to within or without the
underwriting group for any other purpose, including but not limited to the
registration, purchase, or sale of senior subordinated notes, nor is it to
be filed with or referred to in whole or in part in the Offering Circular
or any other document, except that reference may be made to it in the
underwriting agreement or in any list of closing documents pertaining to
the offering of the securities covered by the Offering Circular.
Very truly yours,
<PAGE>
EXHIBIT 4.4
CONFORMED COPY
PURCHASE AGREEMENT AMENDMENT
Reference is made to the Purchase Agreement dated April 28, 1998 (the
"Purchase Agreement"), among CDRJ Acquisition Corporation ("Acquisition Co."),
Jafra Cosmetics International, S.A. de C.V. ("Jafra S.A."), CDRJ Investments
(Lux) S.A. ("Parent"), and Credit Suisse First Boston Corporation and Chase
Securities Inc. (the "Purchasers") relating to $100,000,000 in aggregate
principal amount of 11 3/4% Senior Subordinated Notes Due 2008 (the "Offered
Securities") issued severally by Acquisition Co. and Jafra S.A. under the
Indenture dated as of April 30, 1998, among Acquisition Co., Jafra S.A., Parent
and State Street Bank and Trust Company, as trustee. All capitalized terms used
but not defined herein shall have the meanings set forth in the Purchase
Agreement.
Each of the Subsidiary Guarantors named in Schedule B to the Purchase
Agreement hereby agrees with the Purchasers that it shall hereby becomes a party
to the Purchase Agreement whereupon it shall become fully liable, jointly and
severally with Jafra S.A., for the performance of all obligations of Jafra S.A.
contained therein, including those contained in Section 7 (Indemnification and
Contribution), and shall be entitled to the benefits of all rights of Jafra S.A.
contained therein, in each case to the same extent as if it had been party to
the Purchase Agreement ab initio. Except as supplemented hereby, the Purchase
Agreement shall continue in full force and effect.
This instrument may be executed in counterparts, and shall be governed
by, and shall be construed in accordance with the laws of the State of New York.
Each Subsidiary Guarantor hereby submits to the jurisdiction of the Federal and
state courts in the Borough of Manhattan in The City of New York in any suit or
proceedings arising out of or relating to this Agreement or transactions
contemplated hereby and appoints the U.S. Issuer as its authorized agent upon
which process may be served in any such suit or proceedings. Each Subsidiary
Guarantor further agrees to take any and all action as may be necessary to
maintain such appointment of such agent in full force and effect for a period of
three years from the date of this Agreement.
Date: April 30, 1998
Reday, S.A. de C.V.,
By /s/ David A. Novak
--------------------------------
Name: David A. Novak
Title: Vice President
Distribuidora Venus, S.A. de C.V.,
By /s/ David A. Novak
--------------------------------
Name: David A. Novak
Title: Vice President
Dirsamex, S.A. de C.V.,
By /s/ David A. Novak
--------------------------------
Name: David A. Novak
Title: Vice President
<PAGE>
Qualifax, S.A. de C.V.,
By /s/ David A. Novak
--------------------------------
Name: David A. Novak
Title: Vice President
Jafra Cosmetics, S.R.L.,
By /s/ David A. Novak
--------------------------------
Name: David A. Novak
Title: Vice President
Consultoria Jafra, S.A. de C.V.,
By /s/ David A. Novak
--------------------------------
Name: David A. Novak
Title: Vice President
The foregoing Purchase Agreement Amendment
is hereby confirmed and accepted
as of the date first above written.
Credit Suisse First Boston Corporation
Chase Securities Inc.
By: Credit Suisse First Boston Corporation
By /s/ M. Rod Rivera
------------------------------------
Name: M. Rod Rivera
Title: Director
<PAGE>
EXHIBIT 4.5
CONFORMED COPY
--------------
$100,000,000
JAFRA COSMETICS INTERNATIONAL
11 3/4% SENIOR SUBORDINATED NOTES DUE 2008
REGISTRATION RIGHTS AGREEMENT
-----------------------------
April 30, 1998
Credit Suisse First Boston Corporation
Chase Securities Inc.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Dear Sirs:
CDRJ Acquisition Corporation, a company incorporated under the laws of
Delaware ("Acquisition Co."), and Jafra Cosmetics International, S.A. de C.V., a
company established under the laws of Mexico ("Jafra S.A."), have today
severally issued and sold to Credit Suisse First Boston Corporation and Chase
Securities Inc. (the "Initial Purchasers"), upon the terms set forth in a
purchase agreement dated April 28, 1998 (the "Purchase Agreement"),
U.S.$100,000,000 aggregate principal amount of their 11 3/4% Senior Subordinated
Notes Due 2008 (the "Initial Securities"). The Initial Securities were issued
pursuant to an Indenture, dated as of April 30, 1998 (the "Indenture"), among
Acquisition Co., Jafra S.A., CDRJ Investments (Lux) S.A., a Luxembourg company
("Parent"), and State Street Bank and Trust Company, as trustee (the "Trustee").
The net proceeds of the offering were used to finance the acquisition
by Parent of the worldwide Jafra cosmetics business from The Gillette Company
(the "Acquisition"). At the time of the Acquisition, Acquisition Co. merged with
and into Jafra Cosmetics International, Inc., a company organized under the laws
of California ("JCI"), with Acquisition Co. as the surviving entity, the name of
which is being changed to Jafra Cosmetics International, Inc. (the "U.S.
Surviving Company"). In connection with the Acquisition, Jafra S.A. acquired the
stock of Grupo Jafra S.A. de C.V., a company established under the laws of
Mexico, which is being merged into Jafra S.A., with Jafra S.A. as the surviving
entity. Unless otherwise indicated or unless the context otherwise requires, the
term "U.S. Issuer" refers to (i) for the period prior to the Acquisition,
Acquisition Co. and (ii) for the period after the Acquisition, the U.S.
Surviving Company. Such U.S. Issuer and Jafra S.A. are herein referred to as the
"Issuers." Each Issuer is an indirect, wholly owned subsidiary of Parent.
Parent has guaranteed the Initial Securities on the terms provided in
the Indenture (the "Parent Guarantee"). The U.S. Issuer's obligations with
respect to the Initial Securities have also been guaranteed by Jafra S.A. (the
"Jafra S.A. Cross Guarantee"), and will also be guaranteed by each subsequently
acquired or organized U.S. subsidiary of the U.S. Issuer. Jafra S.A.'s
obligations with respect to the Initial Securities have also been guaranteed by
the U.S. Issuer (the "U.S. Issuer Cross
<PAGE>
Guarantee"), and will also be guaranteed by each existing and subsequently
acquired or organized subsidiary of Jafra S.A. (together with the U.S.
subsidiary guarantees, the "Subsidiary Guarantees"). Concurrently with the
execution and delivery of this Agreement, the Initial Jafra S.A. Subsidiaries
(as defined in the Indenture) party hereto are executing and delivering a
supplement to the Indenture, by which they are providing their Subsidiary
Guarantees of Jafra S.A.'s obligations with respect to the Initial Securities.
The Parent Guarantee, the Jafra S.A. Cross Guarantee, the U.S. Issuer
Cross Guarantee and the Subsidiary Guarantees are herein referred to
collectively as the "Guarantees." The Issuers and Parent are herein
collectively referred to as the "Company," and the obligations of the Company
hereunder are joint and several obligations of the Issuers and Parent.
The Company agrees with the Initial Purchasers, for the benefit of the
holders of the Initial Securities (including, without limitation, the Initial
Purchasers), the Exchange Securities (as defined below) and the Private Exchange
Securities (as defined below) (collectively the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall, at its own cost,
prepare and use its reasonable best efforts to, not later than 180 days (or if
the 180th day is not a business day, the first business day thereafter) after
the date of original issue of the Initial Securities (the "Issue Date"), file
with the Securities and Exchange Commission (the "Commission") a registration
statement (the "Exchange Offer Registration Statement") on an appropriate form
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to a proposed offer (the "Registered Exchange Offer") to those Holders
of Initial Securities that are Transfer Restricted Securities (as defined in
Section 6 hereof) who are not prohibited by any law or policy or interpretation
of the Commission or its staff from participating in the Registered Exchange
Offer, to issue and deliver to such Holders, in exchange for the Initial
Securities, a like aggregate principal amount of debt securities (the "Exchange
Securities") of the Issuers issued under the Indenture and identical in all
material respects to the Initial Securities (except for the transfer
restrictions relating to the Initial Securities and the provisions relating to
the matters described in Section 6 hereof) that would be registered under the
Securities Act. The Company shall use its reasonable best efforts to cause such
Exchange Offer Registration Statement to become effective under the Securities
Act within 210 days (or if the 210th day is not a business day, the first
business day thereafter) after the Issue Date of the Initial Securities and to
keep the Exchange Offer Registration Statement effective for not less than 10
business days (or longer, if required by applicable law) after the date notice
of the Registered Exchange Offer is mailed to the Holders (such period being
called the "Exchange Offer Registration Period"). For purposes hereof, "business
day" shall mean any day other than a Saturday or Sunday, and other than a
holiday on which the Commission shall not be open for the transaction of
business.
If the Company effects the Registered Exchange Offer, the Company will
be entitled to close the Registered Exchange Offer on the last day of the
Exchange Offer Registration Period, provided that the Company has accepted all
the Initial Securities theretofore validly tendered in accordance with the terms
of the Registered Exchange Offer.
2
<PAGE>
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer,
subject to the terms and conditions hereof, to enable each Holder of Initial
Securities that are Transfer Restricted Securities electing to exchange the
Initial Securities for Exchange Securities (assuming that such Holder is not an
affiliate of the Company within the meaning of the Securities Act, acquires the
Exchange Securities in the ordinary course of such Holder's business and has no
arrangements with any person to participate in the distribution of the Exchange
Securities and is not prohibited by any law or policy or interpretation of the
Commission or its staff from participating in the Registered Exchange Offer) to
trade such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act.
The Company and the Initial Purchasers acknowledge that, pursuant to
current interpretations by the Commission's staff of Section 5 of the Securities
Act, in the absence of an applicable exemption therefrom, (i) each Holder that
is a broker-dealer electing to exchange Initial Securities in the Registered
Exchange Offer, acquired for its own account as a result of market making
activities or other trading activities, for Exchange Securities (a
"Participating Broker-Dealer"), is required to deliver a prospectus containing
information substantially to the effect set forth in Annex A hereto, Annex B
hereto and Annex C hereto in the appropriate sections of such prospectus in
connection with a sale of any such Exchange Securities received by such
Participating Broker-Dealer pursuant to the Registered Exchange Offer and (ii)
an Initial Purchaser that elects to sell Private Exchange Securities (as defined
below) acquired in exchange for Initial Securities constituting any portion of
an unsold allotment, is required to deliver a prospectus containing the
information required by Items 507 or 508 of Regulation S-K under the Securities
Act, as applicable, in connection with such sale.
The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein, in order to permit such prospectus to be delivered
by dealers subject to the prospectus delivery requirements of Section 4(3) of
the Securities Act and Rule 174 thereunder (for such period of time as shall be
required thereby for such delivery in order to resell the Exchange Securities),
and shall make such prospectus and any amendment or supplement thereto available
to any Participating Broker-Dealer for use in connection with any resale of any
Exchange Securities, in either case for a period of not more than 90 days after
the consummation of the Registered Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Issuers, simultaneously with the delivery of the Exchange
Securities pursuant to the Registered Exchange Offer. shall issue and deliver to
such Initial Purchaser upon the written request of such Initial Purchaser, in
exchange (the "Private Exchange") for the Initial Securities held by such
Initial Purchaser, a like principal amount of debt securities of the Issuers
issued under the Indenture and identical in all material respects (including the
existence of restrictions on transfer under the Securities Act and the
securities laws of the several states of the United States, but excluding
provisions relating to the matters described in Section 6 hereof) to the Initial
Securities (the "Private Exchange Securities"). The Initial Securities, the
Exchange Securities and the Private Exchange Securities are herein collectively
called the "Securities".
3
<PAGE>
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of
the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 10
business days (or longer, if required by applicable law) after the
date notice thereof is mailed to the Holders;
(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City
of New York, which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York time, on the last business
day on which the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all material respects with all applicable
securities laws.
As soon as practicable after the close of the Registered Exchange
Offer or the Private Exchange, as the case may be, the Company shall:
(x) accept for exchange all the Securities validly tendered and
not withdrawn pursuant to the Registered Exchange Offer and the
Private Exchange;
(y) deliver to the Trustee for cancellation all the Initial
Securities so accepted for exchange; and
(z) request the Trustee to authenticate and deliver promptly, to
each Holder of such Initial Securities, Exchange Securities or Private
Exchange Securities, as the case may be, equal in principal amount to
such Initial Securities of such Holder so accepted for exchange.
The Indenture will provide that all the Securities will vote and
consent together on all matters as one class and that none of the Securities
will have the right to vote or consent as a class separate from one another on
any matter.
Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date to which interest was paid or
duly provided for on the Initial Securities surrendered in exchange therefor
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) or, if no interest
has been paid on the Initial Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any
4
<PAGE>
Exchange Securities received by such Holder will be acquired in the ordinary
course of business, (ii) such Holder will have no arrangements or understanding
with any person to participate in the distribution of the Securities or the
Exchange Securities within the meaning of the Securities Act, (iii) such Holder
is not an "affiliate," as defined in Rule 405 of the Securities Act, of the
Company or if it is an affiliate, such Holder will comply with the registration
and prospectus delivery requirements of the Securities Act to the extent
applicable, (iv) if such Holder is not a broker-dealer, that it is not engaged
in, and does not intend to engage in, the distribution of the Exchange
Securities, (v) if such Holder is a broker-dealer, that it will receive Exchange
Securities for its own account in exchange for Initial Securities that were
acquired as a result of market-making activities or other trading activities and
that it will deliver a prospectus in connection with any resale of such Exchange
Securities, and (vi) that it is not acting on behalf of any person who could not
truthfully make the foregoing representations.
Notwithstanding any other provisions hereof, the Company will use its
reasonable best efforts to ensure that (i) any Exchange Offer Registration
Statement and any amendment thereto and any prospectus forming part thereof and
any supplement thereto complies in all material respects with the Securities Act
and the rules and regulations thereunder, (ii) any Exchange Offer Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
and (iii) any prospectus forming part of any Exchange Offer Registration
Statement, and any supplement to such prospectus, does not include an 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 the
light of the circumstances under which they were made, not misleading.
Upon consummation of the Registered Exchange Offer in accordance with
this Section 1 (whether or not the actions or events specified in the first
sentence of this Section 1 occur within the time periods specified therefor) the
provisions of this Agreement shall continue to apply (to the extent applicable)
solely with respect to Securities that (i) were not eligible to be exchanged in
the Registered Exchange Offer (other than due to the status of the Holder
thereof as an affiliate of either of the Issuers or due to such Holder's
inability to make the representations referred to in the third to last paragraph
of this Section 1) and have not been exchanged for Private Exchange Securities,
(ii) were received by the Holder thereof (other than a Participating Broker-
Dealer) in the Registered Exchange Offer but are not freely tradeable on the
date of such exchange (other than due to the status of such Holder as an
affiliate of either of the Issuers or due to such Holder's inability to make the
representations referred to in the third to last paragraph of this Section 1) or
(iii) are Private Exchange Securities and Exchange Securities held by
Participating Broker-Dealers, and the Company shall have no further obligation
to register Securities (other than those Securities referred to in clause (i) or
(ii) above and Private Exchange Securities) pursuant to Section 2 of this
Agreement.
2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Company
is not permitted to effect a Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within
240 days of the Issue Date, (iii) any Initial Purchaser so requests with respect
to the Initial Securities (or the Private Exchange Securities) not eligible to
be exchanged for Exchange Securities
5
<PAGE>
in the Registered Exchange Offer and held by it following consummation of the
Registered Exchange Offer or (iv) any Holder (other than a Participating Broker-
Dealer) is not eligible to participate in the Registered Exchange Offer or, in
the case of any Holder (other than a Participating Broker-Dealer) that
participates in the Registered Exchange Offer, such Holder does not receive
freely tradeable Exchange Securities on the date of the exchange (other than, in
either case, due solely to the status of such Holder as an affiliate of either
of the Issuers or due to such Holder's inability to make the representations
referred to in the third to last paragraph of Section 1 hereof), the Company
shall take the following actions:
(a) The Company shall, at its cost, use its reasonable best efforts to
file with the Commission as promptly as reasonably practicable, and thereafter
shall use its reasonable best efforts to be declared effective, a registration
statement (the "Shelf Registration Statement" and, together with the Exchange
Offer Registration Statement, a "Registration Statement") on an appropriate form
under the Securities Act relating to the offer and sale of the Transfer
Restricted Securities by the Holders thereof from time to time in accordance
with the methods of distribution set forth in the Shelf Registration Statement
and Rule 415 under the Securities Act (hereinafter, the "Shelf Registration");
provided, however, that no Holder (other than an Initial Purchaser) shall be
- -------- -------
entitled to have the Securities held by it covered by such Shelf Registration
Statement unless such Holder agrees in writing to be bound by all the provisions
of this Agreement applicable to such Holder.
(b) The Company shall use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the prospectus
included therein to be lawfully delivered by the Holders of the relevant
Securities, for a period (the "Shelf Registration Period") of two years (or one
year in the case of a shelf registration effected at the request of the Initial
Purchasers) from the date of its effectiveness or such shorter period that will
terminate when all the Securities covered by the Shelf Registration Statement
(i) have been sold pursuant thereto or (ii) are no longer restricted securities
(as defined in Rule 144 under the Securities Act, or any successor rule
thereof). The Company shall be deemed not to have used its reasonable best
efforts to keep the Shelf Registration Statement effective during the requisite
period if it voluntarily takes any action that would result in Holders of
Securities covered thereby not being able to offer and sell such Securities
during that period, unless (i) such action is required by applicable law, (ii)
- --
such action is taken by the Company in good faith and for valid business reasons
(not including avoidance of the Company's obligations hereunder), including the
acquisition or divestiture of assets, so long as the Company promptly thereafter
complies with the requirements of Section 3(j) hereof, if applicable, or (iii)
---
such action occurs following consummation of the Registered Exchange Offer.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall use its reasonable best efforts to cause the Shelf
Registration Statement and the related prospectus and any amendment or
supplement thereto, as of the effective date of the Shelf Registration
Statement, amendment or supplement, (i) to comply in all material respects with
the applicable requirements of the Securities Act and the rules and regulations
of the Commission and (ii) not to 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 (in any such case, other than with respect
to information
6
<PAGE>
included therein in reliance upon or in conformity with written information
furnished to the Company by or on behalf of any Holder specifically for use
therein).
3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior to the
filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement, if any, to the prospectus included
therein and, in the event that an Initial Purchaser (with respect to any portion
of an unsold allotment from the original offering) is participating in the Shelf
Registration Statement, the Company shall use its reasonable best efforts to
reflect in each such Shelf Registration Statement or related amendment or
supplement, when so filed with the Commission, such comments as such Initial
Purchaser reasonably may propose, (ii) if applicable, include information
substantially to the effect set forth in Annex A hereto, Annex B hereto and
Annex C hereto in the appropriate sections of the prospectus forming a part of
the Exchange Offer Registration Statement and include information substantially
to the effect set forth in Annex D hereto in the Letter of Transmittal delivered
pursuant to the Registered Exchange Offer, (iii) in the case of any Shelf
Registration Statement, if requested by an Initial Purchaser that proposes to
sell Securities pursuant to the Shelf Registration Statement as a selling
securityholder, include the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in the prospectus
forming a part of the Shelf Registration Statement, (iv) include within the
prospectus contained in the Exchange Offer Registration Statement, in a section
entitled "Plan of Distribution" or other appropriate heading, a summary
statement reasonably acceptable to the Initial Purchasers, of the positions
taken or policies made by the staff of the Commission with respect to the
potential "underwriter" status of any broker-dealer that is the beneficial owner
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of Exchange Securities received by such broker-dealer in
the Registered Exchange Offer, and (v) in the case of a Shelf Registration
Statement, include the names of the Holders who propose to sell Securities
pursuant to the Shelf Registration Statement as selling securityholders (the
"Selling Holders").
(b) The Company shall advise each of the Initial Purchasers, the Selling
Holders (in the case of a Shelf Registration Statement) and any Participating
Broker-Dealer (in the case of any Exchange Offer Registration Statement) from
whom the Company has received prior written notice that it will be a
Participating Broker-Dealer in the Registered Exchange Offer, and, if requested
by any such person, confirm such advice in writing (which advice pursuant to
clauses (ii)-(v) hereof shall be accompanied (if applicable) by an instruction
to suspend the use of the relevant prospectus until the requisite changes have
been made):
(i) when the Registration Statement or any amendment thereto has been
filed with the Commission and when the Registration Statement or any post-
effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements to
the Registration Statement or the prospectus included therein or for
additional information;
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<PAGE>
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(v) of the happening of any event that requires the Company to make
changes in the Registration Statement or the prospectus in order that the
Registration Statement (as of its effective date) or the prospectus do not
contain an untrue statement of a material fact nor omit to state a
material fact required to be stated therein or necessary to make the
statements therein (in the case of the prospectus, in light of the
circumstances under which they were made) not misleading.
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of Transfer Restricted
Securities included within the coverage of the Shelf Registration, without
charge, at least one copy of the Shelf Registration Statement and any post-
effective amendment thereto, including financial statements and schedules, and,
if the Holder so requests in writing, all exhibits thereto (including those, if
any, incorporated by reference).
(e) The Company shall deliver to each Participating Broker-Dealer and each
Initial Purchaser, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if any Initial Purchaser requests, all
exhibits thereto (including those, if any, incorporated by reference).
(f) The Company shall, during the Shelf Registration Period, deliver to
each Selling Holder of Securities included within the coverage of the Shelf
Registration Statement, without charge, as many copies of the prospectus
(including each preliminary prospectus) included in the Shelf Registration
Statement and any amendment or supplement thereto as such person may reasonably
request. The Company consents, subject to the provisions of this Agreement, to
the use of the prospectus or any amendment or supplement thereto by each of the
Selling Holders of the Transfer Restricted Securities in connection with the
offering and sale of the Transfer Restricted Securities covered by the
prospectus, or any amendment or supplement thereto, included in the Shelf
Registration Statement.
(g) The Company shall, during the Exchange Offer Registration Period,
deliver to each Initial Purchaser, and any Participating Broker-Dealer, without
charge, as many copies of the final prospectus included in the Exchange Offer
Registration Statement and any amendment or supplement thereto as such person
may reasonably request. The Company consents, subject to the provisions of this
Agreement, to the use of such prospectus or any amendment or supplement thereto,
during the 90 days following the consummation of the Registered Exchange Offer,
by any Participating Broker-Dealer required to deliver a prospectus following
the Registered Exchange Offer in connection with
8
<PAGE>
the offering and sale of the Exchange Securities covered by the prospectus, or
any amendment or supplement thereto, included in such Exchange Offer
Registration Statement.
(h) Prior to any public offering of the Securities pursuant to any Shelf
Registration Statement, the Company shall use its reasonable best efforts to
register or qualify or cooperate with the Selling Holders of the Securities
included therein and their respective counsel in connection with the
registration or qualification of the Securities for offer and sale under the
securities or "blue sky" laws of such states of the United States as any such
Holder of the Securities reasonably requests in writing and do any and all other
acts or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Securities covered by such Registration Statement;
provided, however, that the Company shall not be required to (i) qualify
- -------- -------
generally to do business in any jurisdiction where it is not then so qualified
or (ii) take any action that would subject it to general service of process or
to taxation in any jurisdiction where it is not then so subject.
(i) The Company shall cooperate with the Selling Holders of the Securities
to facilitate the timely preparation and delivery of certificates representing
the Transfer Restricted Securities to be sold pursuant to any Shelf Registration
Statement free of any restrictive legends relating to transfer restrictions (and
not required by stock exchange rule or depository rule or usage) and in such
denominations and registered in such names as the Holders may reasonably request
in writing a reasonable period of time prior to sales of such Securities
pursuant to such Shelf Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 3(b) above during the period for which the Company is
required to maintain an effective Registration Statement, the Company shall use
its reasonable best efforts to promptly prepare and file a post-effective
amendment to the Registration Statement or a supplement to the related
prospectus and any other required document so that, as thereafter delivered to
Holders of the Securities or purchasers of Securities, the prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. If
the Company notifies the Initial Purchasers, the Selling Holders of the
Securities or any known Participating Broker-Dealer in accordance with
paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the
prospectus until the requisite changes to the prospectus have been made, then
the Initial Purchasers, such Holders of the Securities or any such Participating
Broker-Dealer, as applicable, shall suspend use of such prospectus. The period
of effectiveness of the Shelf Registration Statement provided for in Section
2(b) above or the Exchange Offer Registration Statement provided for in Section
1 above, as applicable, shall be extended by the number of days from and
including the date of giving of such notice to and including the date when the
Company shall have mailed to the Selling Holders of the Securities or any known
Participating Broker-Dealer, as applicable, such amended or supplemented
prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Initial Securities,
the Exchange Securities or the Private Exchange Securities, as the case may be,
and provide the applicable trustee with printed certificates
9
<PAGE>
for the Initial Securities, the Exchange Securities or the Private Exchange
Securities, as the case may be, in a form eligible for deposit with The
Depository Trust Company.
(l) The Company will make generally available to its securityholders (or
otherwise provide in accordance with Section 11(a) of the Securities Act) an
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act (which need not be audited), no later than 45 days after the end of a 12-
month period (or 90 days, if such period is a fiscal year) beginning with the
first month of the Company's first fiscal quarter commencing after the effective
date of the Registration Statement, which statement shall cover such 12-month
period.
(m) The Company shall use its reasonable best efforts to cause the
Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in
a timely manner and containing such changes, if any, as shall be necessary for
such qualification. In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Company shall use its
reasonable best efforts to appoint a new trustee thereunder pursuant to the
applicable provision of the Indenture.
(n) The Company may require each Holder of Securities to be sold pursuant
to the Shelf Registration Statement to furnish to the Company such information
regarding the Holder and the distribution of the Securities as the Company may
from time to time reasonably require for inclusion in the Shelf Registration
Statement, and the Company may exclude from such registration the Securities of
any Holder that unreasonably fails to furnish such information within a
reasonable time after receiving such request.
(o) In the case of any Shelf Registration Statement, the Company shall
enter into such customary agreements (including, if requested, an underwriting
agreement in customary form) and use its reasonable best efforts to take all
such other action, if any, as Selling Holders of a majority in aggregate
principal amount of the Securities being sold pursuant to the Shelf Registration
Statement (the "Majority Selling Holders") or the managing underwriters, if any,
in such offering shall reasonably request in order to facilitate the disposition
of the Securities pursuant to such Shelf Registration Statement.
(p) In the case of any Shelf Registration Statement, the Company shall (i)
make reasonably available for inspection by a representative of, and Special
Counsel (as defined below) acting for, the Majority Selling Holders and any
underwriter participating in any disposition of Securities pursuant to the Shelf
Registration Statement (such representative, Special Counsel or underwriter, an
"Inspector"), all relevant financial and other records, pertinent corporate
documents and properties of the Company and (ii) use its reasonable best efforts
to cause the Company's officers, directors, employees, accountants and auditors
to supply all relevant information reasonably requested by such Inspector in
connection with the Shelf Registration Statement, in each case, as shall be
reasonably necessary to enable such persons to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act; provided,
--------
however, that the foregoing inspection and information gathering shall be
- -------
coordinated by the Inspectors. Each Inspector will be required to agree in
writing, pursuant to a confidentiality agreement in form and substance
reasonably satisfactory to the Company and such Inspector, that (i) information
obtained by such Inspector as a result of such inspections shall be deemed
confidential and shall not be used by such Inspector as the basis for any market
10
<PAGE>
transactions in the securities of any of the Company and its subsidiaries unless
and until such information is made generally available to the public (other than
by or through any Inspector) and (ii) such Inspector will, upon learning that
disclosure of such records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of the records deemed confidential.
(q) In the case of any Shelf Registration Statement, the Company, if
requested by the Majority Selling Holders of Securities covered thereby, shall
use its reasonable best efforts to cause (i) its counsel to deliver an opinion
relating to the Securities in customary form, addressed to the Selling Holders
of Securities covered thereby, (ii) its officers to execute and deliver all
customary documents and certificates reasonably requested by any managing
underwriters of the applicable Securities and (iii) its independent public
accountants to provide a comfort letter in customary form addressed to the
Selling Holders of Securities covered thereby, subject to receipt of appropriate
documentation as contemplated, and only if permitted, by Statement of Auditing
Standards No. 72.
(r) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Initial Securities by Holders to the Company
(or to such other Person as directed by the Company) in exchange for the
Exchange Securities or the Private Exchange Securities, as the case may be, the
Company shall mark, or caused to be marked, on the Initial Securities so
exchanged that such Initial Securities are being canceled in exchange for the
Exchange Securities or the Private Exchange Securities, as the case may be; in
no event shall the Initial Securities be marked as paid or otherwise satisfied.
4. Registration Expenses. The Company shall bear all fees and expenses
incurred by it in connection with the performance of its obligations under
Sections 1 through 3 hereof, whether or not the Registered Exchange Offer or a
Shelf Registration Statement is filed or becomes effective, and, in the event of
a Shelf Registration Statement, shall reimburse the Holders of the Securities
covered thereby for the reasonable fees and disbursements of one firm of counsel
designated by the Holders of a majority in principal amount of the Securities
covered thereby (the "Special Counsel") to act as counsel for the Holders of the
Securities in connection therewith. The Initial Purchasers shall bear any fees
and expenses of their counsel incurred in connection with the Registered
Exchange Offer.
5. Indemnification. (a) The Company agrees to indemnify and hold
harmless (in the case of a Shelf Registration Statement) each Selling Holder of
Securities covered thereby and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act, and (in the case
of an Exchange Offer Registration Statement, in connection with any delivery of
the prospectus contained therein by a Participating Broker-Dealer) any
Participating Broker-Dealer and each person, if any, who controls such
Participating Broker-Dealer within the meaning of the Securities Act or the
Exchange Act (each such Holder, any such Participating Broker-Dealer and such
controlling persons are referred to collectively as the "Indemnified Parties")
from and against any losses, claims, damages or liabilities, joint or several,
or any actions in respect thereof (including, but not limited to, any losses,
claims, damages, liabilities or actions relating to purchases and sales of the
Securities) to which each Indemnified Party may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in such
11
<PAGE>
applicable Registration Statement or prospectus forming part thereof or in any
amendment or supplement thereto or (in the case of such Shelf Registration
Statement) in any preliminary prospectus relating to a Shelf Registration
Statement, or arise out of, or are based upon, the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall reimburse the Indemnified Parties for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action in respect
thereof; provided, however, that (i) the Company shall not be liable in any such
-------- -------
case to the extent that such loss, claim, damage or liability arises out of or
is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in a Registration Statement or prospectus forming part
thereof or in any amendment or supplement thereto or in any preliminary
prospectus relating to a Shelf Registration Statement in reliance upon and in
conformity with written information pertaining to such Holder and furnished to
the Company by or on behalf of such Holder specifically for inclusion therein
and (ii) with respect to any untrue statement or omission or alleged untrue
statement or omission made in any prospectus, or any amendment or supplement
thereto, or any preliminary prospectus relating to a Shelf Registration
Statement, the indemnity agreement contained in this subsection (a) shall not
inure to the benefit of any Holder or Participating Broker-Dealer from whom the
person asserting any such losses, claims, damages or liabilities purchased the
Securities concerned to the extent that either (x) a prospectus relating to such
Securities was required to be delivered by such Holder or Participating Broker-
Dealer under the Securities Act in connection with such purchase and there was
not sent or given to such person, at or prior to the written confirmation of the
sale of such Securities to such person, a copy of the final prospectus (in the
case of any such preliminary prospectus) or a prospectus amendment or supplement
(in any other case) if the Company had previously furnished copies thereof to
such Holder or Participating Broker-Dealer, and such untrue statement or
omission or alleged untrue statement or omission was corrected in such final
prospectus or prospectus amendment or supplement, or (y) at the time of such
purchase such Holder or Participating Broker-Dealer had received advice from the
Company that the use of such prospectus, amendment, supplement or preliminary
prospectus was suspended as provided in Section 3(b); provided further, however,
-------- ------- -------
that this indemnity agreement will be in addition to any liability that the
Company may otherwise have to such Indemnified Party.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act from
and against any losses, claims, damages or liabilities, joint or several, or any
actions in respect thereof, to which the Company or any such controlling person
may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in a Registration Statement or prospectus forming part thereof or
in any amendment or supplement thereto or in any preliminary prospectus relating
to a Shelf Registration Statement, or arise out of or are based upon the
omission or alleged omission to state therein a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or omission or alleged untrue statement or omission was made in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein; and, subject to the limitation set forth
12
<PAGE>
immediately preceding this clause, shall reimburse the Company for any legal or
other expenses reasonably incurred by the Company or any such controlling person
in connection with investigating or defending any loss, claim, damage, liability
or action in respect thereof. This indemnity agreement will be in addition to
any liability that such Holder may otherwise have to the Company or any of its
controlling persons.
(c) Promptly after receipt by an indemnified party under this Section 5 of
notice of the commencement of any action or proceeding (including a governmental
investigation), such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 5, notify the
indemnifying party of the commencement thereof, but the omission so to notify
the indemnifying party will not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the indemnification
obligation provided in subsection (a) or (b) above. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof
the indemnifying party will not be liable to such indemnified party under this
Section 5 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened action in which any indemnified party is a party to the extent
such settlement is binding upon such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on any claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section 5 is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other, or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the indemnifying party or parties on
the one hand and the indemnified party on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
such Holder or such other indemnified party, as the case may be, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid
by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim
13
<PAGE>
that is the subject of this subsection (d). No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this subsection (d), each person,
if any, who controls such indemnified party within the meaning of the Securities
Act or the Exchange Act shall have the same rights to contribution as such
indemnified party and each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.
(e) The agreements contained in this Section 5 shall survive the sale of
the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
(f) For purposes of this Section 5, the "Company" shall mean the Issuers
and the Guarantors, and the obligations of the Company hereunder are joint and
several obligations of the Issuers and the Guarantors.
6. Additional Interest Under Certain Circumstances. (a) Additional
interest (the "Additional Interest") with respect to the Initial Securities that
are Transfer Restricted Securities shall be assessed as follows if any of the
following events occur (each such event in clauses (i) through (ii) below being
herein referred to as a "Registration Default"):
(i) neither the Exchange Offer Registration Statement nor a Shelf
Registration Statement has been filed with the Commission on or before the
180th day after the Issue Date (or if such day is not a business day, the
first business day thereafter), or October 27, 1998;
(ii) the Registered Exchange Offer is not consummated on or before the
240th day after the Issue Date (or if such day is not a business day, the
first business day thereafter), or December 28, 1998;
(iii) if a Shelf Registration Statement is required to be filed under this
Agreement, such Shelf Registration Statement is not declared effective by the
Commission on or before the 270th day after the Issue Date (or if such day is
not a business day, the first business day thereafter), or January 25, 1999
(or, in the case of a Shelf Registration Statement required to be filed in
response to any change in applicable interpretation of the Commission, if
later, on or before the 90th day after publication of such change); or
(iv) if a Shelf Registration Statement is required to be filed under this
Agreement, and after the Shelf Registration Statement is declared effective
and during the period that the Company is required to use its reasonable best
efforts to keep the Shelf Registration Statement effective as provided in
Section 2(a), such Shelf Registration Statement thereafter ceases to be
effective and continues not to be effective (other than in connection with
the consummation of the Registered Exchange Offer, as contemplated by the
last sentence of Section 2(a)), or the Company shall have suspended and be
continuing to suspend the availability of the prospectus
14
<PAGE>
contained in the Shelf Registration Statement, for more than 30 days in the
aggregate in any consecutive twelve-month period.
Additional Interest shall accrue on the Initial Securities that are
Transfer Restricted Securities over and above the interest set forth in the
title of the Securities from and including the date on which any such
Registration Default shall occur to but excluding the date on which such
Registration Default has been cured, at a rate of (a) prior to the 91st day of
such period (for so long as such period is continuing), 0.25% per annum and (b)
thereafter (for so long as such period is continuing), 0.50% per annum. Any
such Additional Interest shall not exceed such respective rates for such
respective periods, and shall not in any event exceed 0.50% per annum in the
aggregate, regardless of the number of Registration Defaults that shall have
occurred and be continuing. Following the cure of all Registration Defaults, the
accrual of such Additional Interest will cease. All Registration Defaults will
be deemed cured upon consummation of the Exchange Offer.
Notwithstanding anything to the contrary in this Section 6(a), the Company
shall not be required to pay Additional Interest to any Holder of Transfer
Restricted Securities if such Holder failed to comply with its obligations to
make the representations set forth in the third to last paragraph of Section 1
or failed to provide the information required to be provided by it, if any,
pursuant to Section 3(n).
(b) Any amounts of Additional Interest due pursuant to clause (i), (ii),
(iii) or (iv) of Section 6(a) above will be payable in cash on the regular
interest payment dates with respect to the Initial Securities. The amount of
Additional Interest will be determined by multiplying the applicable Additional
Interest rate by the principal amount of the Initial Securities that are
Transfer Restricted Securities, multiplied by a fraction, the numerator of which
is the number of days such Additional Interest rate was applicable during such
period (determined on the basis of a 360-day year comprised of twelve 30-day
months), and the denominator of which is 360.
(c) "Transfer Restricted Securities" means each Security until (i) the
date on which such Security has been exchanged by a person for a freely
transferable Exchange Security in the Registered Exchange Offer, (ii) the date
on which such Security has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iii) the
date on which such Security is distributed to the public pursuant to Rule 144
under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act (or otherwise is eligible for resale pursuant to Rule 144 (or any
successor provision) under the Securities Act without volume restriction, if
any).
7. Rules 144 and 144A. So long as any Transfer Restricted Securities
remain outstanding, the Company shall use its reasonable best efforts to file
the reports required to be filed by it under the Securities Act and the Exchange
Act in a timely manner or, upon the request of any Holder of Initial Securities
that are Transfer Restricted Securities, make publicly available other
information so long as necessary to permit sales of such Securities pursuant to
Rules 144 and 144A under the Securities Act. The Company covenants that it will
use its reasonable best efforts to take such further action as any Holder of
Transfer Restricted Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell such Securities without
registration under the Securities Act
15
<PAGE>
within the limitation of the exemptions provided by Rules 144 and 144A
(including the requirements of Rule 144A(d)(4)). Upon the written request of any
Holder of Initial Securities that are Transfer Restricted Securities, the
Company shall deliver to such Holder a written statement as to whether it has
complied with such requirements. Notwithstanding the foregoing, nothing in this
Section 7 shall be deemed to require the Company to register any of its
securities pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders of a majority
in aggregate principal amount of such Transfer Restricted Securities to be
included in such offering, subject to the consent of the Company (which shall
not be unreasonably withheld or delayed), and such Holders shall be responsible
for all underwriting commissions and discounts in connection therewith.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of the
Holders of Initial Securities, Exchange Securities or Private Exchange
Securities whose Initial Securities, Exchange Securities or Private Exchange
Securities are being sold pursuant to a Registration Statement, and that does
not directly or indirectly affect the rights of other Holders, may be given by
Holders of a majority in aggregate principal amount of the Initial Securities,
Exchange Securities or Private Exchange Securities, as the case may be, being
sold by such Holders pursuant to such Registration Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current address given by
such Holder to the Company.
(2) if to the Initial Purchasers:
Credit Suisse First Boston Corporation
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<PAGE>
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Fax No.: (212) 474-3700
Attention: Kris F. Heinzelman, Esq.
(3) if to the Company, at its address as follows:
c/o Jafra Cosmetics International, Inc.
2451 Townsgate Road
Westlake Village, California 91361
Fax: (805) 449-2949
Attention: Chief Financial Officer
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Fax No.: (212) 909-6836
Attention: David Brittenham, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier next
day delivery.
(c) No Inconsistent Agreements. The Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Company, each other party hereto and each Holder,
and their respective successors and assigns. Each Holder by its acceptance of a
Security, for itself and its successors and assigns, agrees to be bound hereby.
17
<PAGE>
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY
PRINCIPLES OF CONFLICT OF LAWS TO THE EXTENT THAT THE APPLICATION OF THE LAW OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
(h) Severability. If any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
(j) Agent for Service; Submission to Jurisdiction; Waiver of Immunities.
By the execution and delivery of this Agreement, each of Parent, Jafra S.A. and
the Initial Jafra S.A. Subsidiaries (i) acknowledges that it hereby designates
and appoints the U.S. Issuer (and any successor entity), as its authorized agent
upon which process may be served in any suit or proceeding arising out of or
relating to this Agreement that may be instituted in any federal or state court
in the State of New York or brought under federal or state securities laws, and
acknowledges that the U.S. Issuer has accepted such designation, (ii) submits to
the jurisdiction of any such court in any such suit or proceeding, and (iii)
agrees that service of process upon the U.S. Issuer and written notice of said
service to the U.S. Issuer shall be deemed in every respect effective service of
process upon it in any such suit or proceeding. Each of Parent, Jafra S.A. and
the Initial Jafra S.A. Subsidiaries further agrees to take any and all action,
including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and appointment of
the U.S. Issuer in full force and effect so long as any of the Transfer
Restricted Securities shall be outstanding. To the extent that any of Parent,
Jafra S.A. and the Initial Jafra S.A. Subsidiaries may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service of
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property, it hereby irrevocably
waives such immunity in respect of this Agreement, to the fullest extent
permitted by law.
18
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the several Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
CDRJ Acquisition Corporation
by /s/ Ralph S. Mason III
-------------------------------------
Title: Vice Chairman, Executive Vice
President, General Counsel
by_____________________________________
Title:
Jafra Cosmetics International, S.A. de C.V.
by /s/ Ralph S. Mason III
------------------------------------------
Title: Vice Chairman, Executive Vice
President, General Counsel
CDRJ Investments (Lux) S.A.
by /s/ Thomas E. Ireland
-----------------------------------------
Title: Treasurer and Director
Reday, S.A. de C.V.
by /s/ Thomas E. Ireland
------------------------------------------
Title: Attorney In Fact
Distribuidora, S.A. de C.V.
by /s/ Ralph S. Mason III
------------------------------------------
Title: Vice Chairman, Executive Vice
President, General Counsel
19
<PAGE>
Dirsamex, S.A. de C.V.
by /s/ Ralph S. Mason III
------------------------------------------
Title: Vice Chairman, Executive Vice
President,General Counsel
Qualifax, S.A. de C.V.
by /s/ Ralph S. Mason III
------------------------------------------
Title: Vice Chairman, Executive Vice
President, General Counsel
Jafra Cosmetics, S.A. de C.V.
by /s/ Ralph S, Mason III
------------------------------------------
Title: Vice Chairman, Executive Vice
President, General Counsel
Consultoria Jafra, S.A. de C.V.
by /s/ Thomas E. Ireland
-----------------------------------------
Title: Attorney In Fact
The foregoing Registration Rights Agreement
is hereby confirmed, accepted and agreed to
as of the date first above written.
Credit Suisse First Boston Corporation
Chase Securities Inc.
by: Credit Suisse First Boston Corporation
by /s/ M. Rod Rivera
----------------------------------
Title: Director
20
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Initial Securities where such Initial Securities were acquired by such broker-
dealer as a result of market-making activities or other trading activities. The
Company has agreed that, for a period of 90 days after the Expiration Date (as
defined herein), it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
21
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own account
in exchange for Initial Securities, where such Initial Securities were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange
Securities received in exchange for Initial Securities where such Initial
Securities were acquired as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of 90 days after
the Expiration Date, it will make this prospectus, as amended or supplemented,
available to any Participating Broker-Dealer for use in connection with any such
resale. In addition, until , 199 , all dealers effecting
transactions in the Exchange Securities may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Securities and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that,
by acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incurred by it incident to the Exchange Offer other than commissions or
concessions of any brokers or dealers and will indemnify the Holders of the
Securities (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
<PAGE>
ANNEX D
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: ____________________________________
Address: ____________________________________
____________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer, including a broker-dealer
that will receive Exchange Securities for its own account in exchange for
Initial Securities that were acquired as a result of market-making activities or
other trading activities, it acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Securities; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
<PAGE>
EXHIBIT 4.6
CONFORMED COPY
================================================================================
CREDIT AGREEMENT
dated as of April 30, 1998,
among
CDRJ ACQUISITION CORPORATION,
JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V.,
CDRJ INVESTMENTS (LUX) S.A.,
as Guarantor and Parent of the Borrowers,
THE LENDERS NAMED HEREIN
and
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent
_______________________
CREDIT SUISSE FIRST BOSTON
and
CHASE SECURITIES INC.,
as Arrangers
CHASE SECURITIES INC.,
as Syndication Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
Definitions
<S> <C>
SECTION 1.01. Defined Terms.............................................. 2
SECTION 1.02. Terms Generally............................................ 23
SECTION 1.03. Exchange Rates............................................. 23
ARTICLE II
The Credits
SECTION 2.01. Commitments................................................ 23
SECTION 2.02. Loans...................................................... 24
SECTION 2.03. Borrowing Procedure........................................ 26
SECTION 2.04. Evidence of Debt; Repayment of Loans....................... 27
SECTION 2.05. Fees....................................................... 27
SECTION 2.06. Interest on Loans.......................................... 28
SECTION 2.07. Default Interest........................................... 29
SECTION 2.08. Alternate Rate of Interest................................. 29
SECTION 2.09. Termination and Reduction of Commitments................... 30
SECTION 2.10. Conversion and Continuation of Borrowings.................. 30
SECTION 2.11. Repayment of Term Borrowings............................... 32
SECTION 2.12. Prepayment................................................. 33
SECTION 2.13. Mandatory Prepayments...................................... 34
SECTION 2.14. Requirements of Law........................................ 36
SECTION 2.15. Change in Legality......................................... 38
SECTION 2.16. Indemnity.................................................. 39
SECTION 2.17. Pro Rata Treatment......................................... 40
SECTION 2.18. Sharing of Setoffs......................................... 40
SECTION 2.19. Payments................................................... 41
SECTION 2.20. Taxes...................................................... 41
SECTION 2.21. Certain Rules Relating to the Payment of Additional
Amounts................................................... 43
SECTION 2.22. Letters of Credit.......................................... 45
SECTION 2.23. Swingline Loans............................................ 49
SECTION 2.24. Consistent Tax Treatment................................... 51
ARTICLE III
Representations and Warranties
SECTION 3.01. Financial Condition........................................ 51
SECTION 3.02. Change..................................................... 52
SECTION 3.03. Corporate Existence; Compliance with Law................... 52
SECTION 3.04. Corporate Power; Authorization; Enforceable
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Obligations........................................... 52
SECTION 3.05. No Legal Bar............................................... 53
SECTION 3.06. No Material Litigation..................................... 53
SECTION 3.07. No Default................................................. 54
SECTION 3.08. Intellectual Property...................................... 54
SECTION 3.09. No Burdensome Restrictions; Compliance with Laws........... 54
SECTION 3.10. Taxes...................................................... 54
SECTION 3.11. Federal Regulations........................................ 54
SECTION 3.12. Employee Benefit Plans..................................... 55
SECTION 3.13. Investment Company Act; Other Regulations.................. 55
SECTION 3.14. Subsidiaries............................................... 55
SECTION 3.15. Environmental Matters...................................... 55
SECTION 3.16. Accuracy and Completeness of Information................... 56
SECTION 3.17. Solvency................................................... 57
SECTION 3.18. Senior Indebtedness........................................ 57
SECTION 3.19. Title to Properties; Possession Under Leases............... 57
SECTION 3.20. Security Documents......................................... 57
SECTION 3.21. Location of Real Property and Leased Premises.............. 58
SECTION 3.22. Labor Matters.............................................. 58
SECTION 3.23. Year 2000.................................................. 59
ARTICLE IV
Conditions of Lending
SECTION 4.01. All Credit Events.......................................... 59
SECTION 4.02. First Credit Event......................................... 59
ARTICLE V
Affirmative Covenants
SECTION 5.01. Financial Statements....................................... 63
SECTION 5.02. Certificates; Other Information............................ 63
SECTION 5.03. Payment of Obligations..................................... 64
SECTION 5.04. Conduct of Business and Maintenance of Existence........... 64
SECTION 5.05. Maintenance of Property.................................... 64
SECTION 5.06. Insurance.................................................. 65
SECTION 5.07. Inspection of Property; Books and Records; Discussions..... 65
SECTION 5.08. Notices.................................................... 65
SECTION 5.09. Environmental Laws......................................... 67
SECTION 5.10. Use of Proceeds............................................ 67
SECTION 5.11. Additional Collateral; Further Assurances.................. 67
ARTICLE VI
Negative Covenants
SECTION 6.01. Indebtedness............................................... 69
SECTION 6.02. Liens...................................................... 71
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 6.03. Investments, Loans and Advances............................ 73
SECTION 6.04. Fundamental Changes........................................ 75
SECTION 6.05. Sale of Assets............................................. 76
SECTION 6.06. Restricted Payments........................................ 77
SECTION 6.07. Transactions with Affiliates............................... 78
SECTION 6.08. Business of Parent, Borrowers and Subsidiaries............. 79
SECTION 6.09. Negative Pledge Clauses.................................... 80
SECTION 6.10. Optional Payments and Modifications of Debt
Instruments and other Material Agreements.................. 80
SECTION 6.11. Capital Expenditures....................................... 81
SECTION 6.12. Consolidated Leverage Ratio................................ 81
SECTION 6.13. Consolidated Interest Coverage Ratio....................... 82
SECTION 6.14. Fiscal Year................................................ 82
ARTICLE VII
Events of Default
SECTION 7.01. Certain Bankruptcy Events.................................. 82
SECTION 7.02. Other Events of Default.................................... 83
ARTICLE VIII
The Administrative Agent and the Collateral Agent
SECTION 8.01. Appointment................................................ 86
SECTION 8.02. Delegation of Duties....................................... 86
SECTION 8.03. Exculpatory Provisions..................................... 87
SECTION 8.04. Reliance by Agents......................................... 87
SECTION 8.05. Notice of Default.......................................... 87
SECTION 8.06. Acknowledgments and Representations by Lenders............. 88
SECTION 8.07. Expense Reimbursement; Indemnification..................... 88
SECTION 8.08. Agents in their Individual Capacities...................... 89
SECTION 8.09. Successor Agents........................................... 89
ARTICLE IX
Miscellaneous
SECTION 9.01. Amendments and Waivers..................................... 89
SECTION 9.02. Notices.................................................... 91
SECTION 9.03. No Waiver; Cumulative Remedies............................. 91
SECTION 9.04. Survival of Representations and Warranties................. 91
SECTION 9.05. Successors and Assigns..................................... 92
SECTION 9.06. Payment of Expenses and Taxes.............................. 95
SECTION 9.07. Set-off.................................................... 96
SECTION 9.08. Interest Rate Limitation................................... 96
SECTION 9.09. Counterparts............................................... 96
SECTION 9.10. Severability............................................... 96
SECTION 9.11. Integration................................................ 97
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SECTION 9.12. Headings................................................... 97
SECTION 9.13. Applicable Law............................................. 97
SECTION 9.14. Submission to Jurisdiction; Waivers........................ 97
SECTION 9.15. Acknowledgments............................................ 98
SECTION 9.16. Waivers of Jury Trial...................................... 98
SECTION 9.17. Confidentiality............................................ 98
SECTION 9.18. Judgment Currency.......................................... 99
SECTION 9.19. European Monetary Union.................................... 99
SECTION 9.20. Calculations; Computations................................. 100
SECTION 9.21. Covenant to Pay............................................ 100
</TABLE>
SCHEDULES
Schedule 1.01(a) Inactive Subsidiaries
Schedule 1.01(b) Subsidiary Guarantors
Schedule 1.01(c) Mortgaged Properties
Schedule 2.01 Lenders; Commitments
Schedule 3.04(a) Consents, Authorizations, Notices and Filings
Schedule 3.06 Litigation
Schedule 3.08 Intellectual Property
Schedule 3.10 Tax Liens
Schedule 3.14 Subsidiaries
Schedule 3.20 UCC Filings
Schedule 3.21(a) Owned Real Property
Schedule 3.21(b) Leased Real Property
Schedule 4.02(a) Local Counsel
Schedule 4.02(i) Mortgage Filing Offices
Schedule 6.01(a) Indebtedness
Schedule 6.02(a) Liens
Schedule 6.03(a) Investments
Schedule 6.05(f) Specified Subsidiaries
Schedule 6.07(iii) Permitted Indemnification and Contribution
Schedule 6.07(iv) Affiliate Transactions
EXHIBITS
Exhibit A Form of Administrative Questionnaire
Exhibit B Form of Assignment and Acceptance
Exhibit C Form of Borrowing Request
Exhibit D Form of Indemnity, Subrogation and Contribution Agreement
Exhibit E Form of JCI Guarantee Agreement
Exhibit F Form of JCI Subsidiary Guarantee Agreement
Exhibit G Form of JCISA Guarantee Agreement
Exhibit H Form of JCISA Subsidiary Guarantee Agreement
Exhibit I Form of Mortgage
Exhibit J Form of Parent Guarantee
Exhibit K Form of Pledge Agreement
Exhibit L Form of Security Agreement
Exhibit M-1 Form of Term Note
iv
<PAGE>
Exhibit M-2 Form of Revolving Note
Exhibit N-1 Form of Opinion of Debevoise & Plimpton
Exhibit N-2 Form of Opinion of Ritch, Heather y Mueller, S.C.
Exhibit N-3 Form of Opinion of Bonn & Schmitt
Exhibit N-4 Form of Opinion of Nauta Dutilh
Exhibit N-5 Form of Local Counsel Opinion
v
<PAGE>
CREDIT AGREEMENT dated as of April 30, 1998, among CDRJ
ACQUISITION CORPORATION (to be renamed Jafra Cosmetics
International, Inc.), a Delaware corporation ("JCI"), JAFRA
COSMETICS INTERNATIONAL, S.A. DE C.V., a sociedad anonima de
capital variable organized under the laws of Mexico ("JCISA"
and, with JCI, the "Borrowers"), CDRJ INVESTMENTS (LUX) S.A., a
societe anonyme organized under the laws of Luxembourg
("Parent"), the Lenders (as defined in Article I), the Issuing
Bank (as defined in Article I) and CREDIT SUISSE FIRST BOSTON, a
bank organized under the laws of Switzerland, acting through its
New York branch, as administrative agent (in such capacity, the
"Administrative Agent") and collateral agent (in such capacity,
the "Collateral Agent") for the Lenders.
Pursuant to the Acquisition Agreement (such term and each other
capitalized term used but not immediately defined having the meaning given it in
Article I), Parent intends to acquire (directly and through one or more
subsidiaries) (the "Acquisition") the Jafra Business, including the acquisition
of the Jafra Stock, the Specified Jafra Intellectual Property and the Jafra
Assets and the assumption of the Jafra Liabilities (as each such term is defined
in the Acquisition Agreement), for aggregate cash consideration (the "Purchase
Price") of $200,000,000, subject to adjustment, all as provided in the
Acquisition Agreement.
Contemporaneously with the Acquisition, Jafra Cosmetics International,
Inc., a California corporation, is to merge with and into JCI, which is an
indirect, wholly-owned Subsidiary of Parent, with JCI to be the survivor of such
merger (the "Jafra Merger"). On or shortly after the Closing Date, Grupo Jafra,
S.A. de C.V., a Mexican sociedad anonima de capital variable, is to merge with
and into JCISA, which is an indirect, wholly-owned Subsidiary of Parent, with
JCISA to be the survivor of such merger (together with the Jafra Merger, the
"Merger"). In connection with the Merger, Parent intends to effect such
transactions as may be appropriate to consummate the Acquisition.
The Borrowers have requested the Lenders to extend credit in the form
of (a) Term Loans on the Closing Date, in an aggregate principal amount not in
excess of $25,000,000, and (b) Revolving Loans at any time and from time to time
prior to the Maturity Date, in an aggregate principal amount at any time
outstanding not in excess of $65,000,000 (or the Dollar Equivalent thereof in
Alternative Currencies). Parent and the Borrowers have requested the Swingline
Lender to extend credit, at any time and from time to time prior to the Maturity
Date, in the form of Swingline Loans in Dollars, in an aggregate principal
amount at any time outstanding not in excess of $10,000,000. Parent and the
Borrowers have requested the Issuing Bank to issue letters of credit, in an
aggregate face amount at any time outstanding not in excess of $15,000,000, to
support payment obligations incurred in the ordinary course of business by the
Borrowers and their respective Subsidiaries. The proceeds of the Term Loans are
to be used, together with the proceeds of the Subordinated Notes and the equity
contribution to be made on the Closing Date, solely to pay the Purchase Price
and related fees and expenses. The proceeds of the Revolving Loans and
Swingline Loans are to be used for general corporate purposes.
<PAGE>
2
The Lenders are willing to extend such credit to the Borrowers and the
Issuing Bank is willing to issue letters of credit for the account of the
Borrowers on the terms and subject to the conditions set forth herein.
Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any ABR Term Loan or ABR Revolving Loan.
"ABR Revolving Loan" shall mean any Revolving Loan bearing interest at
a rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"ABR Term Borrowing" shall mean a Borrowing comprised of ABR Term
Loans.
"ABR Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Acquisition" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Acquisition Agreement" shall mean the Acquisition Agreement dated as
of January 26, 1998, between Parent and CDRJ Holding Company, a Cayman Islands
exempt company, and The Gillette Company, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
provisions thereof and hereof.
"Active Subsidiaries" shall mean all Subsidiaries other than those
listed on Schedule 1.01(a).
"Adjusted LIBOR" shall mean, with respect to any Eurocurrency
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBOR in
effect for such Interest Period and (b) Statutory Reserves.
"Administrative Agent Fees" shall have the meaning assigned to such
term in Section 2.05(b).
"Administrative Questionnaire" shall mean an Administrative
Questionnaire in the form of Exhibit A.
"Affiliate" shall mean, as to any Person, any other Person that,
directly or indirectly, is in Control of, is Controlled by or is under common
Control with, such Person.
<PAGE>
3
"Agents" shall have the meaning assigned to such term in Section 8.01.
"Aggregate Alternative Currency Revolving Credit Exposure" shall mean
the aggregate of the Lenders' Alternative Currency Revolving Credit Exposures.
"Aggregate Revolving Credit Exposure" shall mean the aggregate amount
of the Lenders' Revolving Credit Exposures.
"Alternate Base Rate" shall mean, for any day, a rate per annum
(rounded upwards, if necessary, to the next 1/100 of 1%) equal to the greater of
(a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including the inability or failure of the
Administrative Agent to obtain sufficient quotations in accordance with the
terms of the definition thereof, the Alternate Base Rate shall be determined
without regard to clause (b) of the preceding sentence, until the circumstances
giving rise to such inability no longer exist. Any change in the Alternate Base
Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall
be effective as of the opening of business on the effective date of such change
in the Prime Rate or the Federal Funds Effective Rate, respectively. The term
"Prime Rate" shall mean the rate of interest per annum publicly announced from
time to time by the Administrative Agent as its prime rate in effect at its
principal office in New York City. The term "Federal Funds Effective Rate"
shall mean, for any day, the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for the day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Alternative Currency" shall mean (a) Sterling and Marks and (b) any
other freely available currency which is freely transferable and freely
convertible into Dollars and in which dealings in deposits are carried on in the
London interbank market, which shall be requested by either Borrower in respect
of an Alternative Currency Borrowing and approved by the Administrative Agent
and each Lender making an Alternative Currency Loan comprising a part of such
Borrowing.
"Alternative Currency Borrowing" shall mean a Borrowing comprised of
Alternative Currency Loans.
"Alternative Currency Equivalent" shall mean on any date of
determination, with respect to any amount denominated in Dollars in relation to
any specified Alternative Currency, the equivalent in such specified Alternative
Currency of such amount in Dollars, determined by the Administrative Agent
pursuant to Section 1.03 using the applicable Exchange Rate then in effect.
"Alternative Currency Loan" shall mean any Loan denominated in an
Alternative Currency.
"Alternative Currency Revolving Credit Exposure" shall mean, at any
time, the sum of (a) the Dollar Equivalent of the aggregate principal amount of
all outstanding
<PAGE>
4
Alternative Currency Loans at such time, (b) the Dollar Equivalent of the
aggregate undrawn amount of all outstanding Letters of Credit that are
denominated in an Alternative Currency at such time and (c) the Dollar
Equivalent of the aggregate principal amount of all L/C Disbursements in respect
of Letters of Credit that are denominated in an Alternative Currency that have
not yet been reimbursed at such time.
"Applicable Percentage" shall mean, for any day, with respect to any
Eurocurrency Loan or ABR Loan, or with respect to the Commitment Fees, as the
case may be, the applicable percentage set forth below under the caption
"Eurocurrency Spread", "ABR Spread" or "Fee Percentage", as the case may be,
based upon the Consolidated Leverage Ratio as of the relevant date of
determination, provided that, until the date of delivery to the Administrative
Agent of Parent's financial statements pursuant to Section 5.01(b) with respect
to its fiscal quarter ended September 30, 1998, the Applicable Percentage shall
be deemed to be in Category 1:
<TABLE>
<CAPTION>
================================================================================
Eurocurrency ABR Fee
Consolidated Leverage Ratio Spread Spread Percentage
--------------------------- ------ ------ ----------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Category 1
- ----------
Greater than or equal to 4.50 2.625% 1.625% 0.500%
to 1.00
- --------------------------------------------------------------------------------
Category 2
- ----------
Less than 4.50 to 1.00 but
greater than or equal to 4.00
to 1.00 2.375% 1.375% 0.500%
- --------------------------------------------------------------------------------
Category 3
- ----------
Less than 4.00 to 1.00 but
greater than or equal to 3.50
to 1.00 2.125% 1.125% 0.500%
- --------------------------------------------------------------------------------
Category 4
- ----------
Less than 3.50 to 1.00 but
greater than or equal to 3.00
to 1.00 1.875% 0.875% 0.375%
- --------------------------------------------------------------------------------
Category 5
- ----------
Less than 3.00 to 1.00 1.625% 0.625% 0.375%
================================================================================
</TABLE>
Each change in the Applicable Percentage resulting from a change in
the Consolidated Leverage Ratio shall be effective with respect to all Loans,
Commitments and Letters of Credit outstanding on and after the date of delivery
to the Administrative Agent of the financial statements and certificates
required by Section 5.01(a) or (b) indicating such change until the date
immediately preceding the next date of delivery of such financial statements and
certificates indicating another such change.
<PAGE>
5
Notwithstanding the foregoing, at any time during which Parent has
failed to deliver the financial statements and certificates on or prior to the
date required by Section 5.01(a) or (b), the Consolidated Leverage Ratio shall
be deemed to be in Category 1 for purposes of determining the Applicable
Percentage until the date such financial statements are delivered by Parent.
"Assignee" shall have the meaning assigned to such term in Section
9.05(c).
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the Administrative
Agent, in the form of Exhibit B or such other form as shall be approved by the
Administrative Agent.
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States of America.
"Borrowing" shall mean a group of Loans of a single Type made by the
Lenders on a single date to the same Borrower and as to which a single Interest
Period is in effect.
"Borrowing Request" shall mean a request by either Borrower in
accordance with the terms of Section 2.03 and substantially in the form of
Exhibit C.
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close; provided, however, that with respect to matters relating to
Eurocurrency Loans, the term "Business Day" shall also exclude any day on which
commercial banks are not open for dealings in Dollar deposits in the London
interbank market, and, when used in connection with determining any date on
which any amount is to be paid or made available in an Alternative Currency, the
term "Business Day" shall also exclude any day on which commercial banks and
foreign exchange markets are not open for business in the principal financial
center in the country of such Alternative Currency.
"Calculation Date" shall mean (a) the last Business Day of each
calendar month and (b) at any time when the sum of the Aggregate Revolving
Credit Exposure exceeds 75% of the Total Revolving Credit Commitment, the last
Business Day of each calendar week.
"Capital Expenditure" shall have the meaning assigned to such term in
Section 6.11.
"Capital Stock" shall mean any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person (other than
a corporation) and any and all warrants or options to purchase any of the
foregoing.
"Cash Equivalents" shall mean (a) securities with maturities of one
year or less from the date of acquisition issued or fully guaranteed or insured
by the United States Government or any agency thereof, (b) certificates of
deposit and time deposits, bankers acceptances and overnight bank deposits of
any Lender or of any commercial bank having capital and surplus in excess of
$500,000,000, (c) repurchase obligations of any Lender or of any commercial bank
satisfying the requirements of clause (b) of this definition, having
<PAGE>
6
a term of not more than 30 days with respect to securities issued or fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof, (d) commercial paper of a domestic issuer rated at
least A-2 or the equivalent thereof by Standard and Poor's Ratings Service or
any successor rating agency ("S&P") or P-2 or the equivalent thereof by Moody's
Investors Service, Inc. or any successor rating agency ("Moody's") (or if at
such time neither is issuing ratings, then a comparable rating of such other
nationally recognized rating agency as shall be approved by the Administrative
Agent in its reasonable judgment), (e) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political subdivision or
taxing authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may be) are
rated at least A by S&P or A by Moody's, (f) securities with maturities of one
year or less from the date of acquisition backed by standby letters of credit
issued by any Lender or any commercial bank satisfying the requirements of
clause (b) of this definition, (g) shares of money market mutual or similar
funds complying with the risk limiting conditions of Rule 2a-7 or any successor
rule of the Securities and Exchange Commission under the Investment Company Act
of 1940, as amended, and (h) investments similar to any of the foregoing
denominated in foreign currencies approved by the board of directors or
comparable body of Parent or either Borrower, in each case provided in clauses
(a), (b) and (d) above, maturing within twelve months after the date of
acquisition.
"CD&R" shall mean Clayton, Dublier & Rice, Inc., a Delaware
corporation.
"CD&R Group" shall have the meaning assigned to such term in the
definition of the term "Fund V".
A "Change in Control" shall be deemed to have occurred if (a) prior to
the first public offering of Parent's Voting Stock, (i) Permitted Investors
shall cease to own, beneficially and of record, at least 51% (on a fully diluted
basis) of the Voting Stock of Parent, (ii) the CD&R Group shall cease to own,
beneficially and of record, at least 40% (on a fully diluted basis) of the
Voting Stock of Parent or (iii) Permitted Investors shall fail to have the power
(whether or not exercised) to elect a majority of the board of directors of
Parent; provided, however, that it shall be a "Change in Control" if, following
such public offering, (x) any Person or "group" (within the meaning of Section
13(d) or 14(d) of the Securities Exchange Act of 1934 as in effect on the date
hereof), other than any of the Permitted Investors, shall have acquired a
percentage of shares of Voting Stock of Parent that is greater than the
percentage that is held in the aggregate by the Permitted Investors or (y) the
Permitted Investors shall cease to hold in the aggregate at least 35% of the
outstanding Voting Stock of Parent; (b) Parent shall cease to beneficially own,
directly or indirectly, 100% of the Voting Stock of either Borrower (other than
directors' qualifying shares); or (c) a "Change of Control" (as defined in the
Subordinated Note Documents) shall occur.
"Closing Date" shall mean April 30, 1998.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall mean all assets of the Loan Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by any Security
Document.
<PAGE>
7
"Collateral Release Lenders" shall mean, at any time, Lenders having
Loans (excluding Swingline Loans), L/C Exposure, Swingline Exposure and unused
Revolving Credit and Term Loan Commitments representing more than 80% of the sum
of all Loans (excluding Swingline Loans) outstanding, L/C Exposure, Swingline
Exposure and unused Revolving Credit and Term Loan Commitments at such time.
For purposes of determining the Collateral Release Lenders, any amounts
denominated in an Alternative Currency shall be translated into Dollars at the
Exchange Rates in effect on the most recent Calculation Date.
"Commitment" shall mean, with respect to any Lender, such Lender's
Revolving Credit Commitment, Term Loan Commitment and Swingline Commitment.
"Commitment Fee" shall have the meaning assigned to such term in
Section 2.05(a).
"Commonly Controlled Entity" shall mean an entity, whether or not
incorporated, which is under common control with JCI within the meaning of
Section 4001 of ERISA or is part of a group which includes JCI and which is
treated as a single employer under Section 414(b) or 414(c) of the Code.
"Consolidated Current Assets" shall mean, at any date of
determination, all amounts (other than cash and Cash Equivalents) which would,
in conformity with GAAP, be set forth opposite the caption "total current
assets" (or any like caption) on a consolidated balance sheet of Parent and the
Subsidiaries at such date.
"Consolidated Current Liabilities" shall mean, at any date of
determination, all amounts which would, in conformity with GAAP, be set forth
opposite the caption "total current liabilities" (or any like caption) on a
consolidated balance sheet of Parent and the Subsidiaries at such date, but
excluding (a) the current portion of any Funded Debt of Parent and the
Subsidiaries and (b) without duplication of clause (a) above, all Indebtedness
consisting of Revolving Loans or Swingline Loans to the extent otherwise
included therein.
"Consolidated EBITDA" shall mean, for any period, Consolidated Net
Income or Consolidated Net Loss, as the case may be, for such period, adjusted
to exclude the following items to the extent that such items were included in
the calculation of such Consolidated Net Income or Consolidated Net Loss: (a)
depreciation and amortization (including write-offs or write-downs of
amortizable and depreciable items) for such period, (b) the amount of interest
expense (net of interest income) of Parent and the Subsidiaries, determined on a
consolidated basis in accordance with GAAP, for such period on the aggregate
principal amount of their consolidated Indebtedness, (c) the amount of tax
expense of Parent and the Subsidiaries, determined on a consolidated basis in
accordance with GAAP, for such period, (d) any non-cash expenses and charges, in
each case, which represents an accrual for which no cash is expected to be paid
in the short term, (e) any gain or loss associated with the sale or write-down
of assets not in the ordinary course of business, (f) any non-cash provisions
for reserves of discontinued operations, (g) any extraordinary, unusual or non-
recurring gains or losses or charges or credits, (h) any gains or losses
relating to the repatriation of foreign currency denominated investments and (i)
total compensation from the Closing Date paid or accrued to the employees listed
on Annex C of the Transition Services Agreement dated as of April 30, 1998,
among The Gillette Company, CDRJ Holding Company and Parent. In the case of any
period of four consecutive fiscal quarters ending on or prior to March 31, 1999,
"Consolidated EBITDA" shall be determined on a pro
<PAGE>
8
forma basis as if the Transactions had occurred at the beginning of any such
four fiscal quarter period.
"Consolidated Interest Coverage Ratio" shall mean, for any period, the
ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest
Expense for such period. For purposes of this definition, Consolidated Interest
Expense for the period of four consecutive fiscal quarters ending on December
31, 1998, shall be deemed to equal Consolidated Interest Expense for the period
commencing on May 1, 1998, and ending on December 31, 1998, multiplied by 3/2.
"Consolidated Interest Expense" shall mean, for any period, the amount
equal to the interest expense (accrued and paid or payable in cash for such
period, and in any event excluding any amortization or write-off of financing
costs otherwise included therein), net of interest income, of Parent and the
Subsidiaries, determined on a consolidated basis in accordance with GAAP, for
such period on the aggregate principal amount of their consolidated
Indebtedness.
"Consolidated Leverage Ratio" shall mean, as of the last day of any
fiscal quarter, the ratio of (a) Total Debt on such date to (b) Consolidated
EBITDA for the period of four consecutive fiscal quarters ended on such date.
"Consolidated Net Income" or "Consolidated Net Loss" shall mean, for
any period, the amount which, in conformity with GAAP, would be set forth
opposite the caption "net income" (or any like caption) or "net loss" (or any
like caption), as the case may be, on a consolidated statement of earnings of
Parent and the Subsidiaries for such fiscal period.
"Contractual Obligation" shall mean, as to any Person, any provision
of any material security issued by such Person or of any material agreement,
instrument or other undertaking to which such Person is a party or by which it
or any of its property (including any Mortgaged Property) is bound.
"Control" shall mean the power, directly or indirectly, to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise, and the terms
"Controlling" and "Controlled" shall have meanings correlative thereto.
"Credit Event" shall have the meaning assigned to such term in Section
4.01.
"Default" shall mean any of the events specified in Section 7.01 or
7.02, whether or not any requirement for the giving of notice (other than, in
the case of Section 7.02(e), any Default Notice), the lapse of time, or both, or
any other condition, has been satisfied.
"Dollars" or "$" shall mean lawful money of the United States of
America.
"Dollar Equivalent" shall mean, on any date of determination, with
respect to any amount denominated in any currency other than Dollars, the
equivalent in Dollars of such amount, determined by the Administrative Agent
pursuant to Section 1.03 using the applicable Exchange Rate with respect to such
currency at the time in effect.
<PAGE>
9
"Domestic Subsidiaries" shall mean, with respect to any Person, all
Subsidiaries of such Person that are incorporated or organized under the laws of
the United States of America, any state thereof or the District of Columbia.
"Dutch Deed of Pledge" shall have the meaning assigned to such term in
Section 9.21.
"environment" shall mean ambient air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata or as otherwise defined in any Environmental Law.
"Environmental Law" shall mean any and all foreign, Federal, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees, requirements of any Governmental Authority properly promulgated
and having the force and effect of law, or other Requirements of Law (including
common law) regulating, relating to or imposing liability or standards of
conduct concerning protection of the environment or human health as related to
the environment, as now or may at any relevant time hereafter be in effect.
"Environmental Permits" shall have the meaning assigned to such term
in Section 5.09(a).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may be amended from time to time.
"Eurocurrency Borrowing" shall mean a Borrowing comprised of
Eurocurrency Loans.
"Eurocurrency Loan" shall mean any Eurocurrency Revolving Loan or
Eurocurrency Term Loan.
"Eurocurrency Revolving Loan" shall mean any Revolving Loan bearing
interest at a rate determined by reference to the Adjusted LIBOR in accordance
with the provisions of Article II.
"Eurocurrency Term Borrowing" shall mean a Borrowing comprised of
Eurodollar Term Loans.
"Eurocurrency Term Loan" shall mean any Term Loan bearing interest at
a rate determined by reference to the Adjusted LIBOR in accordance with the
provisions of Article II.
"Event of Default" shall mean any of the events specified in Section
7.01 or 7.02, provided that any requirement for the giving of notice, the lapse
of time, or both, or any other condition, has been satisfied.
"Excess Cash Flow" shall mean, for any fiscal year of Parent (or in
the case of the fiscal year ending December 31, 1998, the period commencing on
May 1, 1998, and ending on December 31, 1998), the amount equal to the excess,
if any, of (a) the sum of (i) Consolidated EBITDA for such fiscal year and (ii)
decreases in Working Capital for such fiscal year minus (b) the sum, without
duplication, of (i) the aggregate amount actually paid by Parent and its
Subsidiaries in cash during such fiscal year on account of (w) Capital
<PAGE>
10
Expenditures, (x) interest expense (accrued and paid or payable in cash) on the
aggregate principal amount of their consolidated Indebtedness, (y) tax expense
and (z) any investments made pursuant to Section 6.03(e), (i), (n) or (p), (ii)
the aggregate amount of all principal payments of Indebtedness (net of any
refinancings of any such Indebtedness to the extent applied to fund such
payments) during such fiscal year resulting in permanent reductions of such
Indebtedness (excluding, in the case of the Loans, any principal payment
pursuant to Section 2.13(b), (c) or (d), except to the extent that the event
giving rise to such payment causes an increase in Consolidated EBITDA), (iii)
the Net Proceeds from any sale or other disposition of property or assets of
Parent or any of the Subsidiaries to the extent that such Net Proceeds (A)
consist of any Reinvested Amount or are otherwise applied in accordance with
Section 2.13(b) and (B) are included in the calculation of Consolidated EBITDA,
and (iv) increases in Working Capital for such fiscal year.
"Exchange Rate" shall mean, on any day, with respect to any currency
other than Dollars (for purposes of determining the Dollar Equivalent) or any
Alternative Currency (for purposes of determining the Alternative Currency
Equivalent with respect to such Alternative Currency), the rate at which such
currency may be exchanged into Dollars or the applicable Alternative Currency,
as the case may be, as set forth at approximately 11:00 a.m., New York City
time, on such date on the applicable Bloomberg Key Cross Currency Rates Page.
In the event that any such rate does not appear on any Bloomberg Key Cross
Currency Rates Page, the Exchange Rate shall be determined by reference to such
other publicly available service for displaying exchange rates reasonably
selected by the Administrative Agent for such purpose or, at the discretion of
the Administrative Agent, such Exchange Rate shall instead be the arithmetic
average of the spot rates of exchange of the Administrative Agent in the market
where its foreign currency exchange operations in respect of such currency are
then being conducted, at or about 10:00 a.m., local time, on such date for the
purchase of Dollars or the applicable Alternative Currency, as the case may be,
for delivery two Business Days later, provided that, if at the time of any such
determination, for any reason, no such spot rate is being quoted, the
Administrative Agent, with the consent of Parent (not to be unreasonably
withheld), may use any other reasonable method it deems appropriate to determine
such rate, and such determination shall be presumed correct absent manifest
error.
"Fee Letter" shall mean the Fee Letter dated January 26, 1998, among
Parent, CDRJ Holding Company, a Cayman Islands exempt company, and the
Administrative Agent.
"Fees" shall mean the Commitment Fees, the Administrative Agent's
Fees, the L/C Participation Fees and the Issuing Bank Fees.
"Financial Officer" of any Person shall mean the chief financial
officer, principal accounting officer, Treasurer or Controller of such Person.
"Financing Lease" shall mean any lease of property, real or personal,
the obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
"Financing Transactions" shall mean (a) the execution, delivery and
performance by each Loan Party of the Loan Documents to which it is to be a
party, the borrowing of Loans and the use of the proceeds thereof, (b) the
execution, delivery and performance by each Loan Party of the Subordinated Note
Documents to which it is to be
<PAGE>
11
a party, the issuance of the Subordinated Notes and the use of the proceeds
thereof and (c) the contribution to Parent by Fund V and other Permitted
Investors of an aggregate amount of at least $77,000,000 in cash.
"Foreign Backstop Letter of Credit" shall mean any Letter of Credit
issued under this Agreement to any Person for the account of either Borrower to
provide credit support for Indebtedness of any Foreign Subsidiary to such Person
which is permitted under Section 6.01.
"Foreign Base Rate" shall mean, in respect of any Alternative Currency
Loan on any day, the rate of interest per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) determined to be the average rate charged to borrowers
of similar quality as the applicable Borrower of such Alternative Currency Loans
as reasonably determined by the Administrative Agent.
"Foreign Base Rate Loan" shall mean any Alternative Currency Loan
bearing interest at a rate determined by reference to a Foreign Base Rate in
accordance with the provisions of Article II. Notwithstanding anything to the
contrary contained herein, Loans may be made or maintained as Foreign Base Rate
Loans only to the extent specified in Section 2.02(f), 2.08 or 2.15.
"Foreign Benefit Plan" shall mean any benefit plan which under
applicable law is required to be funded through a trust or other funding vehicle
other than a trust or funding vehicle maintained exclusively by a Governmental
Authority.
"Foreign Subsidiary" shall mean, with respect to any Person, any
Subsidiary of such Person that is not a Domestic Subsidiary.
"Foreign Subsidiary Holdco" shall mean any Subsidiary of Parent that
owns Capital Stock of either Borrower.
"Former Plan" shall mean any employee benefit plan in respect of which
JCI or a Commonly Controlled Entity has engaged in a transaction described in
Section 4069 or Section 4212(c) of ERISA.
"Fund V" shall mean Clayton, Dubilier & Rice Fund V Limited
Partnership, a Cayman Islands exempted limited partnership managed by CD&R, and
its successors and assigns who are existing members of the CD&R Group at the
time of any such assignment. For purposes of this definition, "CD&R Group" shall
mean CD&R, any other investment fund or vehicle managed, sponsored or advised by
CD&R, or any Affiliate of or successor to CD&R, Fund V, or any such other
investment fund or vehicle.
"Funded Debt" shall mean, as to any Person, all Indebtedness of such
Person that matures more than one year from the date of its creation or matures
within one year from such date but is renewable or extendible, at the option of
such Person, to a date more than one year from such date or arises under a
revolving credit or similar agreement that obligates the lender or lenders to
extend credit during a period of more than one year from such date, including
all current maturities and current sinking fund payments in respect of such
Indebtedness whether or not required to be paid within one year from the date of
its creation and, in the case of the Borrowers, Indebtedness in respect of the
Loans.
<PAGE>
12
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time; provided that, for
purposes of determining compliance with the provisions of Section 6.12 or 6.13,
"GAAP" shall mean generally accepted accounting principles in the United States
of America as in effect on December 31, 1997.
"Governmental Authority" shall mean the government of the United
States of America, and, as applicable, Mexico, The Netherlands, Luxembourg, the
United Kingdom, Germany, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Guarantee" of or by any Person shall mean any obligation, contingent
or otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
Person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however, that the
term "Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business.
"Guarantee Agreements" shall mean the Parent Guarantee Agreement, the
JCI Guarantee Agreement, JCI Subsidiary Guarantee Agreement, the JCISA Guarantee
Agreement, the JCISA Subsidiary Guarantee Agreement and, with respect to any
other guarantee agreement to be entered into pursuant to Section 5.11(b), a
guarantee agreement in a form reasonably satisfactory to Parent, the Borrowers
and the Collateral Agent.
"Guarantors" shall mean Parent, JCI, JCISA, the JCI Subsidiary
Guarantors and the JCISA Subsidiary Guarantors.
"Hedging Agreement" shall mean any agreement or arrangement that
relates to any interest rate protection, future, option, swap, cap, collar or
hedge, or to any foreign exchange contract or currency swap or hedge, or any
other similar agreement or arrangement and is entered into, purchased or
otherwise acquired by Parent or any of its Subsidiaries in the ordinary course
of business and not for purposes of speculation.
"Indebtedness" of any Person shall mean, without duplication, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument, (c) all obligations of such Person
under Financing Leases, (d) all reimbursement obligations (contingent or
otherwise) of such Person in respect of letters of credit issued for the account
of such Person, (e) all obligations of such Person in respect of acceptances
created for the account of such Person, (f) all obligations of such Person,
contingent or otherwise, to purchase, redeem, retire or otherwise acquire for
value any preferred stock (or equivalent
<PAGE>
13
equity interests) of such Person which is mandatorily redeemable prior to the
scheduled maturity of the Term Loans (other than any such stock held by
Management Investors), (g) all Guarantees by such Person of Indebtedness of
others and (h) all obligations of the types referred to in clauses (a) through
(g) above secured by any Liens on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof.
"Indemnity, Subrogation and Contribution Agreement" shall mean the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit D, among JCISA, the JCISA Subsidiary Guarantors and the Collateral
Agent.
"Insolvency" shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.
"Intellectual Property" shall have the meaning assigned to such term
in Section 3.08.
"Interest Payment Date" shall mean, with respect to any Loan, the last
day of the Interest Period applicable to the Borrowing of which such Loan is a
part and, in the case of a Eurocurrency Borrowing with an Interest Period of
more than three months' duration, each day that would have been an Interest
Payment Date had successive Interest Periods of three months' duration been
applicable to such Borrowing, and, in addition, the date of any prepayment of
such Borrowing or conversion of such Borrowing to a Borrowing of a different
Type.
"Interest Period" shall mean (a) as to any Eurocurrency Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the
applicable Borrower may elect and (b) as to any ABR Borrowing, the period
commencing on the date of such Borrowing and ending on the earliest of (i) the
last Business Day of each of March, June, September or December, as applicable,
(ii) the Maturity Date and (iii) the date such Borrowing is converted to a
Borrowing of a different Type in accordance with Section 2.10 or repaid or
prepaid in accordance with Section 2.11 or 2.12; provided, however, that, with
respect to Eurocurrency Loans, if any Interest Period would end on a day other
than a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day. Interest shall accrue from and including the first
day of an Interest Period to but excluding the last day of such Interest Period.
"Investment" shall have the meaning assigned to such term in Section
6.03.
"Issuing Bank" shall mean, as the context may require, (a) Credit
Suisse First Boston, with respect to Letters of Credit issued by it, and (b) any
other Lender that may become an Issuing Bank under Section 2.22(i) or (k), with
respect to Letters of Credit issued by it.
"Issuing Bank Fees" shall have the meaning assigned to such term in
Section 2.05(c).
<PAGE>
14
"JCI Guarantee Agreement" shall mean the Guarantee Agreement,
substantially in the form of Exhibit E, made by JCI in favor of the Collateral
Agent for the benefit of the Secured Parties.
"JCI Subsidiary Guarantee Agreement" shall mean the Subsidiary
Guarantee Agreement, substantially in the form of Exhibit F, made by the JCI
Subsidiary Guarantors in favor of the Collateral Agent for the benefit of the
Secured Parties.
"JCI Subsidiary Guarantor" shall mean each Domestic Subsidiary of JCI
listed on Schedule 1.01(b), and each other Domestic Subsidiary of JCI that is or
becomes a party to a JCI Subsidiary Guarantee Agreement.
"JCISA Guarantee Agreement" shall mean the Guarantee Agreement,
substantially in the form of Exhibit G, made by JCISA in favor of the Collateral
Agent for the benefit of the Secured Parties.
"JCISA Maximum Percentage" shall mean 50%; provided, however, that, if
the Total Revolving Credit Commitment is required to be reduced in accordance
with Section 2.09(b), then the JCISA Maximum Percentage shall be reduced so that
the maximum amount of the JCISA Revolving Credit Exposure available after giving
effect to such reduction to the Total Revolving Credit Commitment shall equal
the difference between (a) the maximum amount of the JCISA Revolving Credit
Exposure available immediately prior to such reduction and (b) the amount of
such reduction.
"JCISA Revolving Credit Exposure" shall mean, on any date, that
portion of the Aggregate Revolving Credit Exposure on such date attributable to
Loans made to, or Letters of Credit issued for the account of, JCISA.
"JCISA Subsidiary Guarantee Agreement" shall mean the Subsidiary
Guarantee Agreement, substantially in the form of Exhibit H, made by the JCISA
Subsidiary Guarantors in favor of the Collateral Agent for the benefit of the
Secured Parties.
"JCISA Subsidiary Guarantor" shall mean each Subsidiary of JCISA
listed on Schedule 1.01(b), and each other Subsidiary of JCISA that is or
becomes a party to a JCISA Subsidiary Guarantee Agreement.
"L/C Commitment" shall mean the commitment of the Issuing Bank to
issue Letters of Credit pursuant to Section 2.22.
"L/C Disbursement" shall mean a payment or disbursement made by the
Issuing Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the aggregate
then undrawn and unexpired amount of the then outstanding Letters of Credit
denominated in Dollars, (b) the Dollar Equivalent of the aggregate then undrawn
and unexpired amount of outstanding Letters of Credit denominated in Alternative
Currencies, (c) the aggregate principal amount of all L/C Disbursements in
respect of Letters of Credit denominated in Dollars that have not then been
reimbursed or converted to Loans and (d) the Dollar Equivalent of the aggregate
principal amount of all L/C Disbursements in respect of Letters of Credit
denominated in Alternative Currencies that have not then been reimbursed or
<PAGE>
15
converted to Loans. The L/C Exposure of any Revolving Credit Lender at any time
shall mean its Pro Rata Percentage of the aggregate L/C Exposure at such time.
"L/C Participation Fee" shall have the meaning assigned to such term
in Section 2.05(c).
"Lenders" shall mean (a) the financial institutions listed on Schedule
2.01 (other than any such financial institution that has ceased to be a party
hereto pursuant to an Assignment and Acceptance) and (b) any financial
institution that is a party hereto pursuant to an Assignment and Acceptance and
in compliance with Section 9.05. Unless the context indicates otherwise, the
term "Lenders" shall include the Swingline Lender.
"Letter of Credit" shall mean any letter of credit issued pursuant to
Section 2.22.
"LIBOR" shall mean, with respect to any Eurocurrency Borrowing, the
rate per annum determined by the Administrative Agent at approximately 11:00
a.m. (London time) on the date which is two Business Days prior to the beginning
of the relevant Interest Period (as specified in the applicable Borrowing
Request) by reference to the British Bankers' Association Interest Settlement
Rates for deposits in Dollars or the relevant Alternative Currency, as
applicable (as set forth by any service selected by the Administrative Agent
which has been nominated by the British Bankers' Association as an authorized
information vendor for the purpose of displaying such rates), for a period equal
to the Interest Period applicable to such Eurocurrency Borrowing, provided that,
to the extent that an interest rate is not ascertainable pursuant to the
foregoing provisions of this definition, the "LIBOR" shall be the interest rate
per annum determined by the Administrative Agent to be the average of the rates
per annum at which deposits in Dollars or the relevant Alternative Currency, as
applicable, are offered for such relevant Interest Period to major banks in the
London interbank market in London, England by the Administrative Agent at
approximately 11:00 a.m. (London time) on the date which is two Business Days
prior to the beginning of such Interest Period.
"Lien" shall mean any mortgage, pledge, hypothecation, encumbrance,
lien (statutory or other), charge or security interest or any preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement and any Financing Lease having substantially the same economic effect
as any of the foregoing).
"Loan Documents" shall mean this Agreement, the Notes, the Guarantee
Agreements, the Security Documents and the Indemnity, Subrogation and
Contribution Agreement.
"Loan Parties" shall mean the Borrowers, the Guarantors and the
Subsidiaries of Parent that are parties to the Pledge Agreement and the Dutch
Deed of Pledge.
"Loans" shall mean the Revolving Loans, the Term Loans and the
Swingline Loans.
"Management Investors" shall mean the officers, directors, employees
and other members of the management of Parent or any of the Subsidiaries, or
immediate family members or relatives thereof, or trusts or partnerships for the
benefit of any of the foregoing,
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16
or any of their heirs, executors, successors or legal representatives, who at
any particular date shall beneficially own or have the right to acquire,
directly or indirectly, common stock of Parent.
"Management Subscription Agreements" shall mean one or more stock
subscription, stock option, grant or other agreements which have been or may be
entered into between Parent and certain Management Investors, with respect to
the issuance to or ownership by such parties of common stock of Parent or
options, warrants, units or other rights in respect of common stock of Parent,
any agreements entered into from time to time by transferees of any such stock,
options, warrants or other rights in connection with the sale, transfer or
reissuance thereof, and any assumptions of any of the foregoing by third
parties, as amended, supplemented, waived or otherwise modified from time to
time.
"Marks" and "DM" shall mean the lawful currency for the time being of
Germany.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, results of operations, property or condition (financial or
otherwise) of Parent and the Subsidiaries (after giving effect to the
Transactions), taken as a whole, or (b) the validity or enforceability of the
Loan Documents as to any Loan Parties party thereto or the rights and remedies
of the Administrative Agent, the Collateral Agent or the Lenders hereunder and
thereunder, taken as a whole.
"Material Environmental Amount" shall mean an amount payable by
Parent, either Borrower or any of the Subsidiaries in respect of or under any
Environmental Law for remedial costs, compliance costs, compensatory damages,
punitive damages, fines, penalties or any combination thereof in an amount that
would reasonably be expected to have a Material Adverse Effect.
"Material of Environmental Concern" shall mean any hazardous or toxic
substances, materials, pollutants or wastes, defined or regulated as such in or
under any applicable Environmental Law, including gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.
"Material Indebtedness" shall mean Indebtedness in an aggregate
outstanding principal amount of $5,000,000 (or the Dollar Equivalent thereof in
another currency) or more.
"Material Subsidiary" shall mean, at any date, (a) any Subsidiary of
Parent which at such date has a market value in excess of $2,500,000 or annual
revenues in excess of $2,500,000 or (b) any group of Subsidiaries of Parent,
taken as a whole, which at such date has an aggregate market value in excess of
$5,000,000 or annual revenues in excess of $5,000,000.
"Maturity Date" shall mean April 30, 2004.
"Merger" shall have the meaning assigned to such term in the preamble
to this Agreement.
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17
"Mexican Financing Agreement" shall mean one or more financing
agreements or other arrangements whereby JCISA and/or its Subsidiaries may incur
Indebtedness of the type contemplated by Section 6.01(k).
"Mexican Subsidiary" shall mean, with respect to any Person, any
Subsidiary of such Person that is incorporated or organized under the laws of
Mexico or any political division thereof.
"Mexico" shall mean the United Mexican States.
"Mortgaged Properties" shall mean the owned real properties and
leasehold and subleasehold interests of the Loan Parties specified on Schedule
1.01(c).
"Mortgages" shall mean the mortgages, deeds of trust, leasehold
mortgages, assignments of leases and rents, modifications and other security
documents delivered pursuant to Section 4.02(i)(i) or pursuant to Section 5.11,
each substantially in the form of Exhibit I.
"Multiemployer Plan" shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Proceeds" shall mean, with respect to any of the events referred
to in Section 2.13(b) or (d) and the defined terms used therein, (a) the gross
cash consideration, and all cash proceeds (as and when received) of non-cash
consideration (including any such cash proceeds in the nature of principal and
interest payments on account of promissory notes or similar obligations),
received by Parent and the Subsidiaries in connection with such event, minus (b)
the sum, without duplication, of (i) any taxes reasonably estimated to be
payable to any Federal, state, local or foreign taxing authority by Parent and
the Subsidiaries as a result thereof or as a result of any transfer of funds in
connection with the application of such funds in accordance with Section 2.13(b)
or (d), (ii) the amount of fees and commissions (including reasonable investment
banking fees, legal, accounting, consulting, survey, title and recording tax
expenses and other costs and expenses actually incurred in connection with such
event which are paid or payable by Parent and the Subsidiaries), (iii) the
amount of such net cash proceeds which are attributable to (and payable to)
minority interests, (iv) the amount of any reserve reasonably maintained by
Parent and the Subsidiaries with respect to indemnification obligations owing
pursuant to the definitive documentation pursuant to which such event is
consummated (with any unused portion of such reserve to constitute Net Proceeds
on the earlier of the date upon which the indemnification obligations
terminate), (v) the amount of Indebtedness (other than intercompany
Indebtedness), if any, which is required to be repaid at the time or as a result
of such event out of the proceeds thereof and (vi) with respect to the
determination of Net Proceeds from a sale or other disposition of property or
assets referred to in Section 2.13(b), appropriate amounts to be provided by
Parent and the Subsidiaries to be applied to satisfy any reasonable expenses and
liabilities associated with any such property or assets and retained by Parent
or any such Subsidiary after such sale or other disposition and other
appropriate amounts which shall be used by Parent or any of the Subsidiaries to
discharge or pay on a current basis any other liabilities associated with such
property or assets.
"Note" shall have the meaning assigned to such term in Section
2.04(e).
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18
"Obligations" shall mean all obligations defined as "Obligations" in
the Guarantee Agreements and the Security Documents.
"Parent Guarantee Agreement" shall mean the Parent Guarantee
Agreement, substantially in the form of Exhibit J, made by Parent in favor of
the Collateral Agent for the benefit of the Secured Parties.
"Participants" shall have the meaning assigned to such term in Section
9.05(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA.
"Perfection Certificate" shall mean the Perfection Certificate
substantially in the form of Annex 2 to the Security Agreement.
"Permitted Investors" shall mean (a) the CD&R Group, (b) any Person
reasonably satisfactory to the Administrative Agent, (c) any Management Investor
and (d) any Person acting in the capacity of an underwriter in connection with a
public or private offering of Capital Stock of Parent.
"Person" shall mean any individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan" shall mean any employee pension benefit plan which is covered
by ERISA and in respect of which JCI or a Commonly Controlled Entity is an
"employer" as defined in Section 3(5) of ERISA.
"Pledge Agreement" shall mean the Pledge Agreement, substantially in
the form of Exhibit K, among Parent, the Borrowers, the Subsidiaries party
thereto and the Collateral Agent for the benefit of the Secured Parties.
"Prepayment Account" shall have the meaning assigned to such term in
Section 2.13(g).
"Pro Rata Percentage" of any Revolving Credit Lender at any time shall
mean the percentage of the Total Revolving Credit Commitment represented by such
Lender's Revolving Credit Commitment.
"Purchase Price" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Register" shall have the meaning given such term in Section 9.05(e).
"Regulation U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
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19
"Reinvested Amount" shall mean, with respect to any sale, transfer or
other disposition of assets of Parent or any of its Subsidiaries permitted by
Section 6.05(i) or any recovery of amounts under any property insurance policies
of Parent or any of its Subsidiaries, that portion of the Net Proceeds thereof
as shall, according to a certificate of a Responsible Officer of Parent or the
applicable Borrower delivered to the Administrative Agent within 30 days of such
sale or other disposition, be reinvested in the business of Parent or such
Borrower and its Subsidiaries in a manner consistent with the requirements of
Section 6.08 and the other provisions hereof within 360 days of the receipt of
such Net Proceeds or, if such reinvestment is in a project authorized by the
board of directors or comparable body of Parent or the applicable Borrower that
will take longer than such 360 days to complete, the period of time necessary to
complete such project (so long as Parent or such Subsidiary has committed to
expend such portion of the Net Proceeds within, and is diligently pursuing such
project during, the period of 360 days from the receipt of such Net Proceeds),
provided that (i) if any such certificate of a Responsible Officer is not
delivered to the Administrative Agent on the date of such sale, transfer or
other disposition, any Net Proceeds therefrom shall be promptly (x) deposited in
a cash collateral account established with the Collateral Agent to be held as
collateral for the benefit of the Secured Parties on terms reasonably
satisfactory to the Administrative Agent and shall remain on deposit in such
cash collateral account until such certificate of a Responsible Officer is (or
is required to be) delivered to the Administrative Agent or (y) to the extent
that the applicable Borrower has indicated that no such certificate will be
delivered, used to make a prepayment of the Revolving Loans in accordance with
Section 2.12, provided that, notwithstanding anything in this Agreement to the
contrary, the Borrowers may not request any Revolving Credit Borrowing that
would reduce the aggregate amount of the unused Revolving Credit Commitments to
an amount that is less than the amount of any such prepayment until such
certificate of a Responsible Officer is delivered to the Administrative Agent,
and (ii) any Net Proceeds not so reinvested by such 360th day or later, as
applicable, shall be utilized on such day to prepay Term Loans pursuant to
Section 2.13(b).
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing, depositing, dispersing, emanating or migrating of any Material of
Environmental Concern in, into, onto or through the environment.
"Reorganization" shall mean, with respect to any Multiemployer Plan,
the condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
"Repayment Date" shall have the meaning given such term in Section
2.11(a).
"Reportable Event" shall mean any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the thirty-day notice
period is waived under subsections .22, .23, .25, .27, .28 or .29 of PBGC Reg
(S) 4043.
"Required Lenders" shall mean, at any time, Lenders having Loans
(excluding Swingline Loans), L/C Exposure, Swingline Exposure and unused
Revolving Credit and Term Loan Commitments representing more than 50% of the sum
of all Loans (excluding Swingline Loans) outstanding, L/C Exposure, Swingline
Exposure and unused Revolving Credit and Term Loan Commitments at such time.
For purposes of determining the Required Lenders, any amounts denominated in an
Alternative Currency shall be translated into Dollars at the Exchange Rates in
effect on the most recent Calculation Date.
<PAGE>
20
"Requirement of Law" shall mean, as to any Person, the certificate or
articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or any
restrictions of record affecting any Mortgaged Property or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject, provided that the foregoing shall not apply to
any non-binding recommendation of any Governmental Authority.
"Reset Date" shall have the meaning assigned to such term in Section
1.03(a).
"Responsible Officer" of any Person shall mean the chief executive
officer, the president or vice president, or, with respect to financial matters,
the Financial Officer of such Person or, with respect to benefits matters, the
appropriate officer of such Person.
"Revolving Credit Borrowing" shall mean a Borrowing comprised of
Revolving Loans.
"Revolving Credit Commitment" shall mean, with respect to each Lender,
the commitment of such Lender to make Revolving Loans and/or participate in
Swingline Loans hereunder as set forth on Schedule 2.01, or in the Assignment
and Acceptance pursuant to which such Lender assumed its Revolving Credit
Commitment, as applicable, as the same may be (a) reduced from time to time
pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant
to assignments by or to such Lender pursuant to Section 9.05.
"Revolving Credit Exposure" shall mean, with respect to any Lender at
any time, the aggregate principal amount at such time of all outstanding
Revolving Loans of such Lender denominated in Dollars, plus the Dollar
Equivalent of the aggregate principal amount at such time of all outstanding
Revolving Loans of such Lender that are Alternative Currency Loans, plus the
aggregate amount at such time of such Lender's L/C Exposure and Swingline
Exposure.
"Revolving Credit Lender" shall mean a Lender with a Revolving Credit
Commitment.
"Revolving Loans" shall mean the revolving loans made by the Lenders
to the Borrowers pursuant to Section 2.01.
"Secured Parties" shall have the meaning assigned to such term in the
Security Agreement.
"Security Agreement" shall mean the Security Agreement, substantially
in the form of Exhibit L, among the Borrowers, the Subsidiaries party thereto
and the Collateral Agent for the benefit of the Secured Parties.
"Security Documents" shall mean the Mortgages, the Security Agreement,
the Pledge Agreement and each of the security agreements, mortgages and other
instruments and documents executed and delivered pursuant to any of the
foregoing or pursuant to Section 5.11.
"Single Employer Plan" shall mean any Plan which is covered by Title
IV of ERISA, but which is not a Multiemployer Plan.
<PAGE>
21
"Solvent" shall mean, when used with respect to any Person, that, as
of any date of determination, (a) the amount of the assets of such Person, at a
fair valuation, will, as of such date, exceed the amount of all liabilities of
such Person, contingent or otherwise, as of such date, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the probable liability of such
Person on its debts as such debts become absolute and matured, (c) such Person
will not have, as of such date, an unreasonably small amount of capital with
which to conduct its business and (d) such Person will be able to pay its debts
as they mature. For purposes of determining whether a Person is Solvent, the
amount of any contingent liability shall be computed as the amount that, in
light of all the facts and circumstances existing at such time, represents the
amount that may reasonably be expected to become an actual or matured liability.
"Statutory Reserves" shall mean a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board or by any other Governmental Authority to which Lenders
are subject for any category of deposits or liabilities customarily used to fund
loans or by reference to which interest rates applicable to Loans are
determined. Such reserve, liquid asset or similar percentages shall include
those imposed pursuant to Regulation D of the Board (and for purposes of
Regulation D, Eurocurrency Loans denominated in Dollars shall be deemed to
constitute Eurocurrency Liabilities). Eurocurrency Loans shall be deemed to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under Regulation D or any other applicable law, rule or regulation. Statutory
Reserves shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage.
"Sterling" and "(Pounds)" shall mean the lawful currency for the time
being of the United Kingdom.
"Subordinated Note Documents" shall mean the indenture and other
agreements governing the Subordinated Notes or pursuant to which the
Subordinated Notes are issued.
"Subordinated Notes" shall mean the 11 3/4% Senior Subordinated Notes
Due 2008 of the Borrowers, in an original aggregate principal amount of
$100,000,000.
"Subsidiary" shall mean, as to any Person, a corporation, partnership
or other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, controlled or held, or the management of
which is otherwise Controlled, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or "Subsidiaries" in this Agreement shall refer to
a Subsidiary or Subsidiaries of Parent.
"Subsidiary Guarantors" shall mean the JCI Subsidiary Guarantors and
the JCISA Subsidiary Guarantors.
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22
"Swingline Commitment" shall mean the commitment of the Swingline
Lender to make Swingline Loans pursuant to Section 2.23 in the amount referred
to therein.
"Swingline Exposure" shall mean at any time the aggregate principal
amount at such time of all outstanding Swingline Loans. The Swingline Exposure
of any Revolving Credit Lender at any time shall equal its Pro Rata Percentage
of the aggregate Swingline Exposure at such time.
"Swingline Lender" shall mean Credit Suisse First Boston.
"Swingline Loan" shall mean any loan made by the Swingline Lender
pursuant to its Swingline Commitment.
"Term Borrowing" shall mean a Borrowing comprised of Term Loans.
"Term Loan Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Term Loans hereunder as set forth on Schedule
2.01, or in the Assignment and Acceptance pursuant to which such Lender assumed
its Term Loan Commitment, as applicable, as the same may be (a) reduced from
time to time pursuant to Section 2.09 and (b) reduced or increased from time to
time pursuant to assignments by or to such Lender pursuant to Section 9.05.
"Term Loans" shall mean the term loans made by the Lenders to the
Borrowers pursuant to Section 2.01. Each Term Loan shall be a Eurocurrency Term
Loan or an ABR Term Loan.
"Total Debt" shall mean, as of any date of determination, without
duplication, the total Indebtedness of Parent and its Subsidiaries required to
be reflected on a consolidated balance sheet of Parent on such date in
accordance with GAAP (other than Indebtedness of the type referred to in clause
(d), (e) or (g) of the definition of the term "Indebtedness", except, in the
case of such clause (d) or (e), to the extent of any unreimbursed drawings
thereunder), net of the actual amount of any cash of any Foreign Subsidiary (up
to a maximum of $10,000,000 (or the Dollar Equivalent thereof in another
currency)) on such balance sheet on such date.
"Total Revolving Credit Commitment" shall mean, at any time, the
aggregate amount of the Revolving Credit Commitments, as in effect at such time.
"Transaction Documents" shall mean the Acquisition Agreement, this
Agreement and the other Loan Documents, the Subordinated Note Documents, the
Subordinated Notes, any purchase or registration rights agreements or offering
circular relating to the Subordinated Notes, and any subscription, registration
rights or stockholders agreement relating to the equity investment in connection
with the Transactions.
"Transactions" shall mean the Acquisition, the Merger and the
Financing Transactions.
"Transferee" shall have the meaning assigned to such term in Section
9.05(g).
"Type", when used in respect of any Loan or Borrowing, shall refer to
the Rate by reference to which interest on such Loan or on the Loans comprising
such
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23
Borrowing is determined and the currency in which such Loan or the Loans
comprising such Borrowing are denominated. For purposes hereof, the term "Rate"
shall include the Adjusted LIBOR and the Alternate Base Rate, and currency shall
include Dollars and any Alternative Currency permitted hereunder.
"Underfunding" shall mean an excess of all accrued benefits under a
Plan (based on those assumptions used to fund such Plan), determined as of the
most recent annual valuation date, over the value of the assets of such Plan
allocable to such accrued benefits.
"Voting Stock" of any Person shall mean all Capital Stock entitled to
vote generally in the election of directors (or Persons performing similar
functions) of such Person.
"wholly owned", shall mean, when used to modify the term "Subsidiary",
a Subsidiary of a Person of which securities (except for directors' qualifying
shares or shares held by nominees) or other ownership interests representing
100% of the equity or 100% of the ordinary voting power or 100% of the general
partnership interests are, at the time any determination is being made, owned,
controlled or held by such Person or one or more wholly owned Subsidiaries of
such Person or by such Person and one or more wholly owned Subsidiaries of such
Person.
"Working Capital" shall mean, as of any date of determination,
Consolidated Current Assets on such date minus Consolidated Current Liabilities
on such date.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined. The
words "include", "includes" and "including" shall be deemed to be followed by
the phrase "without limitation". All references herein to Articles, Sections,
Exhibits and Schedules shall be deemed references to Articles and Sections of,
and Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Except as otherwise expressly provided herein, (a) any reference in
this Agreement (or incorporated in any other Loan Document by reference to this
Agreement) to any Loan Document shall mean such Loan Document as amended,
restated, supplemented or otherwise modified from time to time and (b) all terms
of an accounting or financial nature shall be construed in accordance with GAAP.
SECTION 1.03. Exchange Rates. (a) Not later than 1:00 p.m., New
York City time, on each Calculation Date, the Administrative Agent shall
determine the Exchange Rate as of such Calculation Date to be used for
calculating relevant Dollar Equivalent and Alternative Currency Equivalent
amounts. The Exchange Rates so determined shall become effective on the first
Business Day immediately following the relevant Calculation Date (a "Reset
Date"), shall remain effective until the next succeeding Reset Date and shall
for all purposes of this Agreement (other than any provision expressly requiring
the use of a current Exchange Rate) be the Exchange Rates employed in converting
any amounts between the applicable currencies.
(b) Not later than 5:00 p.m., New York City time, on each Reset Date
and on the date of each Alternative Currency Borrowing, the Administrative Agent
shall (i) determine the Dollar Equivalent of the aggregate principal amount of
the Alternative Currency Loans then outstanding (after giving effect to any
Alternative Currency Loans
<PAGE>
24
made or repaid on such date) and (ii) notify the Borrowers of the results of
such determination.
ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly, (a) to make a Term Loan to (i) JCI, in
Dollars, on the Closing Date in an aggregate principal amount not to exceed 60%
of its Term Loan Commitment and (ii) JCISA, in Dollars, on the Closing Date in
an aggregate principal amount not to exceed 40% of its Term Loan Commitment, and
(b) to make Revolving Loans to either Borrower, at any time and from time to
time on or after the Closing Date, and until the earlier of the Maturity Date
and the termination of the Revolving Credit Commitment of such Lender in
accordance with the terms hereof, in Dollars or one or more Alternative
Currencies (as specified in the Borrowing Requests with respect thereto), in an
aggregate principal amount (determined as of the date of each Revolving Credit
Borrowing) that will not result in (i) such Lender's Revolving Credit Exposure
exceeding such Lender's Revolving Credit Commitment, (ii) the JCISA Revolving
Credit Exposure exceeding the JCISA Maximum Percentage of the Total Revolving
Credit Commitment or (iii) the Aggregate Alternative Currency Revolving Credit
Exposure exceeding $32,500,000. Within the limits set forth in clause (b) of
the preceding sentence and subject to the terms, conditions and limitations set
forth herein, each Borrower may borrow, pay or prepay and reborrow Revolving
Loans. Amounts paid or prepaid in respect of Term Loans may not be reborrowed.
SECTION 2.02. Loans. (a) Each Loan (other than a Swingline Loan)
shall be made as part of a Borrowing consisting of Loans made by the Lenders
ratably in accordance with their applicable Commitments; provided, however, that
the failure of any Lender to make any Loan shall not in itself relieve any other
Lender of its obligation to lend hereunder (it being understood, however, that
no Lender shall be responsible for the failure of any other Lender to make any
Loan required to be made by such other Lender). Except for Loans deemed made
pursuant to Section 2.02(f), Loans made pursuant to Sections 2.22 (d) and
2.23(e) and Swingline Loans, the Loans comprising any Borrowing shall be in an
aggregate principal amount that is (i) an integral multiple of $1,000,000 (or
the Alternative Currency Equivalent thereof) and not less than $5,000,000 (or
the Alternative Currency Equivalent thereof) or (ii) equal to the remaining
available balance of the applicable Commitments.
(b) Subject to Sections 2.02(f), 2.08, 2.10(iv) and 2.15, (i) each
Borrowing denominated in Dollars shall be comprised of ABR Loans or Eurocurrency
Loans as the applicable Borrower may request pursuant to Section 2.03 and (ii)
each Alternative Currency Borrowing shall be comprised entirely of Eurocurrency
Loans. Each Lender may at its option make any Eurocurrency Loan by causing any
domestic or foreign branch or Affiliate of such Lender to make such Loan,
provided that any exercise of such option shall not affect the obligation of the
applicable Borrower to repay such Loan in accordance with the terms of this
Agreement. Borrowings of more than one Type may be outstanding at the same
time; provided, however, that no Borrower shall be entitled to request any
Borrowing that, if made, would result in more than 8 Eurocurrency Borrowings
outstanding hereunder at any time. For purposes of the foregoing, Borrowings
having different Interest Periods or
<PAGE>
25
denominated in different currencies, regardless of whether they commence on the
same date, shall be considered separate Borrowings.
(c) Except with respect to Loans made pursuant to Section 2.02(f),
Section 2.22(d) and Section 2.23(e), each Lender shall make each Loan to be made
by it hereunder on the proposed date thereof by wire transfer of immediately
available funds to such account as the Administrative Agent may designate not
later than 10:00 a.m., New York City time, in the case of fundings to an account
in New York City, or 10:00 a.m., local time, in the case of fundings to an
account in another jurisdiction, and the Administrative Agent shall, promptly
upon receipt thereof, credit the amounts so received to an account designated by
the applicable Borrower in the applicable Borrowing Request or, if a Borrowing
shall not occur on such date because any condition precedent herein specified
shall not have been met, return the amounts so received to the respective
Lenders.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) above and the Administrative Agent may, in
reliance upon such assumption, make available to the applicable Borrower on such
date a corresponding amount in the required currency. If the Administrative
Agent shall have so made funds available then, to the extent that such Lender
shall not have made such portion available to the Administrative Agent, such
Lender and (if such amount is not made available by the applicable Lender within
three Business Days of the date of the applicable Borrowing) the applicable
Borrower severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon in such
currency, for each day from the date such amount is made available to such
Borrower until the date such amount is repaid to the Administrative Agent at (i)
in the case of such Borrower, the interest rate applicable at the time to the
Loans comprising such Borrowing and (ii) in the case of such Lender, a rate
determined by the Administrative Agent to represent its cost of overnight or
short-term funds in the relevant currency (which determination shall be
conclusive absent manifest error). If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount shall constitute
such Lender's Loan as part of such Borrowing for purposes of this Agreement.
(e) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request any Eurocurrency Borrowing if the
Interest Period requested with respect thereto would end after the Maturity
Date.
(f) If the Issuing Bank shall not have received from the applicable
Borrower the payment required to be made by Section 2.22(e) within the time
specified in such Section, the Issuing Bank will promptly notify the
Administrative Agent of the L/C Disbursement and the Administrative Agent will
promptly notify each Revolving Credit Lender of such L/C Disbursement and its
Pro Rata Percentage thereof. In the case of Letters of Credit denominated in
Dollars, each Revolving Credit Lender shall pay by wire transfer of immediately
available funds to the Administrative Agent not later than 2:00 p.m., New York
City time, on such date (or, if such Revolving Credit Lender shall have received
such notice later than 12:00 (noon), New York City time, on any day, not later
than 10:00 a.m., New York City time, on the immediately following Business Day),
an amount in Dollars equal to such Lender's Pro Rata Percentage of such L/C
Disbursement (it being understood that such amount shall be deemed to constitute
an ABR Revolving Loan of such
<PAGE>
26
Lender and such payment shall be deemed to have reduced the L/C Exposure), and
the Administrative Agent will promptly pay to the Issuing Bank amounts so
received by it from the Revolving Credit Lenders. In the case of Letters of
Credit denominated in an Alternative Currency, each Revolving Credit Lender
shall pay by wire transfer of immediately available funds to the Administrative
Agent not later than 2:00 p.m., London time, on such date (or if such Revolving
Credit Lender shall have received such notice later than 12:00 (noon), local
time in the country of the Alternative Currency, on the immediately following
Business Day), an amount in such Alternative Currency equal to such Lender's Pro
Rata Percentage of such L/C Disbursement (it being understood that such amount
shall be deemed to constitute an Alternative Currency Revolving Loan bearing
interest at the relevant Foreign Base Rate of such Lender and such payment shall
be deemed to have reduced the L/C Exposure), and the Administrative Agent will
promptly pay to the Issuing Bank amounts so received by it from the Revolving
Credit Lenders. The Administrative Agent will promptly pay to the Issuing Bank
any amounts received by it from the Borrowers with respect to the reimbursement
of any payment of a draft under a Letter of Credit prior to the time that any
Revolving Credit Lender makes any payment pursuant to this paragraph (f); any
such amounts received by the Administrative Agent thereafter from the applicable
Borrower will be promptly remitted by the Administrative Agent to the Revolving
Credit Lenders that shall have made such payments and to the Issuing Bank, as
their interests may appear. If any Revolving Credit Lender shall not have made
its Pro Rata Percentage of such L/C Disbursement available to the Administrative
Agent as provided above, such Lender and (if such amount is not made available
by the applicable Lender within three Business Days of the date of the
applicable Borrowing) the applicable Borrower agrees to pay interest on such
amount, for each day from and including the date such amount is required to be
paid in accordance with this paragraph to but excluding the date such amount is
paid, to the Administrative Agent for the account of the Issuing Bank at (i) in
the case of the Borrower, a rate per annum equal to the interest rate applicable
to Revolving Loans pursuant to Section 2.06(a), and (ii) in the case of such
Lender, for the first such day, a rate determined by the Administrative Agent to
represent its cost of overnight funds in the applicable currency, and for each
day thereafter, (x) if such L/C Disbursement is denominated in Dollars, the
Alternate Base Rate, and (y) if such L/C Disbursement is denominated in an
Alternative Currency, the applicable Foreign Base Rate.
SECTION 2.03. Borrowing Procedure. In order to request a Borrowing
(other than a Swingline Loan, a deemed Borrowing pursuant to Section 2.02(f) or
a Loan made pursuant to Section 2.22(d) or Section 2.23(e), as to which this
Section 2.03 shall not apply), the applicable Borrower shall deliver to the
Administrative Agent a duly completed Borrowing Request (or telephone the
Administrative Agent, promptly confirmed with a written (including by telecopy)
and duly completed Borrowing Request) (a) in the case of a Eurocurrency
Borrowing, not later than 12:30 p.m., New York City time, three Business Days
(or, if such Borrowing is to be an Alternative Currency Borrowing, 12:30 p.m.,
New York time, four Business Days) before a proposed Borrowing, and (b) in the
case of an ABR Borrowing, not later than 12:30 p.m., New York City time, one
Business Day before a proposed Borrowing. Each Borrowing Request (including a
telephonic Borrowing Request) shall be irrevocable, shall be signed by or on
behalf of the applicable Borrower and shall specify the following information:
(i) whether the Borrowing then being requested is to be a Term Borrowing or a
Revolving Credit Borrowing; (ii) the currency of such Borrowing (which shall be
Dollars or an Alternative Currency); (iii) if such Borrowing is to be
denominated in Dollars, whether such Borrowing is to be a Eurocurrency Borrowing
or an ABR Borrowing; (iv) the date of such Borrowing (which shall be a Business
Day), (v) the number and location of the account to which funds are to be
disbursed; (vi) the amount of
<PAGE>
27
such Borrowing (which shall be expressed in Dollars, regardless of whether such
Borrowing is an Alternative Currency Borrowing); and (vii) if such Borrowing is
to be a Eurocurrency Borrowing, the initial Interest Period with respect
thereto; provided, however, that, notwithstanding any contrary specification in
any Borrowing Request, each requested Borrowing shall comply with the
requirements set forth in Section 2.02. If no election as to the currency of
Borrowing is specified in any such notice, then the requested Borrowing shall be
denominated in Dollars. If no election as to the Type of Borrowing is specified
in any such notice, then the requested Borrowing shall be an ABR Borrowing if
denominated in Dollars or a Eurocurrency Borrowing if denominated in an
Alternative Currency. If no Interest Period with respect to any Eurocurrency
Borrowing is specified in any such notice, then the applicable Borrower shall be
deemed to have selected an Interest Period of one month's duration. The
Administrative Agent shall promptly advise the applicable Lenders of any notice
given pursuant to this Section 2.03 (and the contents thereof), and of each
Lender's portion of the requested Borrowing and the account to which Loans
comprising the requested Borrowing are to be wired.
SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) Each
Borrower hereby unconditionally promises, severally and not jointly, to pay to
the Administrative Agent for the account of the Swingline Lender or each other
Lender entitled thereto (i) the then unpaid principal amount of each Swingline
Loan, on the last day of the Interest Period applicable to such Loan or, if
earlier, on the Maturity Date and (ii) on the dates and in the amounts provided
in Section 2.11 (subject to adjustment as specified herein), the principal
amount of each Term Loan of such Lender made to such Borrower. Each Borrower
hereby unconditionally promises, severally and not jointly, to pay to the
Administrative Agent for the account of each Lender, on the Maturity Date, the
then unpaid principal amount of each Revolving Loan of such Lender made to such
Borrower.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of each Borrower to such
Lender resulting from each Loan made by such Lender to such Borrower from time
to time, including the amounts of principal and interest payable and paid to
such Lender by each such Borrower from time to time under this Agreement.
(c) The Administrative Agent shall maintain accounts in which it will
record (i) the amount of each Loan made to each Borrower hereunder, the Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from each
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder from each Borrower or any Guarantor and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraphs (b) and (c) above shall, to the extent permitted by applicable law,
be prima facie evidence of the existence and amounts of the obligations therein
recorded absent manifest error; provided, however, that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligations of the applicable
Borrower to repay the Loans to it in accordance with the terms hereof.
(e) Prior to the Closing Date (or if any Lender becomes a Lender
after the Closing Date, prior to the date such Lender becomes a Lender), any
Lender may through the Administrative Agent request that Loans made by it to a
Borrower be evidenced by a promissory note, substantially in the form of Exhibit
M-1 and/or M-2 (each, a "Note"). In
<PAGE>
28
such event, the applicable Borrower shall execute and deliver to such Lender a
Note payable to such Lender.
SECTION 2.05. Fees. (a) The Borrowers agree, severally and not
jointly in the respective proportions set forth in the next succeeding sentence,
to pay to the Administrative Agent for the account of Revolving Credit Lenders,
on the last Business Day of March, June, September and December in each year and
on each date on which the Commitments of all Lenders shall expire or be
terminated as provided herein, a commitment fee (a "Commitment Fee") equal to
the Applicable Percentage per annum in effect from time to time on the average
daily unused amount of the Commitments (excluding the Swingline Loans) of such
Lender during the preceding quarter (or other period commencing with the Closing
Date (for purposes of this Section 2.05, the aggregate amount of the L/C
Exposure shall be deemed used Commitments) or ending with the Maturity Date or
the date on which the Commitments of all Lenders shall expire or be terminated).
JCI shall be responsible for 60% of such Commitment Fees and JCISA shall be
responsible for 40% of such Commitment Fees. All Commitment Fees shall be
computed on the basis of the actual number of days elapsed in a year of 365 or
366 days, as the case may be. The Commitment Fee due to each Lender shall
commence to accrue on the Closing Date and shall cease to accrue on the date on
which the Commitment of such Lender shall expire or be terminated as provided
herein. For purposes of calculating the Commitment Fees only, no portion of the
Revolving Credit Commitments shall be deemed utilized under Section 2.17 as a
result of outstanding Swingline Loans.
(b) The Borrowers agree, severally and not jointly in the respective
proportions set forth in the next succeeding sentence, to pay to the
Administrative Agent, for its own account, the administrative fees set forth in
the Fee Letter at the times and in the amounts specified therein (the
"Administrative Agent Fees"). JCI shall be responsible for 60% of the
Administrative Agent Fees and JCISA shall be responsible for 40% of such
Administrative Agent Fees.
(c) Each Borrower agrees, severally and not jointly, (i) to pay to
the Administrative Agent for the account of each Revolving Credit Lender, on the
last Business Day of March, June, September and December of each year and on the
date on which the Revolving Credit Commitments of all Lenders shall be
terminated as provided herein (each such date, an "L/C Fee Payment Date"), a fee
(an "L/C Participation Fee") calculated on such Lender's Pro Rata Percentage of
the average daily aggregate L/C Exposure (excluding the portion thereof
attributable to unreimbursed L/C Disbursements) during the preceding quarter (or
shorter period commencing with the Closing Date hereof or ending with the
Maturity Date or the date on which all Letters of Credit have been canceled or
have expired and the Revolving Credit Commitments of all Lenders shall have been
terminated) in respect of Letters of Credit issued for the account of such
Borrower at a rate equal to the Applicable Percentage from time to time used to
determine the interest rate on Revolving Credit Borrowings comprised of
Eurocurrency Loans pursuant to Section 2.06, (ii) to pay to the Issuing Bank a
fronting fee (the "Issuing Bank Fees") with respect to each Letter of Credit
issued by such Issuing Bank (payable in arrears), computed for the period from
and including the date of issuance of such Letter of Credit to the expiration
date of such Letter of Credit on each L/C Fee Payment Date, equal to 0.25% per
annum of the aggregate undrawn face amount of Letters of Credit outstanding
which were issued by such Issuing Bank, and (iii) to pay or reimburse the
Issuing Bank for such normal and customary costs and expenses as are incurred or
charged by such Issuing Bank in issuing, effecting payment under, amending or
otherwise administering any Letter of Credit issued by it. All L/C Participation
Fees and
<PAGE>
29
Issuing Bank Fees shall be computed on the basis of the actual number of days
elapsed in a year of 365 or 366 days, as the case may be.
(d) All Fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, if and as appropriate,
among the Lenders, except that the Issuing Bank Fees and the Issuing Bank's
costs and expenses described in Section 2.05(c)(iii) shall be paid directly to
the Issuing Bank.
SECTION 2.06. Interest on Loans. (a) Subject to the provisions of
Section 2.07, the Loans comprising each ABR Borrowing, including each Swingline
Loan, shall bear interest (computed on the basis of the actual number of days
elapsed over a year of 365 or 366 days, as the case may be, when the Alternate
Base Rate is determined by reference to the Prime Rate and over a year of 360
days at all other times) at a rate per annum equal to the Alternate Base Rate
plus the Applicable Percentage in effect from time to time.
(b) Subject to the provisions of Section 2.07, the Loans comprising
each Eurocurrency Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 360 days) at a rate per annum equal
to the Adjusted LIBOR for the Interest Period in effect for such Borrowing plus
the Applicable Percentage in effect from time to time.
(c) Subject to the provisions of Section 2.07, each Foreign Base Rate
Loan shall bear interest (computed on the basis of the actual number of days
elapsed over a year of 365 days) at a rate per annum equal to the Foreign Base
Rate.
(d) Interest on each Loan shall be payable on the Interest Payment
Dates applicable to such Loan except as otherwise provided in this Agreement.
The applicable Alternate Base Rate, Adjusted LIBOR or Foreign Base Rate for each
Interest Period or day within an Interest Period, as the case may be, shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.
(e) Interest on each Alternative Currency Borrowing shall be payable
in the applicable Alternative Currency.
SECTION 2.07. Default Interest. If a Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder, by acceleration or otherwise, such Borrower shall on demand from
time to time pay interest, to the extent permitted by law, on such defaulted
amount from the date of such defaulted payment to but excluding the date of
actual payment (to the extent lawful, after as well as before judgment) (a) in
the case of overdue principal, at the rate otherwise applicable to such Loan
pursuant to Section 2.06 plus 2.00% per annum and (b) in all other cases, at a
rate per annum (computed on the basis of the actual number of days elapsed over
a year of 365 or 366 days, as the case may be, when determined by reference to
the Prime Rate and over a year of 360 days at all other times) equal to (i) if
such amount is payable in Dollars, the sum of the Alternate Base Rate plus 2.00%
and (ii) if such amount is payable in an Alternative Currency, the applicable
Foreign Base Rate plus 2.00%.
SECTION 2.08. Alternate Rate of Interest. In the event, that on the
day two Business Days prior to the commencement of any Interest Period for a
Eurocurrency Borrowing the Administrative Agent shall have reasonably determined
that (a) deposits in the principal amounts of the Alternative Currency Loans
comprising such Borrowing are not
<PAGE>
30
generally available in the London or other relevant interbank market, or (b) by
reason of circumstances affecting the relevant market, reasonable means do not
exist for ascertaining Adjusted LIBOR, the Administrative Agent shall, as soon
as practicable thereafter, give written (including telecopy) notice of such
determination to the Borrowers and the Lenders. In the event of any such
determination, until the Administrative Agent shall have advised the Borrowers
and the Lenders that the circumstances giving rise to such notice no longer
exist, (i) if the conditions specified in clause (b) above exist, any request
by a Borrower for a Eurocurrency Borrowing denominated in Dollars pursuant to
Section 2.03, or to continue any Eurocurrency Borrowing denominated in Dollars
for another Interest Period or to convert an ABR Borrowing to a Eurocurrency
Borrowing pursuant to Section 2.10, shall be deemed to be a request for an ABR
Borrowing and (ii) if the conditions specified in clause (a) above exist, any
request for an Alternative Currency Borrowing shall be rejected. Each
determination by the Administrative Agent hereunder shall be conclusive absent
manifest error.
SECTION 2.09. Termination and Reduction of Commitments. (a) The
Term Loan Commitments shall automatically terminate at 5:00 p.m., New York City
time, on the Closing Date. The Revolving Credit Commitments, the L/C
Commitment and the Swingline Commitment shall automatically terminate on the
Maturity Date. Notwithstanding the foregoing, all the Commitments shall
automatically terminate at 5:00 p.m., New York City time, on May 31, 1998, if
the initial Credit Event shall not have occurred by such time.
(b) Within one Business Day of entering into any Mexican Financing
Agreement, the Total Revolving Credit Commitment shall be reduced by the Dollar
Equivalent of the maximum committed amount that may be extended thereunder.
Promptly following any reduction to the Total Revolving Credit Commitment under
this Section 2.09(b), the Administrative Agent shall notify the Borrowers and
the Lenders of the amount of the Total Revolving Credit Commitment and of the
new JCISA Maximum Percentage, such determinations being conclusive absent
manifest error.
(c) Upon at least three Business Days' prior irrevocable written
(including telecopy) or telephone notice to the Administrative Agent, the
Borrowers may at any time in whole permanently terminate, or from time to time
in part permanently reduce, the Term Loan Commitments or the Revolving Credit
Commitments; provided, however, that (i) each partial reduction of the Term Loan
Commitments or the Revolving Credit Commitments shall be in an integral multiple
of $1,000,000 and in a minimum amount of $5,000,000, (ii) the Total Revolving
Credit Commitment shall not be reduced to the extent that, after giving effect
thereto, the JCISA Revolving Credit Exposure would exceed the JCISA Maximum
Percentage of the Total Revolving Credit Commitment and (iii) the Total
Revolving Credit Commitment shall not be reduced to an amount that is less than
the Aggregate Revolving Credit Exposure at the time.
(d) Each reduction in the Term Loan Commitments or the Revolving
Credit Commitments hereunder shall be made ratably among the Lenders in
accordance with their respective applicable Commitments.
SECTION 2.10. Conversion and Continuation of Borrowings. Each
Borrower shall have the right at any time upon prior irrevocable notice to the
Administrative Agent (a) not later than 12:30 p.m., New York City time, one
Business Day prior to conversion, to convert any Eurocurrency Borrowing
denominated in Dollars into an ABR
<PAGE>
31
Borrowing, (b) not later than 12:30 p.m., New York City time, three Business
Days (or in the case of an Alternative Currency Borrowing, four Business Days)
prior to conversion or continuation, to convert any ABR Borrowing into a
Eurocurrency Borrowing denominated in Dollars or to continue any Eurocurrency
Borrowing as a Eurocurrency Borrowing in the same currency for an additional
Interest Period, and (c) not later than 12:30 p.m., New York City time, three
Business Days (or in the case of an Alternative Currency Borrowing, four
Business Days) prior to conversion, to convert the Interest Period with respect
to any Eurocurrency Borrowing to another permissible Interest Period, subject in
each case to the following:
(i) each conversion or continuation shall be made pro rata among
the Lenders in accordance with the respective principal amounts of the
Loans comprising the converted or continued Borrowing;
(ii) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, then each resulting Borrowing
shall satisfy the limitations specified in Sections 2.02(a) and 2.02(b)
regarding the principal amount and maximum number of Borrowings of the
relevant Type;
(iii) each conversion shall be effected by each Lender and the
Administrative Agent by recording for the account of such Lender the new
Loan of such Lender resulting from such conversion and reducing the Loan
(or portion thereof) of such Lender being converted by an equivalent
principal amount;
(iv) if any Eurocurrency Borrowing is converted at a time other than
the end of the Interest Period applicable thereto, the applicable Borrower
shall pay, upon demand, any amounts due to the Lenders pursuant to Section
2.16; and
(v) upon notice to the Borrower from the Administrative Agent given
at the request of the Required Lenders, after the occurrence and during the
continuance of an Event of Default (such notice stating that the Required
Lenders have determined that a conversion to, or continuance of a Borrowing
as, a Eurocurrency Borrowing is not appropriate), (x) no outstanding
Borrowing denominated in Dollars may be converted into, or continued as, a
Eurocurrency Borrowing, (y) unless repaid, each Eurocurrency Borrowing
denominated in Dollars shall be converted to an ABR Borrowing at the end of
the Interest Period applicable thereto and (z) no Interest Period in excess
of one month may be selected for any Alternative Currency Borrowing.
Each notice pursuant to this Section 2.10 shall be irrevocable and
shall refer to this Agreement and specify (i) the identity and amount of the
Borrowing that the applicable Borrower requests be converted or continued, (ii)
whether such Borrowing is to be converted to or continued as a Eurocurrency
Borrowing or an ABR Borrowing, (iii) if such notice requests a conversion, the
date of such conversion (which shall be a Business Day) and (iv) if such
Borrowing is to be converted to or continued as a Eurocurrency Borrowing, the
Interest Period with respect thereto. If no Interest Period is specified in any
such notice with respect to any conversion to or continuation as a Eurocurrency
Borrowing, the applicable Borrower shall be deemed to have selected an Interest
Period of one month's duration. The Administrative Agent shall advise the
Lenders of any notice given pursuant to this Section 2.10 and of each Lender's
portion of any converted or continued Borrowing. If the applicable Borrower
shall not have given notice in accordance with this Section 2.10
<PAGE>
32
to continue any Borrowing into a subsequent Interest Period (and shall not
otherwise have given notice in accordance with this Section 2.10 to convert such
Borrowing), such Borrowing shall, at the end of the Interest Period applicable
thereto (unless repaid pursuant to the terms hereof), (i) in the case of a
Borrowing denominated in Dollars, automatically be continued as an ABR Borrowing
and (ii) in the case of an Alternative Currency Borrowing, automatically be
continued into a new Interest Period of one month. Notwithstanding any contrary
provisions herein, the currency of an outstanding Borrowing may not be changed
in connection with any conversion or continuation of such Borrowing.
SECTION 2.11. Repayment of Term Borrowings. (a) (i) JCI shall pay
to the Administrative Agent, for the account of the Lenders, on the dates set
forth below, or if any such date is not a Business Day, on the next preceding
Business Day, a principal amount of the Term Loans (as adjusted from time to
time pursuant to Sections 2.12(b) and 2.13(e)) made to JCI equal to the amount
set forth below opposite such date, together in each case with accrued and
unpaid interest on the principal amount to be paid to but excluding the date of
such payment:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
March 31, 1999 $ 375,000
June 30, 1999 375,000
September 30, 1999 375,000
December 31, 1999 375,000
March 31, 2000 500,000
June 30, 2000 500,000
September 30, 2000 500,000
December 31, 2000 500,000
March 31, 2001 625,000
June 30, 2001 625,000
September 30, 2001 625,000
December 31, 2001 625,000
March 31, 2002 750,000
June 30, 2002 750,000
September 30, 2002 750,000
December 31, 2002 750,000
March 31, 2003 1,000,000
June 30, 2003 1,000,000
September 30, 2003 1,000,000
December 31, 2003 1,000,000
March 31, 2004 1,000,000
Maturity Date 1,000,000
</TABLE>
(ii) JCISA shall pay to the Administrative Agent, for the account of
the Lenders, on the dates set forth below or, if any such date is not a
Business Day, on
<PAGE>
33
the next preceding Business Day (each such date referred to in this clause
(ii) and in clause (i) above being a "Repayment Date"), a principal amount
of the Term Loans (as adjusted from time to time pursuant to Sections
2.12(b) and 2.13(e)) made to JCISA equal to the amount set forth below
opposite such date, together in each case with accrued and unpaid interest
on the principal amount to be paid to but excluding the date of such
payment:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
March 31, 1999 $250,000
June 30, 1999 250,000
September 30, 1999 250,000
December 31, 1999 250,000
March 31, 2000 375,000
June 30, 2000 375,000
September 30, 2000 375,000
December 31, 2000 375,000
March 31, 2001 500,000
June 30, 2001 500,000
September 30, 2001 500,000
December 31, 2001 500,000
March 31, 2002 625,000
June 30, 2002 625,000
September 30, 2002 625,000
December 31, 2002 625,000
March 31, 2003 625,000
June 30, 2003 625,000
September 30, 2003 625,000
December 31, 2003 625,000
March 31, 2004 250,000
Maturity Date 250,000
</TABLE>
(b) To the extent not previously paid, all Term Loans shall be due
and payable on the Maturity Date, together with accrued and unpaid interest on
the principal amount to be paid to but excluding the date of payment.
(c) All repayments pursuant to this Section 2.11 shall be subject to
Section 2.16, but shall otherwise be without premium or penalty.
SECTION 2.12. Prepayment. (a) Each and either Borrower shall have
the right at any time and from time to time to prepay any Borrowing, in whole or
in part, without premium or penalty (except as provided in Section 2.16), upon
prior written or telecopy notice (or telephone notice promptly confirmed by
written (including telecopy) notice) to the Administrative Agent (i) in the case
of a prepayment of a Eurocurrency Borrowing, given
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34
before 12:30 p.m., New York City time, three Business Days (or, in the case of
prepayment of an Alternative Currency Borrowing, four Business Days) before such
prepayment and (ii) in the case of a prepayment of ABR Loans or Foreign Base
Rate Loans, given before 12:30 p.m., New York City time, one Business Day before
such prepayment; provided, however, that each partial prepayment shall be in an
amount that is an integral multiple of $1,000,000 (or the Alternative Currency
Equivalent thereof) and not less than $5,000,000 (or the Alternative Currency
Equivalent thereof).
(b) Optional prepayments of Term Loans by a Borrower shall be applied
(i) first, against the remaining scheduled installments of principal due in
respect of the Term Loans of such Borrower under Section 2.11(a)(i) or (ii), as
the case may be, in the next twelve months in the order of maturity and (ii)
second, pro rata against the remaining scheduled installments of principal due
in respect of such Term Loans.
(c) Each notice of prepayment shall specify the prepayment date and
the principal amount of each Borrowing (or portion thereof) to be prepaid, shall
be irrevocable and shall commit the applicable Borrower to prepay such Borrowing
by the amount stated therein on the date stated therein. All prepayments under
this Section 2.12 shall be subject to Section 2.16 but otherwise without premium
or penalty. All prepayments under this Section 2.12 shall be accompanied by
accrued interest on the principal amount being prepaid to but excluding the date
of payment.
SECTION 2.13. Mandatory Prepayments. (a) In the event of any
termination of all the Revolving Credit Commitments pursuant to Section 2.09,
each Borrower shall repay or prepay all its outstanding Revolving Credit
Borrowings and all outstanding Swingline Loans on the date of such termination.
In the event of any partial reduction of the Revolving Credit Commitments
pursuant to Section 2.09, then at or prior to the effective date of such
reduction, the Administrative Agent shall notify the Borrowers and the Revolving
Credit Lenders of the Aggregate Revolving Credit Exposure and the Aggregate
Alternative Currency Revolving Credit Exposure after giving effect thereto and
the portion of the Aggregate Revolving Credit Exposure and the Aggregate
Alternative Currency Revolving Credit Exposure attributable to each Borrower.
If at any time, as a result of such a partial reduction or termination, as a
result of fluctuations in exchange rates or otherwise, if (i) the Aggregate
Revolving Credit Exposure would exceed the Total Revolving Credit Commitment,
(ii) the Aggregate Alternative Currency Revolving Credit Exposure would exceed
$34,125,000 or (iii) the JCISA Revolving Credit Exposure would exceed the JCISA
Maximum Percentage of the Total Revolving Credit Commitment, then the Borrowers
shall (x) on the date of such reduction or termination of Revolving Credit
Commitments or (y) within four Business Days following notice from the
Administrative Agent of any such fluctuation in exchange rate or otherwise,
repay or prepay Revolving Credit Borrowings or Swingline Loans in an amount
sufficient to eliminate such excess. For purposes of clauses (i) and (iii) in
the immediately preceding sentence, the Aggregate Alternative Revolving Credit
Exposure shall be calculated by reference to the Dollar Equivalent of each
amount denominated in an Alternative Currency, such Dollar Equivalent to be
determined as of the date such Alternative Currency liability was incurred.
(b) The Borrowers shall repay Term Loans in accordance with Section
2.13(e) by the amount equal to the aggregate amount of Net Proceeds (minus any
Reinvested Amount relating thereto) received by Parent or any of its
Subsidiaries from (i) the sale, transfer or other disposition by Parent or any
of its Subsidiaries of any property or assets of Parent or any of its
Subsidiaries to any Person (other than to the Parent or any
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35
Subsidiary thereof) pursuant to Section 6.05(i) or (ii) the recovery by Parent
or any of its Subsidiaries of amounts owing to it under property insurance
policies if Parent and its Subsidiaries have not commenced replacement of the
property on account of which such amounts were paid within one year of the later
of the date of the casualty to, or condemnation of, such property or the receipt
of such Net Proceeds, provided that, notwithstanding the foregoing, any such
repayment of the Term Loans pursuant to this Section 2.13(b) shall only be
required upon any such sale or transfer or recovery to the extent the Net
Proceeds received therefrom, when aggregated with the Net Proceeds received from
all such sales or transfers or recoveries in the immediately preceding twelve-
month period and minus all applicable Reinvested Amounts relating to all such
Net Proceeds, exceed $5,000,000. The applicable Borrower shall make any
prepayment pursuant to this Section 2.13(b) as promptly as practicable (and in
any event, within three Business Days) following the date of receipt of any such
Net Proceeds (except that if any such Net Proceeds are eligible to be reinvested
in accordance with the definition of the term "Reinvested Amount" and neither
Parent nor any such Borrower has elected to reinvest such proceeds, such
prepayment shall be made on the earlier of (x) the date on which the certificate
of a Responsible Officer of Parent or such Borrower to such effect is delivered
to the Administrative Agent in accordance with such definition and (y) the last
day of the period within which a certificate setting forth such election is
required to be delivered in accordance with such definition).
(c) On the Business Day following the date on which the financial
statements with respect to a fiscal year are delivered pursuant to Section
5.01(a), the Borrowers shall prepay outstanding Term Loans in accordance with
Section 2.13(e) in an aggregate principal amount equal to 50% of Excess Cash
Flow for the fiscal year then ended (or, in the case of the fiscal year ended
December 31, 1998, the period commencing on May 1, 1998, and ending on December
31, 1998); provided, however, that no such prepayment shall be required if the
Consolidated Leverage Ratio as of the end of such fiscal year shall be less than
3.75 to 1.00.
(d) In the event that Parent or any Subsidiary shall receive Net
Proceeds from the issuance or other disposition of Indebtedness for money
borrowed (other than Indebtedness for money borrowed permitted pursuant to
Section 6.01), the Borrowers shall, as promptly as practicable upon (and in any
event not later than the third Business Day next following) the receipt of such
Net Proceeds, apply an amount equal to 100% of such Net Proceeds to prepay
outstanding Term Loans in accordance with Section 2.13(e).
(e) Each prepayment of outstanding Term Loans required to be made
pursuant to any paragraph of this Section 2.13 shall be applied (i) first
against the remaining scheduled installments of principal due in respect of the
Term Loans of the applicable Borrower under Section 2.11(a)(i) or (ii), as the
case may be, in the next twelve months in the order of maturity and (ii) second
pro rata against the remaining scheduled installments of principal due in
respect of such Term Loans. To the extent that Excess Cash Flow for any fiscal
year required to be used to prepay Term Loans pursuant to Section 2.13(c) is
attributable (as reasonably determined by Parent) to one Borrower and its
Subsidiaries (as opposed to the other Borrower and its Subsidiaries), then such
Excess Cash Flow shall be used to prepay the Term Loans of such Borrower in
accordance with this Section 2.13(e).
(f) Parent shall deliver to the Administrative Agent, at the time of
each prepayment required under this Section 2.13, (i) a certificate signed by a
Financial Officer of Parent setting forth in reasonable detail the calculation
of the amount of such prepayment and (ii) to the extent reasonably practicable,
at least three days prior written notice of such
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36
prepayment. Each notice of prepayment shall specify the prepayment date, the
Type of each Loan being prepaid and the principal amount of each Loan (or
portion thereof) to be prepaid. All prepayments of Borrowings under this Section
2.13 shall be subject to Section 2.16, but shall otherwise be without premium or
penalty.
(g) Unless the Borrowers otherwise elect, amounts to be applied
pursuant to this Section 2.13 to the prepayment of Term Loans and/or Revolving
Loans shall be applied, as applicable, first to reduce outstanding ABR Term
Loans and ABR Revolving Loans, as the case may be. Any amounts remaining after
each such application shall, at the option of the applicable Borrower, be
applied to prepay Eurocurrency Term Loans or Eurocurrency Revolving Loans, as
the case may be, immediately and/or shall be deposited in the Prepayment Account
(as defined below). The Administrative Agent shall apply any cash deposited in
the Prepayment Account (i) allocable to Term Loans to prepay Eurocurrency Term
Loans and (ii) allocable to Revolving Loans to prepay Eurocurrency Revolving
Loans, in each case on the last day of their respective Interest Periods (or, at
the direction of Borrowers, on any earlier date) until all outstanding Term
Loans or Revolving Loans, as the case may be, have been prepaid to the extent
required by Section 2.13 or until all the allocable cash on deposit with respect
to such Loans has been exhausted and thereupon any balance remaining in the
Prepayment Account shall be disbursed to the applicable Borrower. For purposes
of this Agreement, the term "Prepayment Account" shall mean an account
established by the Borrowers with the Administrative Agent and over which the
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal for application in accordance with this paragraph
(g). The Administrative Agent will, at the request of Borrowers, invest amounts
on deposit in the Prepayment Account in Cash Equivalents that mature prior to
the last day of the applicable Interest Periods of the Eurocurrency Term
Borrowings or Eurocurrency Revolving Borrowings to be prepaid, as the case may
be; provided, however, that (i) the Administrative Agent shall not be required
to make any investment that, in its sole judgment, would require or cause the
Administrative Agent to be in, or would result in any, violation of any law,
statute, rule or regulation and (ii) the Administrative Agent shall have no
obligation to invest amounts on deposit in the Prepayment Account if a Event of
Default pursuant to Section 7.01 or Section 7.02(a) shall have occurred and be
continuing. Any losses that may result from such investments shall not relieve
the applicable Borrower from its obligation to prepay Eurocurrency Borrowings on
the last day of the applicable Interest Period. Other than any interest earned
on such investments, the Prepayment Account shall not bear interest. Interest
or profits, if any, on such investments shall be deposited in the Prepayment
Account and reinvested and disbursed as specified above, except to the extent
necessary to make the applicable prepayment required by Section 2.13. If the
maturity of the Loans has been accelerated pursuant to Article VII, the
Administrative Agent may, in its sole discretion, apply all amounts on deposit
in the Prepayment Account to satisfy any of the Obligations. Each Borrower
hereby grants to the Administrative Agent, for its benefit and the benefit of
the Secured Parties, a security interest in the Prepayment Account to secure the
Obligations.
SECTION 2.14. Requirements of Law. (a) If the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
applicable to any Lender (which term shall include the Issuing Bank in this
Section 2.14) or compliance by any Lender with any request or directive (whether
or not having the force of law) from any central bank or other Governmental
Authority made subsequent to the date hereof (or, if later, the date on which
such Lender becomes a Lender):
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37
(i) shall subject any Lender to any tax of any kind whatsoever with
respect to any Letter of Credit or any Eurocurrency Loan made by it or its
obligation to make Eurocurrency Loans or change the basis of taxation of
payments to such Lender in respect thereof (except for Non-Excluded Taxes
(including Non-Excluded Taxes described in Section 2.20(b) and changes in
taxes measured by or imposed upon the overall net income, or franchise
taxes, or taxes measured by or imposed upon overall capital or net worth,
or branch taxes (in the case of such capital, net worth or branch taxes,
imposed in lieu of such net income tax), of such Lender or its applicable
lending office, branch, or any affiliate thereof);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of Adjusted LIBOR hereunder; or
(iii) shall impose on such Lender any other condition excluding any
tax of any kind whatsoever;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurocurrency Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrowers from such Lender,
through the Administrative Agent, in accordance herewith, the applicable
Borrower shall promptly pay such Lender, upon its demand, any additional amount
or amounts necessary to compensate such Lender for such increased cost or
reduced amount receivable with respect to such Eurocurrency Loans or Letters of
Credit, provided that, in any such case, such Borrower may elect to convert
Eurocurrency Loans made by such Lender hereunder to ABR Loans by giving the
Administrative Agent at least one Business Day's notice of such election, in
which case such Borrower shall promptly pay to such Lender, upon demand, without
duplication, amounts theretofore required to be paid to such Lender pursuant to
this Section 2.14(a) and such amounts, if any, as may be required pursuant to
Section 2.16. If any Lender becomes entitled to claim any additional amounts
pursuant to this Section 2.14(a), it shall provide prompt notice thereof to the
applicable Borrower, through the Administrative Agent, certifying (i) that one
of the events described in this Section 2.14(a) has occurred and describing in
reasonable detail the nature of such event, (ii) as to the increased cost or
reduced amount resulting from such event and (iii) as to the additional amount
demanded by such Lender and a reasonably detailed explanation of the calculation
thereof.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority, in each case, made subsequent to the Closing Date (or, if later, the
date on which such Lender becomes a Lender) shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of such Lender's obligations hereunder or under any Letter of Credit
to a level below that which such Lender or such corporation could have achieved
but for such adoption, change or compliance (taking into consideration such
Lender's or such corporation's policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to time,
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38
within ten Business Days after submission by such Lender to the Borrowers (with
a copy to the Administrative Agent) of a written request therefor certifying (i)
that one of the events described in this Section 2.14(b) has occurred and
describing in reasonable detail the nature of such event, (ii) as to the
reduction of the rate of return on capital resulting from such event and (iii)
as to the additional amount or amounts demanded by such Lender or corporation
and a reasonably detailed explanation of the calculation thereof, the applicable
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender or corporation for such reduction.
(c) Any certificate provided pursuant to paragraph (a) or (b) above as
to any additional amounts payable pursuant to this Section 2.14 submitted by
such Lender, through the Administrative Agent, to the Borrowers shall be
conclusive in the absence of manifest error. The agreements in this Section
2.14 shall survive the termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder.
SECTION 2.15. Change in Legality. (a) Notwithstanding any other
provision of this Agreement, if, after the date hereof, (i) any change in any
Requirement of Law or in the interpretation or application thereof shall make it
unlawful for any Lender to make or maintain any Eurocurrency Loan or to give
effect to its obligations as contemplated hereby with respect to any
Eurocurrency Loan or participations in Letters of Credit denominated in an
Alternative Currency, or shall make it unlawful for the Issuing Bank to issue
Letters of Credit denominated in an Alternative Currency, or (ii) there shall
have occurred any change in national or international financial, political or
economic conditions (including the imposition of or any change in exchange
controls) or currency exchange rates which would make it impracticable for any
Lender to make Loans denominated in such Alternative Currency to, or to issue
Letters of Credit denominated in such Alternative Currency for the account of, a
Borrower, then by prompt written notice thereof to the Borrowers and to the
Administrative Agent (which notice shall be withdrawn whenever such
circumstances no longer exist):
(i) such Lender may declare that Eurocurrency Loans or Alternative
Currency Loans (in the affected currency or currencies), as the case may
be, will not thereafter (for the duration of such unlawfulness) be made by
such Lender hereunder (or be continued for additional Interest Periods and
ABR Loans and Foreign Base Rate Loans will not thereafter (for such
duration) be converted into Eurocurrency Loans), whereupon any request for
a Eurocurrency Borrowing or Alternative Currency Borrowing (in the affected
currency or currencies), as the case may be (or to convert an ABR Borrowing
or a Borrowing comprised of Foreign Base Rate Loans to a Eurocurrency
Borrowing or to continue a Eurocurrency Borrowing or an Alternative
Currency Borrowing (in the affected currency or currencies), as the case
may be, for an additional Interest Period) shall, as to such Lender only,
be deemed a request for an ABR Loan (in the case of Loans denominated in
Dollars) or a Foreign Base Rate Loan (in the case of Loans denominated in
an Alternative Currency) (or a request to continue an ABR Loan as such for
an additional Interest Period or to convert a Eurocurrency Loan into an ABR
Loan or a Foreign Base Rate Loan, as the case may be), unless such
declaration shall be subsequently withdrawn;
(ii) such Lender may require that all outstanding Eurocurrency Loans
or Alternative Currency Loans (in the affected currency or currencies), as
the case may be, made by it be converted to ABR Loans (in the case of
Eurocurrency Loans denominated in Dollars) or Foreign Base Rate Loans (in
the case of Loans
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39
denominated in an Alternative Currency), as the case may be, in which event
all such Eurocurrency Loans or Alternative Currency Loans (in the affected
currency or currencies), as the case may be, shall be automatically
converted to ABR Loans or Foreign Base Rate Loans, as the case may be, as
of the effective date of such notice as provided in paragraph (b) below;
and
(iii) in the case of any such change affecting the Issuing Bank's
ability to issue, or any Revolving Credit Lender's ability to acquire
participations in, Letters of Credit denominated in an Alternative
Currency, the Issuing Bank or such Lender may declare that Letters of
Credit will not thereafter be issued in the affected Alternative Currency
or Currencies, whereupon the affected Alternative Currency or Currencies
shall be deemed (for the duration of such declaration) not to constitute an
Alternative Currency for purposes of the issuance of Letters of Credit.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurocurrency Loans or Alternative Currency Loans, as the case may be,
that would have been made by such Lender or the converted Eurocurrency Loans or
Alternative Currency Loans, as the case may be, of such Lender shall instead be
applied to repay the ABR Loans or Foreign Base Rate Loans, as the case may be,
made by such Lender in lieu of, or resulting from the conversion of, such
Eurocurrency Loans or Alternative Currency Loans, as the case may be.
(b) For purposes of this Section 2.15, a notice to the Borrowers by
any Lender shall be effective as to each Eurocurrency Loan made by such Lender,
on the last day of the Interest Period currently applicable to such Eurocurrency
Loan or within such earlier period required by law; in all other cases such
notice shall be effective on the date of receipt by the applicable Borrower.
SECTION 2.16. Indemnity. Each Borrower agrees to indemnify,
severally and not jointly, each Lender against and to hold each Lender harmless
from any loss or expense (other than through such Lender's gross negligence or
willful misconduct) that such Lender may sustain or incur as a consequence of
(a) default by such Borrower in making a borrowing of, conversion into or
continuation of Eurocurrency Loans after such Borrower has given a notice
requesting the same in accordance with the provisions of this Agreement, (b)
default by such Borrower in making any prepayment after such Borrower has given
a notice thereof in accordance with the provisions of this Agreement or (c) the
making of a prepayment of Eurocurrency Loans on a day which is not the last day
of an Interest Period with respect thereto. Such indemnification may include an
amount equal to the excess, if any, of (i) the amount of interest which would
have accrued on the amount so prepaid, or not so borrowed, converted or
continued, for the period from the date of such prepayment or of such failure to
borrow, convert or continue to the last day of such Interest Period (or, in the
case of a failure to borrow, convert or continue, the Interest Period that would
have commenced on the date of such failure) in each case at the applicable rate
of interest for such Loans provided for herein (excluding, however, the
Applicable Percentage included therein, if any) over (ii) the amount of interest
(as reasonably determined by such Lender) that would have accrued to such Lender
on such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurocurrency market. If any Lender becomes
entitled to claim any amounts under the indemnity contained in this Section
2.16, it shall provide prompt notice thereof to the applicable Borrower, through
the Administrative Agent, certifying (i) that one of the events described in
clause (a), (b) or (c) has occurred and describing in reasonable detail the
nature of such event, (ii) as to the loss or expense
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40
sustained or incurred by such Lender as a consequence thereof and (iii) as to
the amount for which such Lender seeks indemnification hereunder and a
reasonably detailed explanation of the calculation thereof. Such a certificate
as to any indemnification pursuant to this Section 2.16 submitted by such
Lender, through the Administrative Agent, to the applicable Borrower shall be
conclusive in the absence of manifest error. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
SECTION 2.17. Pro Rata Treatment. Except as provided below in this
Section 2.17 with respect to Swingline Loans and as required under Section 2.15,
each Borrowing, each payment or prepayment of principal of any Borrowing, each
payment of interest on the Loans, each payment of the Commitment Fees, each
reduction of the Term Loan Commitments or the Revolving Credit Commitments and
each conversion of any Borrowing to or continuation of any Borrowing as a
Borrowing of any Type shall be allocated pro rata among the Lenders in
accordance with their respective applicable Commitments (or, if such Commitments
shall have expired or been terminated, in accordance with the respective
principal amounts of their outstanding Loans). For purposes of determining the
available Revolving Credit Commitments of the Lenders at any time, each
outstanding Swingline Loan shall be deemed to have utilized the Revolving Credit
Commitments of the Lenders (including those Lenders which shall not have made
Swingline Loans) pro rata in accordance with such Revolving Credit Commitments.
Each Lender agrees that in computing such Lender's portion of any Borrowing to
be made hereunder, the Administrative Agent may, in its discretion, round each
Lender's percentage of such Borrowing to the next higher or lower whole Dollar
(or comparable unit of any applicable Alternative Currency) amount.
SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it
shall, through the exercise of a right of banker's lien, setoff or counterclaim
against a Borrower or any other Loan Party, or pursuant to a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, or by
any other means, obtain payment (voluntary or involuntary) in respect of any
Loan or Loans or L/C Disbursement as a result of which the unpaid principal
portion of its Term Loans and Revolving Loans and participations in L/C
Disbursements shall be proportionately less than the unpaid principal portion of
the Term Loans and Revolving Loans and participations in L/C Disbursements of
any other Lender, it shall be deemed simultaneously to have purchased from such
other Lender at face value, and shall promptly pay to such other Lender the
purchase price for, a participation in the Term Loans and Revolving Loans and
L/C Exposure, as the case may be of such other Lender, so that the aggregate
unpaid principal amount of the Term Loans and Revolving Loans and L/C Exposure
and participations in Term Loans and Revolving Loans and L/C Exposure held by
each Lender shall be in the same proportion to the aggregate unpaid principal
amount of all Term Loans and Revolving Loans and L/C Exposure then outstanding
as the principal amount of its Term Loans and Revolving Loans and L/C Exposure
prior to such exercise of banker's lien, setoff or counterclaim or other event
was to the principal amount of all Term Loans and Revolving Loans and L/C
Exposure outstanding prior to such exercise of banker's lien, setoff or
counterclaim or other event; provided, however, that if any such purchase or
purchases or adjustments shall be made pursuant to this Section 2.18 and the
payment giving rise thereto shall thereafter be recovered, such purchase or
purchases or adjustments shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustment restored without interest. The
Borrowers and Parent expressly consent to the foregoing
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41
arrangements and agree that any Lender holding a participation in a Term Loan or
Revolving Loan or L/C Disbursement deemed to have been so purchased may, to the
extent provided in Section 9.07, exercise any and all rights of banker's lien,
setoff or counterclaim with respect to any and all moneys owing by Parent or
such Borrower to such Lender by reason thereof as fully as if such Lender had
made a Loan directly to the Borrowers in the amount of such participation.
SECTION 2.19. Payments. (a) Except as otherwise provided herein,
the applicable Borrower shall make each payment (including principal of or
interest on any Borrowing or any Fees or other amounts) hereunder and under any
other Loan Document not later than 1:00 p.m., New York City time or, in the case
of any payment in an Alternative Currency, 1:00 p.m., local time in the country
of the Alternative Currency), on the date when due in immediately available
funds, without setoff, defense or counterclaim. Each such payment (other than
(i) Issuing Bank Fees and amounts pursuant to Section 2.05(c)(iii), which shall
be paid directly to the Issuing Bank, and (ii) reimbursements of drafts under
Letters of Credit which shall be paid to the respective Issuing Bank) shall be
made to the Administrative Agent at its offices designated by the Administrative
Agent from time to time. Each such payment (other than principal of and
interest on Alternative Currency Loans which shall be made in the applicable
Alternative Currency) shall be made in Dollars. The Administrative Agent shall
distribute such funds to the Lenders, as the case may be, holding obligations on
account of which such amounts were paid promptly upon receipt in like funds as
received.
(b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
interest or Fees, if applicable.
SECTION 2.20. Taxes. (a) Except to the extent required under
applicable law, all payments made by a Borrower or any Guarantor under this
Agreement or any Loan Document shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority excluding taxes measured by or imposed upon the
overall net income of the Administrative Agent or any Lender or its applicable
lending office, or any branch or affiliate of either, and all franchise taxes,
branch taxes, taxes on doing business or taxes measured by or imposed upon the
overall capital or net worth of the Administrative Agent or any Lender or its
applicable lending office, or any branch or affiliate of either, in each case
imposed: (i) by the jurisdiction under the laws of which the Administrative
Agent or such Lender, applicable lending office, branch or affiliate is
organized or is located, or in which the principal executive office of the
Administrative Agent or any Lender is located, or any nation within which such
jurisdiction is located or any political subdivision thereof; or (ii) by reason
of any connection between the jurisdiction imposing such tax and the
Administrative Agent or such Lender, applicable lending office, branch or
affiliate other than a connection arising from the Administrative Agent or such
Lender having executed, delivered or performed its obligations under, or
received payment under or enforced, this Agreement or any other Loan Document.
If any such non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("Non-Excluded Taxes") are required to be withheld
from any amounts payable to the Administrative Agent or any Lender hereunder or
under any other Loan Document, the amounts so payable to the
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42
Administrative Agent or such Lender shall be increased to the extent necessary
to yield to the Administrative Agent or such Lender (after payment of all Non-
Excluded Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Agreement; provided, however, that the
applicable Borrower and Guarantor shall be entitled to deduct and withhold any
Non-Excluded Taxes and shall not be required to increase any such amounts
payable to any Lender or the Administrative Agent under the circumstances and to
the extent set forth in Section 2.20(b). Whenever any Non-Excluded Taxes are
payable by a Borrower, as promptly as possible thereafter such Borrower shall
send to the Administrative Agent for its own account or for the account of such
Lender, as the case may be, a certified copy of an original official receipt
received by such Borrower showing payment thereof. If a Borrower fails to pay
any Non-Excluded Taxes when due to the appropriate taxing authority or fails to
remit to the Administrative Agent the required receipts or other required
documentary evidence, such Borrower shall indemnify the Administrative Agent and
the Lenders for any incremental taxes, interest or penalties that may become
payable by the Administrative Agent or any Lender as a result of any such
failure. The agreements in this Section 2.20(a) shall survive the termination
of this Agreement and the payment of the Loans and all other amounts payable
hereunder.
(b) Notwithstanding the provisions of Section 2.20(a), the
applicable Borrower or Guarantor shall be entitled to deduct and withhold Non-
Excluded Taxes and shall not be required to increase any amounts payable to a
Lender or the Administrative Agent in respect of:
(i) Non-Excluded Taxes imposed by any Governmental Authority of, or
located in, Mexico, to the extent such Non-Excluded Taxes are imposed on
payments at a rate in excess of 4.9% (such Non-Excluded Taxes in excess of
4.9%, "Excess Mexican Taxes"); provided, however, that if after the date
hereof any tax treaty to which Mexico is a party is amended, this clause
2.20(b)(i) shall not apply to any Lender or the Administrative Agent to the
extent such Lender or the Administrative Agent, as the case may be, would
not have been subject to such Excess Mexican Taxes but for such amendment;
(ii) Non-Excluded Taxes that would not have been incurred but for
the failure of such Lender or the Administrative Agent, as the case may be,
in the case of a participation pursuant to Section 9.06, the failure of the
relevant participant, to comply with any certification, identification,
information, documentation or other reporting requirement, if compliance is
required by law, regulation, administrative practice or an applicable
treaty as a precondition to exemption from, or reduction in the rate of,
Non-Excluded Taxes;
(iii) Non-Excluded Taxes imposed by the United States of America, if
such Lender or the Administrative Agent is not organized under the laws of
the United States of America or a state thereof and fails to comply with
requirements of Section 2.20(c); and
(iv) Non-Excluded Taxes imposed by any Governmental Authority of, or
located in, Mexico, as a result of the failure by any Lender (x) to provide
to the Borrowers or any Guarantor, as the case may be, upon request of the
Borrowers or any Guarantor, as the case may be, and if and when required
under applicable law, a letter specifying that the Lender is the effective
beneficiary of the interest payments under this Agreement or any other Loan
Document, as set forth in the Mexican
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43
Income Tax Law (Ley del Impuesto Sobre la Renta) and the "Miscellaneous Tax
Resolution for 1998" (Resolucion Miscelanea Fiscal para 1998), as amended,
or any equivalent general rules in effect thereafter while this Agreement
shall remain in full force and effect, or (y) to maintain registration with
the Ministry of Finance and Public Credit as a foreign financial
institution for purposes of Article 154 of the Mexican Income Tax Law, as
long as such requirement remains applicable and to comply with the
requirements set forth therein.
(c) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(i) on or before the date of any payment by a Borrower under this
Agreement or any other Loan Document to such Lender, deliver to the
Borrowers and the Administrative Agent (A) two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, or successor
applicable form, as the case may be, and (B) an Internal Revenue Service
Form W-8 or W-9, or successor applicable form, as the case may be;
(ii) deliver to the Borrowers and the Administrative Agent two
further copies of any such form or certification on or before the date that
any such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrowers; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Borrowers or
the Administrative Agent;
unless in any such case, any change in treaty, law or regulation has occurred
after the date such Person becomes a Lender hereunder which renders all such
forms inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrowers and the Administrative Agent. Such Lender shall certify (i) in the
case of a Form 1001 or 4224, that it is entitled to receive payments under this
Agreement and the other Loan Documents without deduction or withholding of any
United States federal income taxes and (ii) in the case of a Form W-8 or W-9,
that it is entitled to an exemption from United States backup withholding tax.
Each Person that shall become a Lender or a participant pursuant to Section 9.06
shall, upon the effectiveness of the related transfer, be required to provide
all of the forms and statements required pursuant to this Section 2.20, provided
that in the case of a participant such participant shall furnish all such
required forms and statements to the Lender from which the related participation
shall have been purchased.
SECTION 2.21. Certain Rules Relating to the Payment of Additional
Amounts. (a) Upon the request, and at the expense, of a Borrower or Guarantor,
each Lender or the Administrative Agent to which such Borrower or Guarantor is
required to pay any additional amount pursuant to Section 2.14 or 2.20, and any
participant of a Lender or the Administrative Agent in respect of whose
participation such payment is required, shall reasonably afford such Borrower or
Guarantor the opportunity to contest, and reasonably cooperate with such
Borrower or Guarantor in contesting, the imposition of any Non-Excluded Tax
giving rise to such payment, provided that (i) such Lender or the Administrative
Agent shall not be required to afford such Borrower or Guarantor the
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44
opportunity to so contest unless the Borrower or Guarantor shall have confirmed
in writing to such Lender or the Administrative Agent its obligation to pay such
amounts pursuant to this Agreement and (ii) such Borrower or Guarantor shall
reimburse such Lender or the Administrative Agent for its reasonable attorneys'
and accountants' fees and disbursements incurred in so cooperating with such
Borrower or Guarantor in contesting the imposition of such Non-Excluded Tax.
(b) If a Lender or the Administrative Agent changes its applicable
lending office (other than pursuant to paragraph (c) below) and the effect of
the change, as of the date of the change, would be to cause a Borrower or
Guarantor to become obligated to pay any additional amount under Section 2.14 or
2.20, such Borrower or Guarantor shall not be obligated to pay such additional
amount.
(c) If a condition or an event occurs which would, or would upon the
passage of time or giving of notice, result in the payment of any additional
amount to any Lender or the Administrative Agent by a Borrower or Guarantor
pursuant to Section 2.14 or 2.20 such Lender or the Administrative Agent shall
take such steps as may reasonably be available to it and acceptable to such
Borrower or Guarantor to mitigate the effects of such condition or event (which
shall include efforts to rebook the Loans or reissue Letters of Credit held by
such Lender at another lending office, or through another branch or an
affiliate, of such Lender), provided that such Lender or the Administrative
Agent shall not be required to take any step that, in its reasonable judgment,
would be materially disadvantageous to its business or operations or would
require it to incur additional costs (unless such Borrower or Guarantor agrees
to reimburse such Lender or the Administrative Agent for the reasonable
incremental out-of-pocket costs thereof). If a condition or event occurs which
would, or would upon the passage of time or giving of notice, result in the
payment of any additional amount to any Lender or the Administrative Agent by a
Borrower or Guarantor pursuant to Section 2.14(a)(i) (i.e. increased costs for
taxes) such Lender or the Administrative Agent shall promptly notify such
Borrower or Guarantor and the Administrative Agent, provided that a failure on
the part of a Lender or the Administrative Agent to notify such Borrower or
Guarantor shall not result in any liability to such Lender or the Administrative
Agent and shall not reduce the amount of any additional amounts payable
hereunder to such Lender or the Administrative Agent to the extent that such
failure to notify such Borrower or Guarantor does not result in the payment of
any additional amount by such Borrower or Guarantor pursuant to Section
2.14(a)(i) which payment could have been avoided or reduced had the Lender or
the Administrative Agent notified the Borrower or Guarantor in accordance with
this Section 2.21(c).
(d) Except as provided in the next sentence, if a Borrower or
Guarantor shall become obligated to pay additional amounts pursuant to Section
2.14 or 2.20 and any affected Lender shall not have promptly taken steps
necessary to avoid the need for payments under Section 2.14 or 2.20, such
Borrower or Guarantor shall have the right, for so long as such obligation
remains, (i) with the assistance of the Administrative Agent, to seek one or
more substitute Lenders reasonably satisfactory to the Administrative Agent and
such Borrower to purchase the affected Loan, in whole or in part, at an
aggregate price no less than such Loan's principal amount plus accrued interest,
and assume the affected obligations under this Agreement, or (ii) to the extent
that no Default or Event of Default under Section 6.12, 6.13 or 7.02(a) shall
have occurred of which either Borrower has actual knowledge and is then
continuing, upon at least four Business Days irrevocable notice to the
Administrative Agent, to prepay the affected Loan, in whole or in part, subject
to Section 2.16 but otherwise without premium or penalty. If a Borrower or
Guarantor shall become obligated to pay
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45
additional amounts pursuant to Section 2.20 in respect of Non-Excluded Taxes
imposed by Mexico, the rights of such Borrower or Guarantor pursuant to the
preceding sentence shall apply only in the event such Non-Excluded Taxes are
imposed at a rate in excess of 4.9%. In the case of the substitution of a
Lender, the Borrowers, the Administrative Agent, the affected Lender, and any
substitute Lender shall execute and deliver an appropriately completed
Assignment and Acceptance pursuant to Section 9.05 to effect the assignment of
rights to, and the assumption of obligations by, the substitute Lender. In the
case of a prepayment of an affected Loan, the amount specified in the notice
shall be due and payable on the date specified therein, together with any
accrued interest to such date on the amount prepaid. In the case of each of the
substitution of a Lender and of the prepayment of an affected Loan, the
applicable Borrower shall first pay the affected Lender any additional amounts
owing under Sections 2.14, 2.16 and 2.20 (as well as any commitment fees and
other amounts then due and owing to such Lender) prior to such substitution or
prepayment.
(e) If the Administrative Agent or any Lender receives a refund in
respect of taxes for which a Borrower or Guarantor has made additional payments
pursuant to Section 2.14(a) or 2.20(a), the Administrative Agent or such Lender,
as the case may be, shall promptly pay such refund (together with any interest
with respect thereto received from the relevant taxing authority) to such
Borrower or Guarantor; provided, however, that such Borrower and Guarantor
agrees promptly to return such refund (together with any interest with respect
thereto due to the relevant taxing authority) (free of all Non-Excluded Taxes)
to the Administrative Agent or the applicable Lender, as the case may be, upon
receipt of a notice that such refund is required to be repaid to the relevant
taxing authority. Notwithstanding anything to the contrary contained in this
Section 2.21(e), no Lender shall have any obligation to disclose to a Borrower
any of such Lender's books, records or tax filings.
(f) The obligations of the Administrative Agent and of each Lender or
participant of a Lender under this Section 2.21 shall survive the termination of
this Agreement and the payment of the Loans and all amounts payable hereunder.
(g) For the purposes of Sections 2.14 and 2.20 a change in treaty,
law, rule or regulation shall not include any change in the income tax treaty
between Luxembourg and the United States of America in effect as of the date
hereof or any change in the tax regulations of the United States of America
concerning procedures for determining entitlement to exemption from, or
reduction in the rate of, withholding taxes imposed by the United States of
America.
SECTION 2.22. Letters of Credit. (a) General. Either Borrower may
request the issuance of a Letter of Credit for its own or any of its
Subsidiaries' account, in a form reasonably acceptable to the Administrative
Agent and the Issuing Bank, at any time and from time to time while the
Revolving Credit Commitments remain in effect. This Section 2.22 shall not be
construed to impose an obligation upon the Issuing Bank to issue any Letter of
Credit that is inconsistent with the terms and conditions of this Agreement.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. In order to request the issuance of a Letter of Credit (or to
amend, renew or extend an existing Letter of Credit), the applicable Borrower
shall deliver (including by telecopy) to the Issuing Bank and the Administrative
Agent (at least five Business Days prior to the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Letter of
Credit, or identifying the Letter of Credit to be amended, renewed or
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46
extended, the date of issuance, amendment, renewal or extension, the date on
which such Letter of Credit is to expire (which shall comply with paragraph (c)
below), the amount of such Letter of Credit, the currency in which such Letter
of Credit is to be denominated (which shall be Dollars or, subject to Section
2.15, an Alternative Currency), the name and address of the beneficiary thereof
and such other information as shall be reasonably necessary to prepare such
Letter of Credit. A Letter of Credit shall be issued, amended, renewed or
extended only if, and upon issuance, amendment, renewal or extension of each
Letter of Credit the applicable Borrower shall be deemed to represent and
warrant that, after giving effect to such issuance, amendment, renewal or
extension (A) the L/C Exposure shall not exceed $15,000,000, (B) the Aggregate
Alternative Currency Revolving Credit Exposure shall not exceed $32,500,000, (C)
the Aggregate Revolving Credit Exposure shall not exceed the Total Revolving
Credit Commitment and (D) the JCISA Revolving Credit Exposure shall not exceed
the JCISA Maximum Percentage of the Total Revolving Credit Commitment.
(c) Expiration Date. Each Letter of Credit shall expire at the close
of business on the earlier of the date one year after the date of the issuance
of such Letter of Credit and the date that is three Business Days prior to the
Maturity Date, unless such Letter of Credit expires by its terms on an earlier
date; provided that any Letter of Credit may, upon the request of the applicable
Borrower, include a provision whereby such Letter of Credit shall be renewed
automatically for additional consecutive periods of 12 months or less (but not
beyond the date that is three Business Days prior to the Maturity Date) unless
the Issuing Bank notifies the beneficiary thereof at least 30 days prior to the
then-applicable expiration date that such Letter of Credit will not be renewed.
(d) Participations. (i) The Issuing Bank irrevocably agrees to grant
and hereby grants to each Revolving Credit Lender, and, to induce the Issuing
Bank to issue Letters of Credit hereunder, each Revolving Credit Lender
irrevocably agrees to accept and purchase and hereby accepts and purchases from
the Issuing Bank, on the terms and conditions hereinafter stated, for such
Revolving Credit Lender's own account and risk an undivided interest equal to
such Revolving Credit Lender's Pro Rata Percentage from time to time in effect
in the Issuing Bank's obligations and rights (other than with respect to the
Issuing Bank Fees and amounts pursuant to Section 2.05(c)(iii)) under each
Letter of Credit issued hereunder and the amount of each draft paid by the
Issuing Bank thereunder. Each Revolving Credit Lender agrees with the Issuing
Bank to make the payments specified in clause (f) of Section 2.02 hereof.
(ii) Whenever, at any time after the Issuing Bank has made payment
under any Letter of Credit issued by it and has received from any Revolving
Credit Lender its pro rata share of such payment in accordance with Section
2.02(f), the Issuing Bank receives any payment related to such Letter of
Credit (whether directly from a Borrower or otherwise, including proceeds
of collateral applied thereto by the Issuing Bank), or any payment of
interest on account thereof, the Issuing Bank will, (x) if with respect to
payments in Dollars, if such payment is received prior to 12:00 noon, New
York City time, on a Business Day, distribute to such Revolving Credit
Lender its pro rata share thereof prior to the end of such Business Day and
otherwise the Issuing Bank will distribute such payment on the next
succeeding Business Day and (y) if with respect to an Alternative Currency,
if such payment is received prior to 10:00 a.m., local time, on a Business
Day, distribute to such Revolving Credit Lender its pro rata share thereof
prior to the end of such Business Day and otherwise the Issuing Bank will
distribute such payment on the next succeeding Business Day;
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47
provided, however, that in the event that any such payment received by the
Issuing Bank and distributed to the Revolving Credit Lenders shall be
required to be returned by the Issuing Bank, each such Revolving Credit
Lender shall return to the Issuing Bank the portion thereof previously
distributed by the Issuing Bank to it.
(e) Reimbursement. (i) Upon payment of a draft under a Letter of
Credit, the applicable Borrower agrees to reimburse the Issuing Bank on the same
Business Day on which it receives notice that a draft presented under any Letter
of Credit issued by such Issuing Bank has been paid by such Issuing Bank,
provided such Issuing Bank provides such notice to the Borrower prior to 11:00
a.m., New York City time, on such Business Day and otherwise the Borrower will
reimburse the Issuing Bank on the next succeeding Business Day by 11:00 a.m.,
New York City time (or, in the case of any payment in an Alternative Currency,
11:00 a.m., local time in the country of the Alternative Currency); provided
further that the failure to provide such notice shall not affect the applicable
Borrower's absolute and unconditional obligation to reimburse the Issuing Bank
for any draft paid under any Letter of Credit issued by it. Any such notice
shall indicate the amount of (x) such draft so paid and (y) any taxes, fees,
charges or other costs or expenses reasonably incurred by the Issuing Bank in
connection with such payment. Each such payment shall be made to the Issuing
Bank at its address for notices specified herein in Dollars or in the applicable
Alternative Currency and in immediately available funds.
(ii) Each drawing under any Letter of Credit shall constitute a
request by the Borrower to the Administrative Agent for a borrowing
pursuant to Section 2.02 of ABR Loans in the amount of such drawing (or the
Dollar Equivalent thereof) but without any requirement for compliance with
the prior notice or minimum borrowing amount provisions of Section 2.02 or
the conditions set forth in Section 4.01. The date of Borrowing with
respect to such borrowing shall be the date of such drawing. Any such
request or borrowing shall not relieve the Issuing Bank or Revolving Credit
Lender of any liability resulting from the gross negligence or willful
misconduct of the Issuing Bank or any Revolving Credit Lender, or otherwise
affect any defenses or other right that either Borrower may have as a
result of any such gross negligence or willful misconduct.
(f) Obligations Absolute. (i) Each Borrower's obligation to
reimburse L/C Disbursements as provided in paragraph (e) above shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment which a Borrower
may have or have had against the Issuing Bank, any Lender or any beneficiary of
a Letter of Credit, provided that this paragraph shall not relieve the Issuing
Bank or any Lender of any liability resulting from the gross negligence or
willful misconduct of the Issuing Bank or any Lender, or otherwise affect any
defense or other right that a Borrower may have as a result of any such gross
negligence or willful misconduct.
(ii) Each Borrower also agrees with the Issuing Bank that the Issuing
Bank shall not be responsible for, and such Borrower's reimbursement
obligations under Section 2.22(e) shall not be affected by, among other
things, (x) the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or (y) any dispute between or among such Borrower and
any beneficiary of any Letter of Credit or any other party to which such
Letter of Credit may be transferred or (z) any claims whatsoever of such
Borrower against any beneficiary of such Letter of Credit or any
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48
such transferee, provided that this paragraph shall not relieve the Issuing
Bank of any liability resulting from the gross negligence or willful
misconduct of the Issuing Bank, or otherwise affect any defense or other
right that such Borrower may have as a result of any such gross negligence
or willful misconduct.
(iii) Neither the Issuing Bank with respect to any Letter of Credit
nor any Lender with respect thereto shall be liable for any error,
omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with such Letter
of Credit, except for errors or omissions caused by such Person's gross
negligence or willful misconduct.
(iv) Each Borrower agrees that any action taken or omitted by the
Issuing Bank under or in connection with any Letter of Credit issued by it
or the related drafts or documents, if done in the absence of gross
negligence or willful misconduct and in accordance with the standards of
care specified in the Uniform Commercial Code of the State of New York,
shall be binding on such Borrower and shall not result in any liability of
such Issuing Bank or any Lender to such Borrower.
(g) Disbursement Procedures. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall as promptly
as possible give telephonic notification, confirmed by telecopy, to the
Administrative Agent and the applicable Borrower of such demand for payment and
whether the Issuing Bank has made or will make an L/C Disbursement thereunder,
provided that any failure to give or delay in giving such notice shall not
relieve the applicable Borrower of its obligation to reimburse the Issuing Bank
and the Revolving Credit Lenders with respect to any such L/C Disbursement;
provided further that this paragraph shall not relieve the Issuing Bank of any
liability resulting from the gross negligence or willful misconduct of the
Issuing Bank, or otherwise affect any defense or other right that the applicable
Borrower may have as a result of any such gross negligence or willful
misconduct. The Administrative Agent shall promptly give each Revolving Credit
Lender notice thereof.
(h) Interim Interest. If the Issuing Bank shall make any L/C
Disbursement in respect of a Letter of Credit, then, unless the applicable
Borrower shall reimburse such L/C Disbursement in full as specified in clause
(e) above the unpaid amount thereof shall bear interest for the account of the
Issuing Bank, for each day from and including the date of such L/C Disbursement,
to but excluding the earlier of the date of payment by the Borrower or the date
on which interest shall commence to accrue thereon as provided in Section
2.02(f), at the rate per annum that would apply to such amount if such amount
were (i) in the case of an L/C Disbursement denominated in Dollars, an ABR Loan,
and (ii) in the case of an L/C Disbursement denominated in an Alternative
Currency, a Foreign Base Rate Loan.
(i) Resignation or Removal of the Issuing Bank. The Issuing Bank
may resign at any time by giving 180 days' prior written notice to the
Administrative Agent, the Lenders and the Borrowers, and may be removed at any
time by the Borrowers by notice to the Issuing Bank and the Administrative
Agent. Subject to the next succeeding paragraph, upon the acceptance of any
appointment as the Issuing Bank hereunder by a Lender that shall agree to serve
as successor Issuing Bank, such successor shall succeed to and become vested
with all the interests, rights and obligations of the retiring Issuing Bank and
the retiring Issuing Bank shall be discharged from its obligations to issue
additional Letters of Credit
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49
hereunder. At the time such removal or resignation shall become effective, the
Borrowers shall pay all accrued and unpaid fees pursuant to Section 2.05(c)(ii).
The acceptance of any appointment as the Issuing Bank hereunder by a successor
Lender shall be evidenced by an agreement entered into by such successor, in a
form satisfactory to the Borrowers and the Administrative Agent, and, from and
after the effective date of such agreement, (i) such successor Lender shall have
all the rights and obligations of the previous Issuing Bank under this Agreement
and the other Loan Documents and (ii) references herein and in the other Loan
Documents to the term "Issuing Bank" shall be deemed to refer to such successor
or to any previous Issuing Bank, or to such successor and all previous Issuing
Banks, as the context shall require. After the resignation or removal of the
Issuing Bank hereunder, the retiring Issuing Bank shall remain a party hereto
and shall continue to have all the rights and obligations of an Issuing Bank
under this Agreement and the other Loan Documents with respect to Letters of
Credit issued by it prior to such resignation or removal, but shall not be
required to issue additional Letters of Credit.
(j) Reporting Requirements of Issuing Banks. (a) Within two Business
Days following the last day of each calendar month, each Issuing Bank shall
deliver to the Administrative Agent a report detailing all activity during the
preceding month with respect to any Letters of Credit issued by such Issuing
Bank, including the face amount, the account party, the beneficiary and the
expiration date of such Letters of Credit and any other information with respect
thereto as may be requested by the Administrative Agent.
(k) Additional Issuing Banks. The Borrowers may, at any time and from
time to time with the consent of the Administrative Agent (which consent shall
not be unreasonably withheld) and such Lender, designate one or more additional
Lenders to act as an issuing bank under the terms of this Agreement. Any Lender
designated as an issuing bank pursuant to this paragraph (k) shall be deemed to
be an "Issuing Bank" (in addition to being a Lender) in respect of Letters of
Credit issued or to be issued by such Lender, and, with respect to such Letters
of Credit, such term shall thereafter apply to the other Issuing Bank or Issuing
Banks and such Lender.
SECTION 2.23. Swingline Loans. (a) Swingline Commitment. Subject
to the terms and conditions and relying upon the representations and warranties
herein set forth, the Swingline Lender agrees to make loans, in Dollars, to
either Borrower at any time and from time to time on and after the Closing Date
and until the earlier of the Maturity Date and the termination of the Revolving
Credit Commitments in accordance with the terms hereof, in an aggregate
principal amount at any time outstanding that will not result in (i) the
aggregate principal amount of all Swingline Loans exceeding $10,000,000 in the
aggregate or (ii) the Aggregate Revolving Credit Exposure, after giving effect
to any Swingline Loan, exceeding the Total Revolving Credit Commitment. Each
Swingline Loan shall be in a minimum amount of $250,000 or a multiple of
$100,000 in excess thereof. The Swingline Commitments may be terminated or
reduced from time to time as provided herein. Within the foregoing limits, each
Borrower may borrow, pay or prepay and reborrow Swingline Loans hereunder,
subject to the terms, conditions and limitations set forth herein.
(b) Swingline Loans. The applicable Borrower shall notify the
Administrative Agent and the Swingline Lender, by telecopy, or by telephone
(confirmed by telecopy), not later than 2:00 p.m., New York City time, on the
day of a proposed Swingline Loan. Such notice shall be delivered on a Business
Day, shall be irrevocable and shall refer to this Agreement and shall specify
the requested date (which shall be a Business Day), the account of the
applicable Borrower into which the Swingline Loan is to be deposited and the
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amount of such Swingline Loan. The Swingline Lender will make the proceeds of
the Swingline Loan available to the Administrative Agent for further credit on
the date of such notice to the account so designated by the applicable Borrower.
(c) Prepayment. Each Borrower shall have the right at any time and
from time to time to prepay any Swingline Loan, in whole or in part, upon giving
written or telecopy notice (or telephone notice promptly confirmed by written,
or telecopy notice) to the Swingline Lender and the Administrative Agent before
1:00 p.m., New York City time, on the date of prepayment at the Swingline
Lender's address for notices specified on Schedule 2.01 or as otherwise
specified in writing to the applicable Borrower. All principal payments of
Swingline Loans shall be accompanied by accrued interest on the principal amount
being repaid to the date of payment.
(d) Interest. Each Swingline Loan shall be an ABR Loan and, subject
to the provisions of Section 2.07, shall bear interest as provided in Section
2.06(a).
(e) Participations. (i) The Administrative Agent, at any time in
its sole and absolute discretion, may (or, upon the request of the Swing Line
Lender, shall), on behalf of the applicable Borrower (which hereby irrevocably
directs the Administrative Agent to act on its behalf) request that each
Revolving Credit Lender make a Revolving Credit Loan in an amount equal to such
Revolving Credit Lender's Pro Rata Percentage of the then outstanding principal
amount of Swing Line Loans (the "Refunded Swing Line Loans") on the date such
notice is given (regardless of whether the Refunded Swing Line Loans comply with
the minimum borrowing provisions of Section 2.02). In the event that the
Swingline Lender makes its request for refunding of the Swingline Loans, each
Revolving Credit Lender shall make the proceeds of its Revolving Loan available
in immediately available funds to the Administrative Agent, for the benefit of
the Swingline Lender, at the office of the Administrative Agent prior to 11:00
a.m., New York City time, on the first Business Day following such request (or,
if such request is made prior to 10:00 a.m., New York City time, on any date,
then the proceeds of such Revolving Loans shall instead be so made available to
the Administrative Agent prior to 2:00 p.m., New York City time, on the date of
such request), provided that in the event that any of the events described in
Section 7.01(a) or (b) shall have occurred and be continuing, the Revolving
Credit Lenders shall not make such Revolving Loans and the provisions of clause
(ii) below shall apply.
(ii) If, prior to the making of a Revolving Loan pursuant to clause
(i) above, one of the events described in Section 7.01(a) or (b) shall have
occurred and be continuing, each Revolving Credit Lender will, on the date
such Revolving Loan was to have been made, purchase from the Swingline
Lender an undivided participating interest in the Swingline Loan to be
refunded in an amount equal to its Pro Rata Percentage of such Swingline
Loan to be refunded. Each Revolving Credit Lender will immediately
transfer to the Administrative Agent, in immediately available funds, the
amount of its participation.
(iii) Whenever, at any time after the Swingline Lender has received
from any Revolving Credit Lender such Lender's participating interest in a
Swingline Loan to be refunded pursuant to clause (ii), the Swingline Lender
receives any payment on account thereof, the Swingline Lender will pay to
the Administrative Agent for distribution to such Revolving Credit Lender
its participating interest in such amount (appropriately adjusted, in the
case of interest payments, to reflect the period of time during which such
Revolving Credit Lender's participating interest was outstanding
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51
and funded) in like funds as received, provided that in the event that such
payment received by the Swingline Lender is required to be returned, such
Revolving Credit Lender will return to the Swingline Lender any portion
thereof previously distributed by the Swingline Lender through the
Administrative Agent to it in like funds as such payment is required to be
returned by the Swingline Lender.
(f) Unconditional Obligation to Refund Swingline Loans. Each
Revolving Credit Lender's obligation to make Revolving Loans and to purchase
participating interests in accordance with Sections 2.23(e)(i) and (ii) shall be
absolute and unconditional and shall not be affected by any circumstance,
including, without limitation, (i) any set-off, counterclaim, recoupment,
defense or other right which such Revolving Credit Lender may have against the
Swingline Lender, either Borrower or any other Person for any reason whatsoever;
(ii) the occurrence or continuance of any Default or Event of Default; (iii) any
adverse change in the condition (financial or otherwise) of the applicable
Borrower or any other Person; (iv) any breach of this Agreement by the Borrower
or any other Person; (v) any inability of the applicable Borrower to satisfy the
conditions precedent to borrowing set forth in this Agreement on the date upon
which such Revolving Loan is to be made or participating interest is to be
purchased; or (vi) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing. If any Revolving Credit Lender
does not make available to the Administrative Agent the amount required pursuant
to Sections 2.23(e)(i) and (ii), as the case may be, the Administrative Agent
shall be entitled to recover such amount on demand from such Revolving Credit
Lender, together with interest thereon for each day from the date of non-payment
until such amount is paid in full at the rate applicable to ABR Loans.
SECTION 2.24. Consistent Tax Treatment. Each Borrower and each
Lender hereby agrees to treat the Loans to JCI as Indebtedness of JCI and the
Loans of JCISA as Indebtedness of JCISA for all U.S. federal, state and local
tax purposes and for all non-U.S. tax purposes.
ARTICLE III
Representations and Warranties
Each of Parent and each Borrower hereby represents and warrants as to
itself and its Subsidiaries to the Administrative Agent, the Collateral Agent,
the Issuing Bank and each Lender that:
SECTION 3.01. Financial Condition. (a) The unaudited pro forma
consolidated balance sheet of Parent as at December 31, 1997 (including the
notes thereto) and the unaudited pro forma consolidated income statement for the
fiscal year ended December 31, 1997 (including the notes thereto) (collectively,
the "Pro Forma Financial Statements"), copies of which have heretofore been
furnished to each Lender, has been prepared giving effect to the Transactions.
The Pro Forma Financial Statements have been prepared based on the good faith
assumptions of Parent as of the date of delivery thereof and, based on such
assumptions, present fairly in all material respects on a pro forma basis the
estimated financial position of Parent and the Subsidiaries as at December 31,
1997, assuming that the events specified in the preceding sentence had actually
occurred at such date.
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52
(b) The audited combined balance sheet of Jafra Cosmetics
International (as defined in note 1 to such balance sheet, the "Audited
Company") as at December 31, 1997, and the related combined statements of income
and of cash flows for the fiscal year ended on such date, reported on by and
accompanied by an unqualified report from KPMG Peat Marwick, present fairly, in
all material respects, the combined financial conditions of the Audited Company
as at such date, and the combined results of its operations and its combined
cash flows for the fiscal year then ended. The unaudited combined balance sheet
of the Audited Company as at March 31, 1998, and the related unaudited combined
statements of income and cash flows for the three-month period ended on such
date, on the basis disclosed in the footnotes to such financial statements,
present fairly, in all material respects, the combined financial condition of
the Audited Company as at such date, and the combined results of its operations
and its combined cash flows for the three-month period then ended (subject to
the omission of certain footnotes and normal year-end audit and other
adjustments). All such financial statements, including the related schedules
and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by a
Responsible Officer, and disclosed in any such schedules and notes, and except
that such unaudited financial statements do not contain certain footnotes). All
material Guarantees, material contingent liabilities and liabilities for taxes,
or all material long-term leases or unusual forward or long-term commitments,
including any interest rate or foreign currency swap or exchange transaction or
other obligation in respect of derivatives, which according to GAAP must be
reflected in such financial statements or the notes thereto are so reflected.
During the period from March 31, 1998, to and including the date hereof, there
has been no disposition by the Audited Company of any business or property that
would be material to the Audited Company, taken as a whole, other than any such
disposition which is reflected in the foregoing financial statements or in the
notes thereto, or which has otherwise been disclosed in writing to the Lenders
on or prior to the Closing Date, or which is pursuant to the Transactions.
SECTION 3.02. Change. Since December 31, 1997, there has been no
development or event relating to or affecting any Loan Party which has had or
would reasonably be expected to have a Material Adverse Effect (after giving
effect to the Transactions and the transactions related thereto).
SECTION 3.03. Corporate Existence; Compliance with Law. Each of
Parent, each Borrower and each of the Active Subsidiaries (a) is duly organized,
validly existing and, with respect to any such entity organized under the laws
of a jurisdiction of the United States of America, in good standing under the
laws of the jurisdiction of its organization, (b) has the corporate or other
organizational power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, except to the extent that the failure
to have such legal right would not be reasonably expected to have a Material
Adverse Effect, (c) is duly qualified as a foreign entity and, if applicable, in
good standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, other than in such jurisdictions where the failure to be so
qualified and, if applicable, in good standing would not be reasonably expected
to have a Material Adverse Effect and (d) is in compliance with all Requirements
of Law except to the extent that the failure to comply therewith would not, in
the aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 3.04. Corporate Power; Authorization; Enforceable
Obligations. (a) Each of Parent, each Borrower and each other Loan Party has
the corporate or other
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53
organizational power and authority, and the legal right, to make, deliver and
perform the Loan Documents to which it is a party and, in the case of each
Borrower, to borrow hereunder, and has taken all necessary corporate or other
organizational action to authorize, in the case of each Borrower, the Borrowings
on the terms and conditions of this Agreement and to authorize the execution,
delivery and performance of the Loan Documents to which it is a party. No
consent or authorization of, filing with, notice to or other similar act by or
in respect of, any Governmental Authority or any other Person is required to be
obtained or made by or on behalf of any Loan Party or any other Subsidiary of
Parent in connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of the Loan Documents to which
Parent, the Borrowers and each other Loan Party is a party, except for (i)
consents, authorizations, notices and filings described in Schedule 3.04(a), all
of which have been obtained or made or have the status described therein, (ii)
filings to perfect the Liens created by the Security Documents, (iii) filings
pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. (S) 3737
et seq.), in respect of Accounts of the Borrowers and their Subsidiaries the
obligor in respect of which is the United States of America or any department,
agency or instrumentality thereof, (iv) recordation of the Mortgages and (v)
consents, authorizations, notices and filings which the failure to obtain or
make would not reasonably be expected to have a Material Adverse Effect.
(b) This Agreement has been, and each of the other Loan Documents and
any other agreement to be entered into by any Loan Party pursuant hereto will
be, duly executed and delivered on behalf of such Loan Party that is party
thereto. This Agreement constitutes, and each of the other Loan Documents and
any other agreement to be entered into by any Loan Party pursuant hereto will
constitute upon execution and delivery, the legal, valid and binding obligation
of such Loan Party, enforceable against such Loan Party in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, or similar laws relating to or affecting
creditors' rights generally and by general equitable principles (regardless of
whether enforcement is sought in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
SECTION 3.05. No Legal Bar. The execution, delivery and performance
of each Loan Document by each Loan Party party thereto, the incurrence or
issuance of and use of the proceeds of the Loans and of drawings under the
Letters of Credit by the Borrowers and the consummation on the Closing Date of
the other Transactions (a) will not violate any Requirement of Law or result in
a breach of any Contractual Obligation applicable to or binding upon either
Borrower, any Subsidiary or any of their respective properties or assets in any
respect that would reasonably be expected to have a Material Adverse Effect and
(b) will not result in the creation or imposition of any Lien on any of their
properties or assets pursuant to any Requirement of Law applicable to it, as the
case may be, or any of its Contractual Obligations, except for the Liens arising
under the Security Documents or permitted under Section 6.02.
SECTION 3.06. No Material Litigation. Except as disclosed on
Schedule 3.06, no litigation by, investigation by, or proceeding of or before
any arbitrator or any Governmental Authority is pending or, to the knowledge of
Parent or either Borrower, threatened by or against Parent or either Borrower or
any Subsidiary, or against any of its or their respective properties or revenues
(including after giving effect to the Transactions), which (a) is so pending or
threatened at any time on or prior to the Closing Date and relates
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54
to any Loan Document or the other transactions contemplated hereby or (b) would
reasonably be expected to have a Material Adverse Effect.
SECTION 3.07. No Default. None of Parent, either Borrower or any of
the Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which would reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
SECTION 3.08. Intellectual Property. Parent and each of the
Subsidiaries owns, or has the legal right to use, all United States patents,
trademarks, trade names, copyrights, technology, know-how and processes
necessary for the conduct of its business substantially as currently conducted
(the "Intellectual Property"), except for those the failure to own or have such
legal right to use which would not reasonably be expected to have a Material
Adverse Effect. Except as set forth on Schedule 3.08, no claim has been
asserted and is pending by any Person challenging or questioning the use of any
such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does Parent or any Subsidiary know of any such claim
and, to the knowledge of Parent and the Subsidiaries, the use of such
Intellectual Property by Parent and the Subsidiaries does not infringe on the
rights of any Person, except for such claims and infringements that, in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
SECTION 3.09. No Burdensome Restrictions; Compliance with Laws. (a)
Except as previously disclosed to the Lenders in writing prior to the Closing
Date, no Requirement of Law applicable to or Contractual Obligation of Parent,
either Borrower or any Subsidiary would reasonably be expected to have a
Material Adverse Effect.
(b) Certificates of occupancy and permits are in effect for each
Mortgaged Property as currently constructed, except to the extent that any such
failure to be in effect would reasonably be expected to have a Material Adverse
Effect.
(c) No exchange control law or regulation materially restricts any
Loan Party from complying with its obligations in respect of any Alternative
Currency Loan or Letter of Credit denominated in an Alternative Currency.
SECTION 3.10. Taxes. Each of Parent and each of its Subsidiaries has
filed or caused to be filed all United States Federal income tax returns and all
other material tax returns which, to the knowledge of Parent and each Borrower,
are required to be filed and has paid all taxes shown to be due and payable on
said returns or on any assessments made against it or any of its property and
all other taxes, fees or other charges imposed on it or any of its property by
any Governmental Authority (other than any (i) taxes, fees or other charges with
respect to which the failure to pay, in the aggregate, would not have a Material
Adverse Effect or (ii) taxes, fees or other charges the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of Parent, such Borrower or such Subsidiary, as the case may be); other
than as disclosed on Schedule 3.10, no tax Lien has been filed, and, to the
knowledge of Parent or either Borrower, no claim is being asserted, with respect
to any such tax, fee or other charge.
SECTION 3.11. Federal Regulations. No part of the proceeds of any
Loans will be used for "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation U. If
requested by any Lender or the Administrative Agent, each Borrower will furnish
to the Administrative Agent and each
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55
Lender a statement to the foregoing effect in conformity with the requirements
of FR Form U-1 referred to in Regulation U.
SECTION 3.12. Employee Benefit Plans. During the five-year period
prior to each date as of which this representation is made, or deemed made, with
respect to any Plan (or, with respect to (vi), (viii) or (xi) below, as of the
date such representation is made or deemed made), none of the following events
or conditions, either individually or in the aggregate, has resulted or is
reasonably likely to result in a liability to JCI or any of its Subsidiaries
which would be reasonably expected to have a Material Adverse Effect; (i) a
Reportable Event; (ii) an "accumulated funding deficiency" (within the meaning
of Section 412 of the Code or Section 302 of ERISA); (iii) any material
noncompliance with the applicable provisions of ERISA or the Code; (iv) a
termination of a Single Employer Plan (other than a standard termination
pursuant to Section 4041(b) of ERISA); (v) a Lien in favor of the PBGC or a
Plan; (vi) Underfunding with respect to any Single Employer Plan; (vii) a
complete or partial withdrawal from any Multiemployer Plan by JCI or any
Commonly Controlled Entity; (viii) any liability of JCI or any Commonly
Controlled Entity under ERISA if JCI or any such Commonly Controlled Entity were
to withdraw completely from all Multiemployer Plans as of the annual valuation
date most closely preceding the date on which this representation is made or
deemed made; (ix) the Reorganization or Insolvency of any Multiemployer Plan;
(x) an event or condition with respect to which JCI or any Commonly Controlled
Entity has incurred or could incur any liability in respect of a Former Plan;
and (xi) with respect to any Foreign Benefit Plan, any material noncompliance
with applicable foreign law or the incurrence of any material liability.
SECTION 3.13. Investment Company Act; Other Regulations. None of
Parent, either Borrower or any Subsidiary is an "investment company" required to
register as such under the Investment Company Act of 1940, as amended, within
the meaning of such Act. None of Parent, either Borrower or any Subsidiary is
subject to regulation under any federal or state statute or regulation (other
than Regulation X) which limits its ability to incur Indebtedness.
SECTION 3.14. Subsidiaries. On the Closing Date, the Subsidiaries
and their jurisdiction of incorporation shall be as set forth on Schedule 3.14.
SECTION 3.15. Environmental Matters. Other than exceptions to any of
the following that would not, individually or in the aggregate, reasonably be
expected to result in the payment of a Material Environmental Amount:
(a) the facilities and properties owned, leased or operated by
Parent, either Borrower or any Subsidiary (the "Properties") do not contain
any Materials of Environmental Concern in amounts or concentrations which
(i) constitute a violation of, or (ii) would reasonably be expected to give
rise to liability on the part of Parent, either Borrower or any Subsidiary
under, any applicable Environmental Law;
(b) the Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance, in all
material respects with all applicable Environmental Laws, and there is no
contamination at, under or about the Properties or violation of any
applicable Environmental Law with respect to the Properties or the business
operated by Parent, either Borrower or any Subsidiary (the "Business")
which would materially interfere with the continued operation of the
Properties;
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56
(c) none of Parent, either Borrower or any Subsidiary has received
any written notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with applicable Environmental Laws with regard to any of the
Properties or the Business, and none of Parent or either Borrower has
knowledge or reason to believe that any such notice will be received or is
being threatened;
(d) Materials of Environmental Concern have not been transported or
disposed of from the Properties, in violation of, or in a manner or to a
location which would reasonably be expected to give rise to liability on
the part of Parent, either Borrower or any Subsidiary under, any applicable
Environmental Law, nor have any Materials of Environmental Concern been
generated, treated, stored or disposed of at, on or under any of the
Properties, in violation of, or in a manner that would reasonably be
expected to give rise to liability on the part of Parent, either Borrower
or any Subsidiary under, any applicable Environmental Law;
(e) no judicial proceeding or governmental or administrative action
is pending or, to the knowledge of Parent or either Borrower, threatened,
under any applicable Environmental Law to which Parent, either Borrower or
any Subsidiary is or will be named as a party with respect to the
Properties or the Business, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any applicable
Environmental Law with respect to the Properties or the Business;
(f) there has been no Release or threatened Release of Materials of
Environmental Concern at or from the Properties, or arising from or related
to the operations of Parent, either Borrower or any Subsidiary in
connection with the Properties or otherwise in connection with the
Business, in violation of or in amounts or in a manner that would
reasonably be expected to give rise to liability on the part of Parent,
either Borrower or any Subsidiary under applicable Environmental Laws; and
(g) none of Parent, either Borrower or any Subsidiary has assumed or
retained, by contract or operation of law, any known or suspected
liabilities of any kind, fixed or contingent, as a result of any violation
or breach of applicable Environmental Law or with respect to any
contamination by any Materials of Environmental Concern.
SECTION 3.16. Accuracy and Completeness of Information. The factual
statements contained in the financial statements referred to in Sections 3.01(a)
and (b), the Loan Documents (including the schedules thereto, but excluding any
statements by the Administrative Agent or any Lender) and any other certificate
or document furnished by or on behalf of Parent, either Borrower or any
Subsidiary to the Administrative Agent or the Lenders from time to time in
connection with this Agreement, taken as a whole, did not, as of the Closing
Date, to the best knowledge of the Parent and the Borrowers, contain any
material misstatement of fact or omit to state a material fact necessary in
order to make the statements contained therein, in light of the circumstances
under which the same were made, not materially misleading in their presentation
of the Transactions or the other transactions contemplated hereby or by the
other Transaction Documents or of Parent and the Subsidiaries taken as a whole;
all except as otherwise qualified herein or therein. It is understood that no
representation or warranty is made concerning any forecasts, estimates,
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57
pro forma information, projections and statements as to anticipated future
performance or conditions, and the assumptions on which they were based,
contained in any such financial statements, certificates or documents except
that, as of the date such forecasts, estimates, pro forma information,
projections and statements were generated, (i) such forecasts, estimates, pro
forma information, projections and statements were based on the good faith
assumptions of the management of Parent or either Borrower and (ii) such
assumptions were believed by such management to be reasonable. Such forecasts,
estimates, pro forma information, projections and statements, and the
assumptions on which they were based, may or may not prove to be correct.
SECTION 3.17. Solvency. As of the Closing Date, immediately prior to
and after giving effect to the Transactions and the incurrence of all
Indebtedness and obligations being incurred in connection herewith and
therewith, each Loan Party will be Solvent.
SECTION 3.18. Senior Indebtedness. The monetary obligations of the
Loan Parties under this Agreement and the other Loan Documents constitute
"Senior Indebtedness" of such Person under and as defined in the Subordinated
Note Documents.
SECTION 3.19. Title to Properties; Possession Under Leases. (a)
Each Borrower and each of the Subsidiaries of either Borrower, as the case may
be, has good and marketable title to, or valid leasehold interests in, all its
material real properties (including all Mortgaged Property), except for defects
in title that do not interfere with its ability to conduct its business as
currently conducted or to utilize such properties for their intended purposes
(except with respect to such properties of the Borrowers and their Subsidiaries
which will be retitled after the Closing Date in connection with the
Transactions). All such properties are free and clear of Liens, other than
Liens expressly permitted by Section 6.02.
(b) Neither Parent nor any Borrower has received any written notice of
any pending condemnation proceeding affecting the Mortgaged Properties or any
sale or disposition thereof in lieu of condemnation.
(c) None of Parent, either Borrower or any of the Subsidiaries is
obligated under any right of first refusal, option or other contractual right to
sell, assign or otherwise dispose of any Mortgaged Property or any interest
therein.
SECTION 3.20. Security Documents. Except with respect to (a) Liens
on equipment constituting fixtures, (b) any reserved rights of the United States
government as required under law, (c) Liens upon Patents, Patent Licenses,
Trademarks and Trademark Licenses (as such terms are defined in the Security
Agreement) to the extent that (i) such Liens cannot be perfected by the filing
of financing statements under the Uniform Commercial Code or by the filing and
acceptance thereof in the United States Patent and Trademark Office or (ii) such
Patents, Patent Licenses, Trademarks and Trademark Licenses are not,
individually or in the aggregate, material to the business of Parent, the
Borrowers and the Subsidiaries taken as a whole, (d) Liens on uncertificated
securities, (e) Liens on Collateral the perfection of which requires filings in
or other actions under the laws of jurisdictions outside of the United States of
America, any state, territory or dependency thereof, Puerto Rico or the District
of Columbia (except to the extent that such filings or other actions have been
made or taken), (f) Liens on contracts or Accounts (as such term is defined in
the Security Agreement) on which the United States of America or any department,
agency, or instrumentality thereof is the obligor, (g) Liens on proceeds of
Accounts and Inventory (as such term is defined in the Security Agreement),
until transferred
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to or deposited in the Collateral Proceeds Account (as such term is defined in
the Security Agreement) (if any), and (h) claims of creditors of Persons
receiving goods included as Collateral for "sale or return" within the meaning
of Section 2-326 of the Uniform Commercial Code of the applicable jurisdiction,
upon filing of the financing statements delivered to the Administrative Agent by
Parent, the Borrowers and the Subsidiaries on the effective date of this
Agreement in the jurisdictions listed on Schedule 3.20 (which financing
statements are in proper form for filing in such jurisdictions) and the
recording of the Mortgages (and the recording of the Security Agreement, and the
making of filings after the effective date of this Agreement in any other
jurisdiction as may be necessary under any Requirement of Law) and the delivery
to, and continuing possession by, the Administrative Agent of all Instruments,
Chattel Paper and Documents (as such terms are defined in the Security
Agreement) a security interest in which is perfected by possession, the Liens
created pursuant to each Security Document, when executed and delivered, will
constitute valid Liens on and, to the extent provided therein, perfected
security interests in the collateral referred to in such Security Document (but
as to the Copyrights and the Copyright Licenses (as defined in the Security
Agreement) and accounts arising therefrom, only to the extent the Uniform
Commercial Code of the relevant jurisdiction, from time to time in effect, is
applicable) in favor of the Administrative Agent for the benefit of the Lenders,
which Liens will be prior to all other Liens of all other Persons, except for
Liens permitted pursuant to the Loan Documents (including, without limitation,
those permitted to exist pursuant to Section 6.02), and which Liens are
enforceable as such as against all other Persons (except, with respect to goods
only, buyers in the ordinary course of business to the extent provided in
Section 9-307(1) of the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction and except to the extent that recording of an
assignment or other transfer of title to the Administrative Agent in the United
States Patent and Trademark Office or the United States Copyright Office may be
necessary for such enforceability), except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law). Notwithstanding any other provision of this Agreement, capitalized
terms which are used in this Section 3.20 and not defined in this Agreement are
so used as defined in the applicable Security Document.
SECTION 3.21. Location of Real Property and Leased Premises. (a) To
the knowledge of the Parent and the Borrowers, Schedule 3.21(a) lists completely
and correctly as of the Closing Date all real property owned by the Borrowers
and the Subsidiaries and the addresses thereof.
(b) To the knowledge of the Parent and the Borrowers, Schedule 3.21(b)
lists completely and correctly as of the Closing Date all real property leased
by the Borrowers and the Subsidiaries and the addresses thereof.
SECTION 3.22. Labor Matters. As of the Closing Date, there are no
strikes, lockouts or slowdowns against Parent, either Borrower or any Subsidiary
pending or, to the knowledge of Parent or the Borrowers, reasonably expected to
be commenced against Parent, either Borrower or any Subsidiary which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect. The hours worked by and payments made to employees of
Parent, the Borrowers and the Subsidiaries have not been in violation of any
applicable federal, state, local or foreign law dealing with such matters,
except where such violations would not reasonably be expected to have a Material
Adverse Effect. The consummation of the Transactions will not give rise to any
right of termination or right of
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renegotiation on the part of any union under any collective bargaining agreement
to which Parent, either Borrower or any Subsidiary is bound.
SECTION 3.23. Year 2000. The replacement of internally developed
business critical software or other solutions necessary to address the year 2000
issue in respect of internally developed business critical software is expected
to be completed by December 31, 1999. As of the Closing Date, the cost to
Parent and its Subsidiaries of such replacement or other solution, to the extent
not reflected or reserved for on the consolidated balance sheet of Parent, would
not reasonably be expected to have a Material Adverse Effect.
ARTICLE IV
Conditions of Lending
The obligations of the Lenders to make Loans and of the Issuing Bank
to issue, amend, renew or extend Letters of Credit hereunder are subject to the
satisfaction of the following conditions:
SECTION 4.01. All Credit Events. On the date of each Borrowing,
including each Borrowing of a Swingline Loan, and on the date of each issuance,
amendment, renewal or extension of a Letter of Credit (each such event being
called a "Credit Event"):
(a) The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.03 (or such notice shall have been deemed
given in accordance with Section 2.02(f), 2.03 and 2.23) or, in the case of the
issuance, amendment, renewal or extension of a Letter of Credit, the Issuing
Bank and the Administrative Agent shall have received a notice requesting the
issuance, amendment, renewal or extension of such Letter of Credit as required
by Section 2.22(b) or, in the case of the Borrowing of a Swingline Loan, the
Swingline Lender and the Administrative Agent shall have received a notice
requesting such Swingline Loan as required by Section 2.23(b).
(b) The representations and warranties set forth in Article III hereof
shall be true and correct in all material respects on and as of the date of such
Credit Event with the same effect as though made on and as of such date, except
to the extent such representations and warranties relate to an earlier date.
(c) No Event of Default or Default shall have occurred and be
continuing.
Each Credit Event shall be deemed to constitute a representation and
warranty by the applicable Borrower and Parent on the date of such Credit Event
as to the matters specified in paragraphs (b) and (c) of this Section 4.01.
SECTION 4.02. First Credit Event. On the Closing Date:
(a) The Administrative Agent shall have received, on behalf of itself
and the Lenders, a favorable written opinion of each of (i) Debevoise &
Plimpton, New York counsel for Parent and its Subsidiaries, substantially
to the effect set forth in Exhibit N-1, (ii) Ritch, Heather y Mueller,
S.C., Mexican counsel for JCISA and its subsidiaries, substantially to the
effect set forth in Exhibit N-2, (iii) Bonn & Schmitt, Luxembourg counsel
for Parent, substantially to the effect set forth in Exhibit N-3,
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(iv) Nauta Dutilh, Dutch counsel for Parent and its Subsidiaries,
substantially to the effect set forth in Exhibit N-4, and (v) each local
counsel listed on Schedule 4.02(a), substantially to the effect set forth
in Exhibit N-5, in each case (A) dated the Closing Date, (B) addressed to
the Administrative Agent, the Collateral Agent and the Lenders, and (C)
covering such other matters relating to the Loan Documents and the other
transactions contemplated hereby as the Administrative Agent shall
reasonably request, and Parent and the Borrowers hereby request such
counsel to deliver such opinions.
(b) The Administrative Agent shall have received (i) a copy of the
certificate or articles of incorporation, including all amendments thereto,
of each Loan Party, certified, if available, as of a recent date by the
Secretary of State or other Governmental Authority of the state or other
jurisdiction of its organization, and, if applicable, a certificate as to
the good standing of each Loan Party as of a recent date, from such
Secretary of State or other Governmental Authority; (ii) a certificate of
the Secretary, Assistant Secretary or officer or director, as the case may
be, of each Loan Party dated the Closing Date and certifying (A) that
attached thereto is a true and complete copy of the by-laws, if any, of
such Loan Party as in effect on the Closing Date and at all times since a
date prior to the date of the resolutions described in clause (B) below,
(B) that attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors (or other corporate or comparable body,
as appropriate) of such Loan Party authorizing the execution, delivery and
performance of the Loan Documents to which such Person is a party and, in
the case of the Borrowers, the borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended and are in full
force and effect, (C) that the certificate or articles of incorporation of
such Loan Party delivered have not been amended and (D) as to the
incumbency and specimen signature of each officer executing any Loan
Document or any other document delivered in connection herewith on behalf
of such Loan Party; and (iii) a certificate of another officer as to the
incumbency and specimen signature of the Secretary or Assistant Secretary
executing the certificate pursuant to (ii) above.
(c) The Administrative Agent shall have received a certificate, dated
the Closing Date and signed by a Responsible Officer of Parent and each
Borrower, confirming compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 4.01.
(d) The Administrative Agent shall have received all fees, costs and
expenses due and payable on or prior to the Closing Date, including the
fees referred to in Sections 2.05(b).
(e) The Pledge Agreement shall have been duly executed by the parties
thereto and delivered to the Collateral Agent and shall be in full force
and effect, and all the outstanding Capital Stock of the Persons pledged
thereunder shall have been duly and validly pledged thereunder (for
purposes of U.S. law, insofar as such law may be applicable) to the
Collateral Agent for the ratable benefit of the Secured Parties and (to the
extent required to perfect the pledge of Capital Stock of any Foreign
Subsidiary thereunder) to the extent such Capital Stock is certificated,
certificates representing such shares, accompanied by instruments of
transfer and stock powers endorsed in blank, shall be in the actual
possession of the Collateral Agent, provided that (i) neither JCI nor any
Domestic Subsidiary shall be required
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to pledge more than 65% of the Voting Stock of any Foreign Subsidiary of
such Person and (ii) no Foreign Subsidiary of JCI shall be required to
pledge the Capital Stock of any of its Foreign Subsidiaries.
(f) The Security Agreement shall have been duly executed by the Loan
Parties party thereto and shall have been delivered to the Collateral Agent
and shall be in full force and effect on such date and each document
(including each Uniform Commercial Code financing statement) required by
law or reasonably requested by the Administrative Agent to be filed,
registered or recorded in order to create in favor of the Collateral Agent
for the benefit of the Secured Parties a valid, legal and perfected first-
priority security interest in and lien on the Collateral (subject to any
Lien expressly permitted by Section 6.02) described in such agreement shall
have been delivered to the Collateral Agent.
(g) The Collateral Agent shall have received the results of a search
of the Uniform Commercial Code (or equivalent) filings made with respect to
the Loan Parties in the states (or other jurisdictions) within the United
States of America in which the chief executive office of each such Person
is located, any offices of such Persons in which records have been kept
relating to Accounts (as defined in the Security Documents) and the other
jurisdictions in which Uniform Commercial Code filings (or equivalent
filings, if any,) are to be made pursuant to such security document,
together with copies of the financing statements (or similar documents)
disclosed by such search, and accompanied by evidence reasonably
satisfactory to the Collateral Agent that the Liens indicated in any such
financing statement (or similar document) would be permitted under Section
6.02 or have been released.
(h) The Collateral Agent shall have received a Perfection Certificate
with respect to JCI dated the Closing Date and duly executed by a
Responsible Officer of JCI.
(i) (i) Each of the Mortgages, in form and substance reasonably
satisfactory to the Lenders, relating to each of the Mortgaged Properties
shall have been duly executed by the parties thereto and delivered to the
Collateral Agent and shall be in full force and effect, (ii) each of such
Mortgaged Properties shall not be subject to any Lien other than those
permitted under Section 6.02, (iii) each of such Mortgages shall have been
filed and recorded in the recording office as specified on Schedule 4.02(i)
(or a lender's title insurance policy, in form and substance reasonably
acceptable to the Collateral Agent, insuring such Mortgages as a first lien
on such Mortgaged Property (subject to any Lien permitted by Section 6.02)
shall have been received by the Collateral Agent) and, in connection
therewith, the Collateral Agent shall have received evidence satisfactory
to it of each such filing and recordation and (iv) the Collateral Agent
shall have received such other documents, including a policy or policies of
title insurance issued by a nationally recognized title insurance company,
together with such endorsements, coinsurance and reinsurance as may be
reasonably requested by the Collateral Agent and the Lenders, insuring the
Mortgages as valid first liens on the Mortgaged Properties, free of Liens
other than those permitted under Section 6.02, together with such surveys,
abstracts and appraisals required to be furnished pursuant to the terms of
the Mortgages or this Agreement.
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62
(j) Each of the Guarantee Agreements shall have been duly executed by
the parties thereto, shall have been delivered to the Collateral Agent and
shall be in full force and effect.
(k) The Indemnity, Subrogation and Contribution Agreement shall have
been duly executed by the parties thereto, shall have been delivered to the
Collateral Agent and shall be in full force and effect.
(l) The Administrative Agent shall have received a copy of, or a
certificate as to coverage under, the insurance policies required by
Section 5.06 and the applicable provisions of the Security Documents, each
of which shall be endorsed or otherwise amended to include a "standard" or
"New York" lender's loss payable endorsement and to name the Administrative
Agent as additional insured, in form and substance reasonably satisfactory
to the Administrative Agent.
(m) The Acquisition shall have been, or substantially simultaneously
with the first Credit Event shall be, consummated in accordance with the
Acquisition Agreement, and the Acquisition Agreement shall not have been
amended, modified or waived in any material respect, except with respect to
any amendment, modification or waiver approved by the Administrative Agent.
(n) The Borrowers shall have received at least $100,000,000 in gross
cash proceeds from the issuance of the Subordinated Notes.
(o) Parent shall have received net cash proceeds of not less than
$77,000,000 from Fund V and certain members of management of Parent and the
Borrowers.
(p) After giving effect to the Transactions and the other transactions
contemplated hereby, none of Parent, either Borrower or any Subsidiary
shall have outstanding any Indebtedness or preferred stock other than (A)
the extensions of credit under this Agreement, (B) the Subordinated Notes
and (C) the Indebtedness listed on Schedule 6.01(a) and the other
Indebtedness permitted by Section 6.01.
(q) Parent, each Borrower and their respective Subsidiaries shall have
obtained all consents and approvals of Governmental Authorities and third
parties necessary in connection with the Transactions and the continuing
operations of Parent and its Subsidiaries (after giving effect to the
Transactions), except to the extent that the failure to obtain such
consents and approvals would not reasonably be expected to have a Material
Adverse Effect; all such consents and approvals shall be in full force and
effect and all applicable waiting periods under applicable law shall have
expired without any governmental or judicial action being taken that has
had or would reasonably likely to have the effect of restraining,
preventing or imposing materially burdensome conditions on the Transactions
and the other transactions contemplated hereby.
ARTICLE V
Affirmative Covenants
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63
Each of Parent and each Borrower hereby agrees that, from and after
the Closing Date, so long as any Commitments shall remain in effect, and
thereafter until all outstanding Letters of Credit have been canceled or
expired, payment in full of the Loans, all reimbursement obligations under any
L/C Disbursement then due and owing, and any other amount then due and owing, to
any Lender or the Administrative Agent hereunder or under any Note, each of
Parent and each Borrower shall and (except in the case of delivery of financial
information) shall cause each of its Subsidiaries to:
SECTION 5.01. Financial Statements. Furnish to the Administrative
Agent and each Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of Parent, a copy of the consolidated balance sheet
of Parent as at the end of such fiscal year and the related consolidated
statements of income and retained earnings and of cash flows for such
fiscal year, setting forth in each case in comparative form the figures for
the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope of
the audit, by Deloitte & Touche LLP or other independent certified public
accountants of nationally recognized standing; and
(b) as soon as available, but in any event (i) not later than 60 days
after the end of each of the quarterly periods of the fiscal year of Parent
ended December 31, 1998 and (ii) not later than 45 days after the end of
each of the first three quarterly periods of each subsequent fiscal year of
Parent, the unaudited consolidated balance sheet of Parent as at the end of
such fiscal quarter and the related unaudited consolidated statements of
income and retained earnings and of cash flows of Parent for such fiscal
quarter and the portion of the fiscal year through the end of such fiscal
quarter, setting forth in each case in comparative form the figures for the
previous fiscal year, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit and other
adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by a Responsible Officer and disclosed therein, and
except, in the case of any financial statements delivered pursuant to Section
5.01(b), for the absence of certain notes).
SECTION 5.02. Certificates; Other Information. Furnish to the
Administrative Agent and each Lender:
(a) concurrently with the delivery of the financial statements
referred to in Section 5.01(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that, in
making the audit necessary therefor, no knowledge was obtained of any
Default or Event of Default, insofar as the same relates to any financial
accounting matters covered by their audit, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statements
referred to in Sections 5.01(a) and (b), a certificate of Parent, executed
on behalf of Parent by a Responsible Officer of Parent, stating that, to
the best of such Responsible Officer's knowledge, during such period (i) no
Subsidiary has been formed or acquired (or, if
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any such Subsidiary has been formed or acquired, either Borrower has
complied with the requirements of Section 5.11 with respect thereto), (ii)
neither Borrower nor any other Loan Party has changed its name, its
principal place of business, its chief executive office or the location of
any material item of tangible Collateral without complying with the
requirements of this Agreement and the Security Documents with respect
thereto and (iii) to the best of such Responsible Officer's knowledge, each
Borrower and each of the other Loan Parties has observed or performed all
of its covenants and other agreements, and satisfied every condition,
contained in this Agreement and the other Loan Documents to be observed,
performed or satisfied by it (and including therein a reasonably detailed
calculation of the covenants set forth in Sections 6.11, 6.12 and 6.13 and,
in the case of the annual financial statements, of Excess Cash Flow as of
the last day of such period), and that such Responsible Officer has
obtained no knowledge of any Default or Event of Default except, in each
case, as specified in such certificate;
(c) not later than 90 days after the beginning of each fiscal year of
Parent, a copy of the projections by Parent of the operating budget and
cash flow budget of Parent and the Subsidiaries for such fiscal year, such
projections to be accompanied by a certificate of a Responsible Officer to
the effect that such Responsible Officer believes such projections have
been prepared on the basis of reasonable assumptions;
(d) within five Business Days after the same are sent, copies of all
financial statements and reports which Parent or either Borrower sends to
its public stockholders, and within five Business Days after the same are
filed, copies of all financial statements and reports which Parent, either
Borrower or any Subsidiary of either Borrower may make to, or file with,
the Securities and Exchange Commission or any successor or analogous
Governmental Authority; and
(e) promptly, such additional financial and other information as the
Administrative Agent or any Lender (acting through the Administrative
Agent) may from time to time reasonably request.
SECTION 5.03. Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its material obligations of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of Parent or the applicable Subsidiary, as the case may
be.
SECTION 5.04. Conduct of Business and Maintenance of Existence.
Continue to engage in business of the same general type as now conducted by
Parent, the Borrowers and their respective Subsidiaries, taken as a whole, and
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of the business of Parent, the
Borrowers and the Subsidiaries, taken as a whole, except as otherwise permitted
pursuant to Section 6.04 or in connection with the Transactions, provided that
none of Parent, either Borrower or any of their Subsidiaries shall be required
to maintain any such rights, privileges and franchises, if the failure to do so
would not reasonably be expected to have a Material Adverse Effect; and comply
with all Contractual Obligations and Requirements of Law except to the extent
that failure to comply therewith would not, in the aggregate, be reasonably
expected to have a Material Adverse Effect.
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65
SECTION 5.05. Maintenance of Property. Keep all property useful and
necessary in the business of the Borrowers and the Subsidiaries of the
Borrowers, taken as a whole, in good working order and condition.
SECTION 5.06. Insurance. (a) Maintain with financially sound and
reputable insurance companies insurance on all its property material to the
business of Parent, the Borrowers and their respective Subsidiaries, taken as a
whole, in at least such amounts and against at least such risks as are usually
insured against in the same general area by companies engaged in the same or a
similar business; and furnish to the Administrative Agent, upon written request,
full information as to the insurance carried.
SECTION 5.07. Inspection of Property; Books and Records; Discussions.
Keep proper books of records and account in which full, complete and correct
entries in conformity with all material Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities; and permit
representatives of the Administrative Agent or any Lender (acting through the
Administrative Agent), at any reasonable time, upon reasonable notice, and as
often as may reasonably be desired, to visit and inspect any of its properties
and examine and, to the extent reasonable, make abstracts from any of its books
and records and to discuss the business, operations, properties and financial
and other condition of Parent and its Subsidiaries with officers and employees
of Parent and its Subsidiaries and with their independent certified public
accountants, in each case, (a) at the expense of Parent and the Borrowers (i)
with respect to any such actions by a Lender during the continuance of a Default
or an Event of Default or as otherwise required by Section 9.06 or (ii) with
respect to any such actions by the Administrative Agent and (b) at the expense
of the relevant Lender in any other case.
SECTION 5.08. Notices. Promptly give notice to the Administrative
Agent, the Issuing Bank and each Lender of:
(a) as soon as possible after a Responsible Officer of Parent or
either Borrower knows or reasonably should know thereof, the occurrence of
any Default or Event of Default;
(b) as soon as possible after a Responsible Officer of Parent or
either Borrower knows or reasonably should know thereof, any (i) default or
event of default under any Contractual Obligation of Parent, either
Borrower or any of their respective Subsidiaries other than as previously
disclosed to the Lenders, or (ii) litigation, investigation or proceeding
which may exist at any time between Parent, either Borrower or any of the
Subsidiaries of the Borrowers and any Governmental Authority, which in
either case, if not cured or if adversely determined, as the case may be,
would reasonably be expected to have a Material Adverse Effect;
(c) as soon as possible after a Responsible Officer of Parent or
either Borrower knows or reasonably should know thereof, any litigation or
proceeding which has a reasonable possibility of an adverse determination
which would result in a judgment against Parent, either Borrower or any of
their respective Subsidiaries of $5,000,000 or more and which is not
covered by insurance, or in which injunctive or similar relief is sought
that would reasonably be expected to have a Material Adverse Effect;
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(d) the following events, as soon as possible and in any event within
30 days after a Responsible Officer of Parent or either Borrower knows or
reasonably should know thereof: (i) the occurrence or expected occurrence
of any Reportable Event with respect to any Single Employer Plan (other
than a Reportable Event described in Section 4043(c)(9) of ERISA), a
failure to make any required contribution to a Single Employer Plan or
Multiemployer Plan, the creation of any Lien on the property of Parent,
either Borrower or any of the Subsidiaries in favor of the PBGC or a Plan
or any withdrawal from, or the termination, Reorganization or Insolvency
of, any Multiemployer Plan, if, as a result thereof, Parent, either
Borrower or any of the Subsidiaries would reasonably be expected to incur
any material liability; (ii) the existence of an Underfunding under a
Single Employer Plan that exceeds 10% of the value of the assets of such
Single Employer Plan, determined as of the most recent annual valuation
date of such Single Employer Plan on the basis of the actuarial assumptions
used to determine the funding requirements of such Single Employer Plan as
of such date; (iii) the institution of proceedings or the taking of any
other formal action by the PBGC or Parent, either Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal
from, or the termination, Reorganization or Insolvency of, any Single
Employer Plan or Multiemployer Plan if, as a result thereof, Parent, either
Borrower or any of the Subsidiaries would reasonably be expected to incur
any material liability; (iv) the occurrence or expected occurrence of any
event or condition under which Parent, either Borrower or any Commonly
Controlled Entity has incurred or would reasonably be expected to incur any
liability in respect of a Former Plan; or (v) with respect to any Foreign
Benefit Plan, the occurrence of any material noncompliance with applicable
foreign law or the incurrence by either Borrower or any other Loan Party of
any material liability;
(e) as soon as possible after a Responsible Officer of Parent or
either Borrower knows, and except as would not, individually or in the
aggregate, reasonably be expected to result in the payment of a Material
Environmental Amount, that (i) any Governmental Authority has identified
Parent, either Borrower or any of the Subsidiaries as a potentially
responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or any similar Environmental Law
for the cleanup of Materials of Environmental Concern at any location,
whether or not owned, leased or operated by Parent, either Borrower or any
of the Subsidiaries; (ii) any Governmental Authority may revoke any permit
pursuant to Environmental Law held by Parent, either Borrower or any of the
Subsidiaries of the Borrowers, or deny or refuse to renew any such permit
sought by Parent, either Borrower or any of the Subsidiaries of the
Borrowers; or (iii) any property owned, leased, or operated by Parent,
either Borrower or any of the Subsidiaries of the Borrowers is being listed
on, or proposed for listing on, the National Priorities List ("NPL") or the
Comprehensive Environmental Response, Compensation, and Liability
Information System ("CERCLIS") maintained by the U.S. Environmental
Protection Agency or any similar list maintained by any Governmental
Authority; and
(f) as soon as possible after a Responsible Officer of Parent or
either Borrower knows or reasonably should know thereof, any development or
event which as had or would reasonably be expected to have a material
adverse change in the business, operations, property or condition
(financial or otherwise) of Parent, either Borrower and the Subsidiaries,
taken as a whole.
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Each notice pursuant to this Section 5.08 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action Parent or the applicable Borrower proposes to
take with respect thereto.
SECTION 5.09. Environmental Laws. (a) Comply substantially with all
Environmental Laws applicable to it, and obtain, comply substantially with and
maintain any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws (collectively, "Environmental
Permits"); and (b) take all reasonable efforts to ensure that all of its
tenants, subtenants, contractors, subcontractors and invitees comply
substantially with all Environmental Laws, and obtain, comply substantially with
and maintain any and all Environmental Permits applicable to any of them insofar
as any failure to so comply, obtain or maintain reasonably would be expected to
adversely affect Parent, either Borrower or any of the Subsidiaries of the
Borrowers. For purposes of this Section 5.09(a), noncompliance shall be deemed
not to constitute a breach of this covenant, provided that, upon learning of any
actual or suspected noncompliance, Parent or the applicable Borrower shall in a
timely manner undertake all reasonable efforts to achieve substantial
compliance, and provided further that, in any case, such noncompliance, and any
other such noncompliance with any Environmental Law or Environmental Permit,
individually or in the aggregate, would not reasonably be expected to give rise
to the payment of a Material Environmental Amount.
SECTION 5.10. Use of Proceeds. Use the proceeds of the Loans and
request the issuance of Letters of Credit only for the purposes set forth in the
preamble to this Agreement.
SECTION 5.11. Additional Collateral; Further Assurances. (a) With
respect to any owned real property or fixtures located on owned real property,
in each case with a purchase price or a fair market value of at least
$1,000,000, in which either Borrower or a Domestic Subsidiary of JCI or any
Subsidiary of JCISA acquires ownership rights at any time after the Closing
Date, promptly grant to the Administrative Agent, for the benefit of the
Lenders, a Lien of record on all such owned real property and fixtures, upon
terms reasonably satisfactory in form and substance to the Administrative Agent
and in accordance with any applicable requirements of any Governmental Authority
(including, without limitation, any appraisals of such property under the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 which the
Administrative Agent reasonably deems to be required by law), provided that (i)
nothing in this Section 5.11(a) shall defer or impair the attachment or
perfection of any security interest in any Collateral covered by any of the
Security Documents which would attach or be perfected pursuant to the terms
thereof without action by either Borrower, any of its Subsidiaries or any other
Person and (ii) no such Lien shall be required to be granted as contemplated by
this Section 5.11(a) on any owned real property or fixtures the acquisition of
which is financed, or is to be financed within any time period permitted by
Section 6.01, until such Indebtedness is repaid in full (and not refinanced as
permitted by Section 6.01) or, as the case may be, the Borrowers determine not
to proceed with such financing or refinancing. In connection with any such
grant to the Administrative Agent, for the benefit of the Lenders, of a Lien of
record on any such real property in accordance with this Section 5.11, the
applicable Borrower or such Subsidiary shall deliver or cause to be delivered to
the Administrative Agent any surveys, title insurance policies, environmental
reports and other documents in connection with such grant of such Lien obtained
by it in connection with the acquisition of such ownership rights in such real
property or as the Administrative Agent shall reasonably request (in light of
the value of such real property and the cost and availability of such surveys,
title insurance
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policies, environmental reports and other documents and whether the delivery of
such surveys, title insurance policies, environmental reports and other
documents would be customary in connection with such grant of such Lien in
similar circumstances).
(b) With respect to any Person that, subsequent to the Closing Date,
becomes (i) a Domestic Subsidiary of Parent, (ii) a Foreign Subsidiary Holdco or
(iii) a Subsidiary of JCISA, promptly upon the request of the Administrative
Agent: (x) execute and deliver to the Administrative Agent, for the benefit of
the Secured Parties, a new pledge agreement or a supplement to the Pledge
Agreement as the Administrative Agent shall reasonably deem necessary or
reasonably advisable to grant to the Collateral Agent, for the benefit of the
Secured Parties, a Lien on the Capital Stock of such Subsidiary which, with
respect to any Domestic Subsidiary, is owned by Parent or any of its
Subsidiaries or, with respect to any Subsidiary of JCISA, owned by JCISA or any
of its Subsidiaries, (y) deliver to the Collateral Agent the certificates (if
any) representing such Capital Stock, together with undated stock powers
executed and delivered in blank by a duly authorized officer of the applicable
Borrower or such Subsidiary, as the case may be, and (z) cause such new
Subsidiary (if it is a Subsidiary of either Borrower) (A) to become a party to
the applicable Security Documents and Guarantee Agreements, in each case
pursuant to documentation which is in form and substance reasonably satisfactory
to the Administrative Agent, and (B) to take all actions reasonably deemed by
the Administrative Agent to be necessary or reasonably advisable to cause the
Lien created by the applicable Security Documents to be duly perfected in
accordance with all applicable Requirements of Law, including, without
limitation, the filing of financing statements in such jurisdictions as may be
reasonably requested by the Administrative Agent.
(c) With respect to any Person that, subsequent to the Closing Date,
becomes a Foreign Subsidiary and which has Voting Stock which is owned directly
by (i) JCI or (ii) a Domestic Subsidiary of Parent, promptly upon the request of
the Administrative Agent: (A) JCI or such Domestic Subsidiary shall execute and
deliver to the Administrative Agent a new Pledge Agreement or a supplement to
the Pledge Agreement as the Administrative Agent shall reasonably deem necessary
or reasonably advisable to grant to the Collateral Agent, for the benefit of the
Secured Parties, a Lien on the Capital Stock of such Foreign Subsidiary which is
owned directly by JCI or any such Domestic Subsidiary of Parent (provided that
in no event shall more than 65% of the Voting Stock of any such Foreign
Subsidiary be required to be so pledged) and (ii) to the extent reasonably
deemed advisable by the Administrative Agent to perfect such security interest,
deliver to the Administrative Agent certificates (if any) representing such
Voting Stock, together with undated stock powers executed and delivered in blank
by a duly authorized officer of JCI or such Domestic Subsidiary of Parent, as
the case may be.
(d) Notwithstanding anything to the contrary contained herein, no
Subsidiary shall be required to comply with the provisions of this Section 5.11
until such date as either (i) the consolidated gross revenues of such Subsidiary
and its Subsidiaries for the most recently completed period of four consecutive
fiscal quarters or (ii) the consolidated assets of such Subsidiary and its
Subsidiaries, exceed $2,500,000 (it being understood that any such Subsidiary
which achieves such assets or revenues after the date hereof shall be deemed,
for purposes of this Section 5.11 only, to have been newly acquired by Parent or
the applicable Borrower on the date upon which such assets or revenues, as the
case may be, are achieved).
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ARTICLE VI
Negative Covenants
Each of Parent and each Borrower hereby agrees that, so long as the
Revolving Credit Commitments remain in effect, and thereafter until all
outstanding Letters of Credit have been canceled or expired, payment in full of
the Revolving Loans and the Term Loans, all L/C Disbursements then due and
owing, and any other amount then due and owing hereunder or under any Note to
any Lender, each of Parent and each Borrower shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly:
SECTION 6.01. Indebtedness. Create, incur, assume or suffer to exist
any Indebtedness, except:
(a) Indebtedness for borrowed money existing on the date hereof and
set forth on Schedule 6.01(a);
(b) Indebtedness created hereunder and under the other Loan
Documents;
(c) Indebtedness of the Borrowers on account of the Subordinated
Notes;
(d) Guarantees:
(i) of the Subordinated Notes, provided that (x) such Guarantees
are subordinated to the Obligations to the same extent as the
Subordinated Notes and (y) no Subsidiary shall Guarantee all or any
part of the Subordinated Notes unless such Subsidiary also Guarantees
the Obligations;
(ii) in connection with up to an aggregate principal amount of
$10,000,000 of Indebtedness outstanding at any time incurred by any
Management Investors in connection with any Management Subscription
Agreements or other purchases by them of Capital Stock of Parent or
any of its Subsidiaries, and any refinancings, refundings, extensions
or renewals thereof, provided that such amount shall be reduced by the
aggregate then outstanding principal amount of loans and advances made
in reliance upon the provisions of Section 6.03(k);
(iii) in respect of third-party loans and advances to officers
or employees of Parent or any of its Subsidiaries (x) for travel and
entertainment expenses incurred in the ordinary course of business,
(y) for relocation expenses incurred in the ordinary course of
business or (z) for other purposes, and in the case of this clause
(z), in an aggregate amount (as to Parent and all its Subsidiaries) of
up to $1,500,000 outstanding at any time;
(iv) by any Subsidiary (other than a Foreign Subsidiary Holdco)
in respect of Indebtedness of a Person in connection with joint
ventures or similar arrangements in respect of which no other co-
investor or other Person has a greater legal or beneficial ownership
interest than Parent and its Subsidiaries, and as to all of such
Persons does not at any time exceed $7,500,000 in aggregate principal
amount, provided that (x) such amount shall be increased by an amount
equal to $1,000,000 on each anniversary of
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70
the Closing Date, commencing on the second anniversary of the Closing
Date, so long as no Default or Event of Default shall have occurred
and be continuing on any date on which such amount is to be increased
and (y) such amount and any increase in such amount permitted by
clause (x) shall be reduced by the aggregate amount of Investments
permitted by Section 6.03(i);
(v) of Parent and its Subsidiaries under any Hedging Agreements;
and
(vi) other than those described in clauses (i) through (v) of
this paragraph (d), by any Subsidiary (other than a Foreign Subsidiary
Holdco) in an aggregate amount not to exceed $2,500,000;
(e) to the extent that any Indebtedness may be incurred or arise
thereunder, Indebtedness of Parent and any of its Subsidiaries under any
Hedging Agreements;
(f) Indebtedness of Parent to any wholly owned Subsidiary and
Indebtedness of any Subsidiary to Parent or any other wholly owned
Subsidiary of Parent;
(g) additional Indebtedness of Parent or any of its Subsidiaries
which is subordinated to the obligations of the Loan Parties hereunder not
exceeding $20,000,000 in aggregate principal amount at any one time
outstanding, provided that any such Indebtedness shall have terms and
conditions which are not materially more burdensome to the Loan Parties
than, and subordination provisions substantially similar to, the
Subordinated Notes;
(h) Indebtedness of any Subsidiary (other than any Foreign Subsidiary
Holdco) incurred to finance or refinance the purchase price of, or
Indebtedness of any Subsidiary (other than any Foreign Subsidiary Holdco)
assumed in connection with, any Permitted Acquisition permitted by Section
6.03(n), provided that (i) such Indebtedness is incurred prior to,
substantially simultaneously with or within six months after such
acquisition or in connection with a refinancing thereof, (ii) if such
Indebtedness is owed to a Person, other than the Person from whom such
acquisition is made or any Affiliate thereof, such Indebtedness shall have
terms and conditions reasonably satisfactory to the Required Lenders and
shall not exceed 60% of the purchase price of such acquisition (including
any Indebtedness (excluding subordinated Indebtedness) assumed in
connection with such acquisition but excluding any Indebtedness under this
Agreement incurred to finance such acquisition), (iii) immediately after
giving effect to such acquisition no Default or Event of Default shall have
occurred and be continuing and (iv) the aggregate principal amount of
Indebtedness which may be incurred pursuant to this paragraph (h) shall not
exceed $10,000,000 during the term of this Agreement; and any refinancing,
refunding, renewal or extension of any such Indebtedness; provided further
that, the amount of such Indebtedness is not increased at the time of such
refinancing, refunding, renewal or extension except by an amount equal to
the premium or other amounts paid, and fees and expenses incurred, in
connection with such refinancing, refunding, renewal or extension;
(i) Indebtedness of a Person that becomes a Subsidiary of either
Borrower after the date hereof, provided that (i) such Indebtedness existed
at the time such
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71
Person became a Subsidiary and was not created in anticipation thereof,
(ii) immediately after giving effect to the acquisition of such Person by
the applicable Borrower, no Default or Event of Default shall have occurred
and be continuing and (iii) the aggregate principal amount of Indebtedness
which may be incurred pursuant to this paragraph (i) shall not exceed
$15,000,000 during the term of this Agreement; and any refinancing,
refunding, renewal or extension of any such Indebtedness;
(j) Indebtedness of any Subsidiary (other than any Foreign Subsidiary
Holdco) incurred to finance or refinance the acquisition of fixed or
capital assets (whether pursuant to a loan, a Financing Lease or otherwise)
and any other Financing Leases in an aggregate principal amount not
exceeding as to the Borrowers and all Subsidiaries $10,000,000 at any time
outstanding;
(k) Indebtedness of JCISA and its Mexican Subsidiaries incurred in
the ordinary course of business to finance the working capital needs of
JCISA and such Subsidiaries, provided that the aggregate principal amount
of any such Indebtedness pursuant to this paragraph (k) shall not exceed
$5,000,000 (or the equivalent thereof in Mexican Pesos);
(l) Indebtedness of Foreign Subsidiaries (other than Mexican
Subsidiaries and Foreign Subsidiary Holdcos) of Parent incurred in the
ordinary course of business to finance the working capital needs of such
Foreign Subsidiaries;
(m) Indebtedness of Parent or any of its Subsidiaries incurred to
finance insurance premiums in the ordinary course of business;
(n) Indebtedness arising from the honoring of a check, draft or
similar instrument against insufficient funds, provided that such
Indebtedness is extinguished within two Business Days of its incurrence;
(o) Indebtedness of any Foreign Subsidiary (other than any Foreign
Subsidiary Holdco) of Parent fully supported on the date of the incurrence
thereof by a Foreign Backstop Letter of Credit;
(p) Indebtedness arising from performance, appeal, judgment, replevin
and similar bonds and suretyship arrangements, all in the ordinary course
of business; and
(q) additional Indebtedness of Subsidiaries (other than Foreign
Subsidiary Holdcos) of Parent, provided that the aggregate principal amount
of any such Indebtedness incurred pursuant to this paragraph (q) (i) by all
such Subsidiaries shall not exceed $10,000,000 (or the equivalent thereof
in the applicable foreign currencies) and (ii) by Domestic Subsidiaries and
Mexican Subsidiaries of Parent shall not exceed $2,000,000 (or the
equivalent thereof in applicable foreign currencies);
SECTION 6.02. Liens. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, now owned or hereafter
acquired by it, except:
(a) Liens existing on the date hereof and set forth on Schedule
6.02(a);
(b) Liens created pursuant to the Loan Documents;
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72
(c) Liens for taxes, assessments and similar charges not yet
delinquent or the nonpayment of which in the aggregate would not reasonably
by expected to have a Material Adverse Effect, or which are being contested
in good faith by appropriate proceedings, provided that adequate reserves
with respect thereto are maintained on the books of Parent or the
Subsidiaries, as the case may be, in conformity with GAAP (or, in the case
of relevant Foreign Subsidiaries of Parent, generally accepted accounting
principles in effect from time to time in their respective jurisdictions of
incorporation);
(d) pledges, deposits or other Liens in connection with workers'
compensation, unemployment insurance and other social security benefits or
other insurance related obligations (including pledges or deposits or other
Liens securing liability to insurance carriers under insurance or self-
insurance arrangements);
(e) Liens to secure the performance of bids, trade contracts (other
than for borrowed money), obligations for utilities, leases, statutory
obligations, surety and appeal bonds, performance bonds, judgment and like
bonds, replevin and similar bonds and other obligations of a like nature
incurred in the ordinary course of business;
(f) zoning restrictions, easements, rights-of-way, restrictions,
other similar encumbrances incurred in the ordinary course of business and
minor irregularities of title which do not materially interfere with the
ordinary conduct of the business of Parent and its Subsidiaries taken as a
whole;
(g) Liens securing Indebtedness of Parent and its Subsidiaries
permitted by Section 6.01(h) or Section 6.01(j), provided that (i) such
Liens shall be created prior to, substantially simultaneously with or
within six months of the acquisition thereby financed or the date of the
incurrence or assumption of such Indebtedness and (ii) such Liens do not at
any time encumber any property other than the property financed by such
Indebtedness;
(h) Liens on the property or assets of a Person which becomes a
Subsidiary after the date hereof securing Indebtedness permitted by Section
6.01(i), provided that (i) such Liens existed at the time such Person
became a Subsidiary and were not created in anticipation thereof and (ii)
any such Lien is not spread to cover any property or assets of such Person
after the time such Person becomes a Subsidiary;
(i) Liens of landlords or of mortgagees of landlords arising by
operation of law or pursuant to the terms of real property leases, provided
that the rental payments secured thereby are not yet due and payable;
(j) Liens arising by reason of any judgment, decree or order of any
court or other Governmental Authority, if appropriate legal proceedings
which may have been duly initiated for the review of such judgment, decree
or order, are being diligently prosecuted and shall not have been finally
terminated or the period within which such proceedings may be initiated
shall not have expired;
(k) Liens existing on assets or properties at the time of the
acquisition thereof by Parent or any of the Subsidiaries which do not
materially interfere with the use, occupancy, operation and maintenance of
structures existing on the property subject
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73
thereto or extend to or cover any assets or properties of Parent or such
Subsidiary other than the assets or property being acquired;
(l) any encumbrance or restriction (including, without limitation,
put and call agreements) with respect to the Capital Stock of any joint
venture or similar arrangement pursuant to the joint venture or similar
agreement with respect to such joint venture or similar arrangement,
provided that no such encumbrance or restriction affects in any way the
ability of Parent or any of the Subsidiaries to comply with the provisions
of Section 5.11;
(m) Liens on property of any Foreign Subsidiary of Parent securing
Indebtedness of such Foreign Subsidiary of Parent permitted by Sections
6.01(d)(iv), 6.01(l) and 6.01(q);
(n) Liens securing Guarantees permitted under Section 6.01(d)(ii) or
(iii);
(o) Liens on the accounts receivable and inventory of the Mexican
Subsidiaries of Parent to secure Indebtedness permitted by Section 6.01(k),
provided that such Liens secure only such Indebtedness and do not extend to
the assets of Parent or any other Subsidiary;
(p) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business that are not
overdue for a period of more than 60 days or which are being contested in
good faith by appropriate proceedings;
(q) Liens on the assets of Parent or its Subsidiaries (not otherwise
permitted hereunder) which secure obligations not exceeding (as to the
Borrowers and the Subsidiaries in the aggregate) $2,500,000 in aggregate
amount at any time outstanding; and
(r) Liens on Intellectual Property and foreign patents, trademarks,
trade names, copyrights, technology, know-how and processes to the extent
such Liens arise from the granting of licenses to use such Intellectual
Property and foreign patents, trademarks, trade names, copyrights,
technology, know-how and processes to any Person in the ordinary course of
business of Parent and its Subsidiaries.
SECTION 6.03. Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment (each an "Investment") in, any
Person, except:
(a) Investments existing on the Closing Date and set forth on
Schedule 6.03(a);
(b) Investments in cash and Cash Equivalents;
(c) Investments constituting Capital Expenditures permitted pursuant
to Section 6.11;
(d) extensions of trade credit in the ordinary course of business;
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(e) loans and advances to officers, directors or employees of Parent
or its Subsidiaries (i) for travel, entertainment and relocation expenses
in the ordinary course of business, (ii) for other purposes in an aggregate
amount for Parent and its Subsidiaries not to exceed $1,500,000 at any one
time outstanding and (iii) relating to indemnification or reimbursement of
any officers, directors or employees in respect of liabilities relating to
their serving in any such capacity or as otherwise specified in Section
6.07;
(f) Investments in Parent, either Borrower or any wholly owned
Subsidiary;
(g) Investments in the nature of pledges or deposits with respect to
leases or utilities provided to third parties in the ordinary course of
business or otherwise described in Section 6.02(d), (e) or (i);
(h) Investments representing non-cash consideration received by
Parent or any of its Subsidiaries in connection with any sale or other
disposition of the property of Parent or any of its Subsidiaries permitted
by Section 6.05;
(i) Investments by Parent or any of its Subsidiaries in one or more
Persons in connection with joint ventures or similar arrangements in
respect of which no other co-investor or other Person has a greater legal
or beneficial ownership interest than Parent or such Subsidiary, in an
aggregate amount, when added to the amount of Permitted Acquisitions made
pursuant to paragraph (n) below, not to exceed $25,000,000 at any one time
outstanding;
(j) Investments representing evidences of Indebtedness, securities or
other property received from another Person in connection with any
bankruptcy proceeding or other reorganization of such other Person or as a
result of foreclosure, perfection or enforcement of any Lien or exchange
for evidences of Indebtedness, securities or other property of such other
Person, provided that any such securities or other property received by any
Loan Party party to any Security Document is pledged to the Collateral
Agent for the benefit of the Secured Parties pursuant to the Security
Documents;
(k) loans and advances to Management Investors in connection with the
purchase by such Management Investors of Capital Stock of Parent or any of
its Subsidiaries of up to $10,000,000 outstanding at any time, provided
that such amount shall be reduced by the aggregate principal amount of
Indebtedness in respect of Guarantees permitted by Section 6.01(d)(ii);
(l) Investments in the Capital Stock of Parent which (i) is held by
Parent as treasury stock and is restored to unissued status or is
eliminated from authorized shares, or options in respect thereof or (ii) is
purchased by JCI in connection with the exercise of management stock
options issued by JCI to officers, directors and employees of Parent and
its Subsidiaries;
(m) Investments of Parent and its Subsidiaries under any Hedging
Agreements;
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(n) the acquisition of all or substantially all of the business or
assets or the Capital Stock of any Person or any business unit thereof (a
"Permitted Acquisition"), provided that:
(i) such acquisition is expressly permitted by Section 6.04;
and
(ii) the aggregate consideration (including cash and any
Indebtedness assumed in connection with such acquisitions) for all
such acquisitions made pursuant to this paragraph (n), when added to
the amount of Investments permitted pursuant to paragraph (i) above,
does not exceed $25,000,000 at any time outstanding;
provided in each case that, (A) the target of such acquisition has positive
Consolidated EBITDA, calculated on a pro forma basis after giving effect to
such acquisition (such calculation to be made in a manner reasonably
satisfactory to the Administrative Agent and to be evidenced by a
certificate in form and substance reasonably satisfactory to the
Administrative Agent signed by a Responsible Officer of each Borrower and
delivered to the Administrative Agent (which shall promptly deliver copies
to each Lender) at least three Business Days prior to the consummation of
such acquisition) and (B) after giving effect thereto, no Default or Event
of Default shall occur as a result of such acquisition;
(o) Investments in notes receivable and other instruments and
securities obtained in connection with transactions permitted by Section
6.05(d); and
(p) additional Investments in an aggregate amount not to exceed
$10,000,000 at any one time outstanding.
SECTION 6.04. Fundamental Changes. Enter into any merger
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets except:
(a) any Subsidiary of Parent or either Borrower may be merged or
consolidated with or into Parent or such Borrower (provided that Parent or
such Borrower shall be the continuing or surviving corporation) or with or
into any one or more wholly owned Subsidiaries of Parent (provided that any
such wholly owned Subsidiary or Subsidiaries shall be the continuing or
surviving corporation);
(b) any Subsidiary of Parent or either Borrower may liquidate or
sell, lease, transfer or otherwise dispose of any or all of its assets
(upon voluntary liquidation or otherwise) to such Parent or Borrower or any
other wholly owned Subsidiary of Parent or such Borrower (provided that no
Loan Party shall sell or otherwise dispose of any Collateral (other than
inventory in the ordinary course of business and, to the extent permitted
by Sections 6.03, 6.06 and 6.08, cash and Cash Equivalents) pursuant to
this clause (b) to any Subsidiary that is not a Loan Party);
(c) Parent may consolidate or merge with or into or transfer all or
substantially all its assets to an Affiliate incorporated or organized for
the purpose of reincorporating or reorganizing Parent in another
jurisdiction in the United States of America, the Cayman Islands,
Luxembourg or the Kingdom of the Netherlands
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(including the Netherlands Antilles) or any other member of the European
Union, or changing its legal structure to a corporation or other entity,
provided that (i) no such action shall be taken if to do so would adversely
affect the Secured Parties and (ii) any such successor entity to Parent
shall execute or otherwise agree in a writing reasonably satisfactory to
the Administrative Agent to be bound by all applicable Loan Documents to
which Parent is a party and take all actions reasonably requested by the
Administrative Agent to comply with Section 5.11, including the delivery of
legal opinions reasonably satisfactory to the Administrative Agent;
(d) pursuant to the Transactions; and
(e) as permitted by Section 6.05.
SECTION 6.05. Sale of Assets. Convey, sell, lease, assign, transfer
or otherwise dispose of any of its property, business or assets (including
leasehold interests), whether now owned or hereafter acquired, or, in the case
of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock
to any Person other than Parent or any wholly owned Subsidiary of Parent,
except:
(a) the sale or other disposition of inventory, or of surplus,
obsolete or worn out property or assets, whether now owned or hereafter
acquired, in the ordinary course of business;
(b) the sale or other disposition of any other property or assets in
the ordinary course of business (it being understood that this shall not
include the sale or other disposition of all or substantially all of any
business unit);
(c) the sale or other disposition of any property or assets (other
than assets described in clauses (a) and (b) above), provided that the
aggregate market value of all assets so sold or disposed of in any period
of twelve consecutive months shall not exceed $5,000,000;
(d) the sale or discount without recourse of accounts receivable or
notes receivable arising in the ordinary course of business, or the
conversion or exchange of accounts receivable into or for notes receivable
in connection with the compromise or collection thereof, provided that, in
the case of any Foreign Subsidiary, any such sale or discount may be with
recourse if such sale or discount is consistent with customary practice in
such Foreign Subsidiary's country of business;
(e) the sale or other disposition of any assets or property by Parent
or any of its Subsidiaries to Parent, either Borrower or any wholly owned
Subsidiary thereof (provided that no Loan Party shall sell or otherwise
dispose of any Collateral (other than inventory in the ordinary course of
business and, to the extent permitted by Sections 6.03, 6.06 and 6.08, cash
and Cash Equivalents) pursuant to this clause (e) to any Subsidiary that is
not a Loan Party);
(f) the sale of the Capital Stock or all or substantially all of the
assets of the Subsidiaries set forth on Schedule 6.05(f);
(g) as permitted by Section 6.04(b), (c) or (d);
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(h) the abandonment, sale or other disposition of patents, trademarks
or other intellectual property that are, in the reasonable judgment of
Parent or either Borrower, no longer economically practicable to maintain
or useful in the conduct of the business of Parent, the Borrowers and the
Subsidiaries thereof taken as a whole;
(i) any sale or other disposition of the property of Parent or any of
its Subsidiaries, so long as the Net Proceeds of any such sale or other
disposition do not exceed $10,000,000 in the aggregate after the Closing
Date, provided that an amount equal to 100% of the Net Proceeds of such
sale or other disposition less the Reinvested Amount is applied in
accordance with Section 2.13(b); and
(j) any issuance, sale or other disposition of preferred stock (or
equivalent equity interest) of any Subsidiary constituting Indebtedness
created, incurred, assumed or existing in compliance with Section 6.01.
SECTION 6.06. Restricted Payments. Declare or pay any dividend
(other than dividends payable solely in common stock of Parent or options,
warrants or other rights to purchase common stock of Parent) on, or make any
payment on account of, or set apart assets for a sinking or other analogous fund
for, the purchase, redemption, defeasance, retirement or other acquisition of,
any shares of any class of Capital Stock of Parent that is not Indebtedness or
any warrants or options to purchase any such stock, whether now or hereafter
outstanding, or make any other distribution (other than dividends payable solely
in the common stock of Parent or options, warrants or other rights to purchase
common stock of Parent) in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of Parent (such declarations,
payments, setting apart, purchases, redemptions, defeasance, retirements,
acquisitions and distributions being herein called "Restricted Payments"),
except that:
(a) either Borrower and any other Subsidiary may pay cash dividends
in an amount sufficient to allow Parent to pay, and Parent may pay, its
obligations to CD&R under any agreement with CD&R for the rendering of
management consulting or financial advisory services, provided that such
amount shall not exceed in the aggregate $500,000 per annum plus reasonable
out-of-pocket expenses;
(b) either Borrower and any other Subsidiary may, and may pay cash
dividends in an amount sufficient to allow Parent to and Parent may,
repurchase shares of its common stock or rights, options or units in
respect thereof, from Management Investors, including as contemplated by
any Management Subscription Agreements, for an aggregate purchase price not
to exceed $10,000,000 plus $1,000,000 multiplied by the number of calendar
years that have commenced since the Closing Date, provided that such amount
shall be increased by an amount equal to the proceeds of any resales or new
issuances of shares and options to any such Management Investors, at any
time after the initial issuances to any Management Investors, together with
the aggregate amount of deferred compensation owed by Parent, or any of its
Subsidiaries to any such Management Investor that shall thereafter have
been canceled, waived or exchanged in connection with the grant to such
Management Investor of the right to receive or acquire shares of Parent's
or any Subsidiary's common stock; and
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(c) Parent and its Subsidiaries may enter into and consummate the
Transactions, and may pay cash dividends in an amount sufficient to allow
Parent to, and Parent may, pay all fees and expenses incurred in connection
with the Transactions and perform its obligations under or in connection
with the Transactions and (ii) to permit Parent to pay its Guarantee on
account of interest on the Subordinated Notes and the Subordinated Note
Documents, to the extent that the payment of such Guarantee does not
violate the subordination provisions contained in the Subordinated Notes or
the Subordinated Note Documents.
SECTION 6.07. Transactions with Affiliates. Enter into any
transaction, including any purchase, sale, lease or exchange of property or the
rendering of any service, with any Affiliate of Parent unless such transaction
(a) is otherwise permitted under this Agreement and (b) either (i) is upon terms
no less favorable to Parent, the applicable Borrower or its Subsidiary, as the
case may be, than it would obtain in a comparable arm's length transaction with
a Person that is not such an Affiliate, or (ii) has been approved by a majority
of the Disinterested Directors of Parent, or in the event that at the time of
any such transaction, there are no Disinterested Directors serving on the board
of directors or comparable body of Parent, such transaction shall be approved by
a nationally recognized expert with expertise in appraising the terms and
conditions of the type of transaction for which approval is required, provided
that nothing contained in this Section 6.07 shall be deemed to prohibit:
(i) Parent or any of its Subsidiaries from entering into or
performing any consulting, management or employment agreements or other
compensation arrangements with a director, officer or employee of Parent or
any of its Subsidiaries, provided that in the case of any such agreement or
arrangement with any director, such agreement or arrangement provides for
annual aggregate base compensation not in excess of $150,000 for such
director, in his capacity as such;
(ii) the payment of transaction expenses in connection with this
Agreement and the Transactions;
(iii) Parent or any of its Subsidiaries from entering into, making
payments pursuant to and otherwise performing an indemnification and
contribution agreement in favor of any of the Persons listed on Schedule
6.07(iii) and their Affiliates, any Management Investor and each Person who
is or becomes a director, officer, agent or employee of Parent or any of
the Subsidiaries, in respect of liabilities (A) arising under the
Securities Act of 1933, the Securities Exchange Act of 1934 and any other
applicable securities laws or otherwise, in connection with any offering of
securities by Parent or any of the Subsidiaries, (B) incurred to third
parties for any action or failure to act of Parent or any of the
Subsidiaries, predecessors or successors, (C) arising out of the
performance by CD&R of management consulting or financial advisory services
provided to Parent or any of the Subsidiaries, (D) arising out of the fact
that any indemnitee was or is a director, officer, agent or employee of
Parent or any of the Subsidiaries, or is or was serving at the request of
any such corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or enterprise or (E) to the
fullest extent permitted by Delaware or other applicable state law, arising
out of any breach or alleged breach by such indemnitee of his or her
fiduciary duty as a director or officer of Parent or any of the
Subsidiaries;
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(iv) Parent or any of the Subsidiaries from performing any agreements
or commitments with or to any Affiliate existing on the Closing Date and
described on Schedule 6.07(iv); or
(v) any transaction (including entering into and performing any
agreement with respect thereto) permitted under Section 6.01(d), 6.02(n),
6.03(e), 6.03(k), 6.04, 6.06 or 6.08, or any transaction with a wholly
owned Subsidiary of Parent.
For purposes of this Section 6.07, "Disinterested Director" shall mean, with
respect to any Person and transaction, a member of the board of directors or
comparable body of such Person who does not have any material direct or indirect
financial interest in or with respect to such transaction (other than by virtue
of such member's ownership of Capital Stock of Parent or any Subsidiary of
Parent).
SECTION 6.08. Business of Parent, Borrowers and Subsidiaries. (a)
Enter into any business, either directly or through any Subsidiary, except for
those businesses of the same general type as those in which Parent and the
Subsidiaries are engaged on the Closing Date or which are related thereto.
(b) In the case of Parent or any Foreign Subsidiary Holdco, engage in
any business or business activity other than (i) the Transactions and other
transactions contemplated by the Loan Documents and the provision of
administrative, legal, accounting and management services to or on behalf of
Parent or any of its Subsidiaries, (ii) holding the Capital Stock, directly or
indirectly, of the Borrowers or any Subsidiary (including any Subsidiary formed
or acquired after the Closing Date) and the issuance, sale or transfer of
Capital Stock of such Foreign Subsidiary Holdco or any Subsidiary to Parent or
any wholly owned Subsidiary thereof, and the exercise of rights and the
performance of obligations in connection therewith, (iii) the entry into, and
exercise of rights and performance of obligations in respect of, (A) the Loan
Documents to which Parent or such Foreign Subsidiary Holdco, as the case may be,
is a party, and any other agreement to which Parent or such Foreign Subsidiary
Holdco, as the case may be, is a party on the date hereof, in each case, as
amended, supplemented, waived or otherwise modified from time to time, and any
refinancings, refundings, renewals or extensions thereof, (B) contracts and
agreements with officers, directors and employees of Parent or such Foreign
Subsidiary Holdco, as the case may be, or a Subsidiary thereof relating to their
employment or directorships, (C) insurance policies and related contracts and
agreements and (D) equity subscription agreements, registration rights
agreements, voting and other stockholder agreements, engagement letters,
underwriting agreements and other agreements in respect of its equity securities
or any offering, issuance or sale thereof, including but not limited to in
respect of Management Subscription Agreements, (iv) with respect to Parent only,
the offering, issuance and sale of its equity securities, (v) with respect to
Parent only, the filing of registration statements, and compliance with
applicable reporting and other obligations, under federal, state or other
securities laws, (vi) with respect to Parent only, the listing of its equity
securities and compliance with applicable reporting and other obligations in
connection therewith, (vii) the retention of counsel, accountants and other
advisory and consultants, and, with respect to Parent only, transfer agents,
private placement agents and underwriters, (viii) the performance of obligations
under and compliance with its certificate of incorporation and by-laws, or any
applicable law, ordinance, regulation, rule, order, judgment, decree or permit,
(ix) the incurrence and payment of its operating and business expenses and any
taxes for which it may be liable, (x) making loans to or other Investments in,
or borrowing money from, other Subsidiaries or Parent, (xi) owning Intellectual
Property and foreign patents,
<PAGE>
80
trademarks, trade names, copyrights, technology, know-how and processes and
licensing such Intellectual Property and foreign patents, trademarks, trade
names, copyrights, technology, know-how and processes to other subsidiaries of
Parent, (xii) paying dividends and other distributions on account of its Capital
Stock (to the extent permitted by Section 6.06) and (xiii) other activities
incidental or related to any of the foregoing.
SECTION 6.09. Negative Pledge Clauses. Enter into any agreement
which prohibits or limits the ability of Parent or any of its Subsidiaries to
create, incur, assume or suffer to exist any Lien upon any of its property or
revenues, whether now owned or hereafter acquired, to secure the Obligations or,
in the case of any Guarantor, its Obligations under the applicable Guarantee
Agreement, other than (a) this Agreement and the other Loan Documents and any
related documents, (b) any industrial revenue or development bonds, agreements
governing any purchase money Liens, acquisition agreements or Financing Leases
or operating leases of real property entered into in the ordinary course of
business otherwise permitted hereby (in which case, any prohibition or
limitation shall only be effective against the assets financed, acquired or
leased thereby) or (c) as otherwise permitted by any Security Document.
SECTION 6.10. Optional Payments and Modifications of Debt Instruments
and other Material Agreements. (a) Make any optional payment, prepayment,
repurchase or redemption of the Subordinated Notes or make any optional payments
on account of or for a sinking or other analogous fund for the repurchase,
redemption, defeasance or other acquisition thereof (other than mandatory
payments of principal and interest and payments of, in each case, fees and
expenses required by the Subordinated Notes or the Subordinated Note Documents,
only to the extent permitted under the subordination provisions, if any,
applicable thereto), (b) make any amendment, supplement, modification or waiver
of any of the terms of the Subordinated Notes or the Subordinated Note Documents
(i) which amends or modifies the subordination provisions contained in the
Subordinated Notes and the Subordinated Note Documents; (ii) which shortens the
fixed maturity or increases the principal amount of, or increases the rate or
shortens the time of payment of interest on, or increases the amount or shortens
the time of payment of any principal or premium payable whether at maturity, at
a date fixed for prepayment or by acceleration or otherwise of the Indebtedness
evidenced by the Subordinated Notes or increases the amount of, or accelerates
the time of payment of, any fees or other amounts payable in connection
therewith to any holder of the Subordinated Notes; (iii) which relates to any
material affirmative or negative covenants or any events of default or remedies
thereunder and the effect of which is to subject Parent or any Subsidiary to any
more onerous or more restrictive provisions; or (iv) which otherwise adversely
affects the interests of the Lenders as senior creditors with respect to the
Subordinated Notes or the interests of the Lenders hereunder in any material
respect or (c) in the event of the occurrence of a Change in Control, repurchase
the Subordinated Notes, unless the Borrowers shall have (i) made payment in full
of the Loans, all L/C Disbursements and any other amounts then due and owing to
any Secured Party hereunder and cash collateralized the obligations of the
Borrowers in respect of Letters of Credit on terms reasonably satisfactory to
the Administrative Agent and Issuing Bank or (ii) made an offer to pay the
Loans, all L/C Disbursements and any amounts then due and owing to each Secured
Party hereunder and to cash collateralize the obligations of the Borrowers in
respect of Letters of Credit in respect of each Lender and shall have made
payment in full thereof to each such Lender or the Administrative Agent which
has accepted such offer and cash collateralized such obligations in respect of
Letters of Credit of each such Issuing Bank which has accepted such offer.
<PAGE>
81
SECTION 6.11. Capital Expenditures. Make any expenditure (a "Capital
Expenditure") in respect of the purchase or other acquisition of fixed or
capital assets (excluding (i) any such asset acquired in connection with normal
replacement and maintenance programs properly charged to current operations and
(ii) any Permitted Acquisition permitted by Section 6.03(n)) except for (x)
Capital Expenditures described in the immediately preceding parenthetical and
(y) additional Capital Expenditures, in the case of this clause (y) not
exceeding, in the aggregate for Parent and its Subsidiaries, during any fiscal
year of Parent the amount set forth below opposite such fiscal year:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1998 $15,000,000
1999 17,500,000
2000 17,500,000
2001 17,500,000
2002 17,500,000
2003 20,000,000
</TABLE>
; provided that any portion of such amount which is not so expended in the
fiscal year for which it is permitted above may be carried over to increase the
amount permitted for the next fiscal year of Parent and shall be deemed to be
the first amounts expended in such next fiscal year; provided, however, that
none of the amounts set forth in the table above shall be increased by more than
50% of such amount by virtue of any such carry-over.
SECTION 6.12. Consolidated Leverage Ratio. Permit the Consolidated
Leverage Ratio on the last day of any fiscal quarter of Parent ending during any
period set forth below to be in excess of the ratio set forth below for such
period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From and including September 30, 1998 6.25 to 1.00
through and including December 30,
1998
From and including December 31, 1998 5.90 to 1.00
through and including December 30,
1999
From and including December 31, 1999 5.00 to 1.00
through and including December 30,
2000
From and including December 31, 2000 4.25 to 1.00
through and including December 30,
2001
From and including December 31, 2001 3.75 to 1.00
through and including December 30,
2002
</TABLE>
<PAGE>
82
<TABLE>
<S> <C>
Thereafter 3.50 to 1.00
</TABLE>
SECTION 6.13. Consolidated Interest Coverage Ratio. Permit, for any
period of four consecutive fiscal quarters of Parent ending during any period
set forth below, the Consolidated Interest Coverage Ratio at the last day of
such four fiscal quarter period to be less than the ratio set forth below
opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From and including December 31, 1998 1.50 to 1.00
through and including December 30,
1999
From and including December 31, 1999 1.75 to 1.00
through and including December 30,
2000
From and including December 31, 2000 2.50 to 1.00
through and including December 30,
2001
From and including December 31, 2001 2.75 to 1.00
through and including December 30,
2002
Thereafter 3.00 to 1.00
</TABLE>
SECTION 6.14. Fiscal Year. Permit the fiscal year of Parent to end on
a day other than December 31.
ARTICLE VII
Events of Default
SECTION 7.01. Certain Bankruptcy Events. If any of the following
events shall occur and be continuing:
(a) Parent, either Borrower or any Material Subsidiary shall commence
any case, proceeding or other action (i) under any existing or future law
of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with
respect to it or its debts, or (ii) seeking appointment of a receiver,
trustee, custodian, conservator or other similar official for it or for all
or any substantial part of its assets, or Parent, either Borrower or any
Material Subsidiaries shall make a general assignment for the benefit of
its creditors;
<PAGE>
83
(b) there shall be commenced against Parent, either Borrower or any
Material Subsidiary any case, proceeding or other action of a nature
referred to in clause (a) above which (i) results in the entry of an order
for relief or any such adjudication or appointment or (ii) remains
undismissed, undischarged or unbonded for a period of 60 days;
(c) there shall be commenced against Parent, either Borrower or any
Material Subsidiary any case, proceeding or other action seeking issuance
of a warrant of attachment, execution, distraint or similar process against
all or any substantial part of its assets which results in the entry of an
order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof;
(d) Parent, either Borrower or any Material Subsidiary shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (a), (b) or (c) above;
or
(e) Parent, either Borrower or any Material Subsidiary shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due;
then, and in any such event:
(A) if such event is an Event of Default specified in clause (a) or
(b) of this Section 7.01 with respect to Parent or either Borrower, the
Commitments shall immediately terminate and the Loans hereunder (with
accrued interest thereon) and all other amounts owing under this Agreement
(including all amounts of obligations under Letters of Credit, whether or
not the beneficiaries of the then outstanding Letters of Credit shall have
presented the documents required thereunder) shall immediately become due
and payable; and
(B) if such event is any other Event of Default specified in this
Section 7.01, any or all of the following actions may be taken: (i) with
the consent of the Required Lenders, the Administrative Agent may, or upon
the request of the Required Lenders, the Administrative Agent shall, by
notice to the Borrowers, declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate; and (ii)
with the consent of the Required Lenders, the Administrative Agent may, or
upon the request of the Required Lenders, the Administrative Agent shall,
by notice to the Borrowers, declare the Loans hereunder (with accrued
interest thereon) and all other amounts owing on account thereof under this
Agreement (including all amounts due in respect of Letters of Credit,
whether or not the beneficiaries of the then outstanding Letters of Credit
shall have presented the documents required thereunder) to be due and
payable forthwith, whereupon the same shall immediately become due and
payable.
SECTION 7.02. Other Events of Default. If any of the following
events shall occur and be continuing:
(a) either Borrower shall fail to pay in the applicable currency any
principal of any Loan or the reimbursement obligation with respect to any
L/C Disbursement when due in accordance with the terms thereof or hereof
(it being understood that any
<PAGE>
84
conversion of a reimbursement obligation under a Letter of Credit into a
borrowing pursuant to Section 2.22(e) shall not constitute a failure to
make a payment in satisfaction of such reimbursement obligation) or either
Borrower shall fail to pay in the applicable currency any interest on any
Loan, or any other amount payable, within five days after any such interest
or other amount becomes due in accordance with the terms thereof or hereof;
(b) any representation or warranty made or deemed made by either
Borrower or any other Loan Party herein or in any other Loan Document or
that is contained in any certificate furnished by it at any time under or
pursuant to this Agreement or any such other Loan Document shall prove to
have been incorrect in any material respect on or as of the date deemed
made;
(c) Parent, either Borrower or any Subsidiary shall default in the
observance or performance of any agreement contained in Article VI or
Section 4.07, 4.08, 4.09 or 4.10 of the Security Agreement;
(d) either Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in paragraphs
(a) through (c) of this Section 7.02), and such default shall continue
unremedied for a period ending on the earlier of (i) the date 30 days after
a Responsible Officer of Parent or either Borrower shall have discovered or
should have discovered such default and (ii) the date 15 days after written
notice has been given to the Borrowers by the Administrative Agent;
(e) Parent, either Borrower or any of the Borrowers' Subsidiaries
shall (i) default in any payment in the applicable currency of principal of
or interest on any Material Indebtedness (other than the Loans and the
reimbursement obligations under the Letters of Credit), beyond the period
of grace, if any, provided in the instrument or agreement under which such
Indebtedness was created; or (ii) default in the observance or performance
of any other agreement or condition relating to any such Material
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause,
or to permit the holder or holders of such Material Indebtedness (or a
trustee or Administrative Agent on behalf of such holder or holders) to
cause, with the giving of notice or lapse of time if required, such
Material Indebtedness to become due prior to its stated maturity (an
"Acceleration"), and such time shall have lapsed and, if any notice (a
"Default Notice") shall be required to commence a grace period or declare
the occurrence of an Event of Default before notice of Acceleration may be
delivered, such Default Notice shall have been given;
(f) (i) any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of
Parent, either Borrower or any Commonly Controlled Entity, (iii) a
Reportable Event shall occur with respect to, or proceedings shall commence
to have a trustee appointed, or a trustee shall be appointed, to administer
or to terminate, any Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of a trustee is reasonably
likely to
<PAGE>
85
result in the termination of such Plan for purposes of Title IV of ERISA
(other than a standard termination pursuant to Section 4041(b) of ERISA),
(iv) any Single Employer Plan shall terminate for purposes of Title IV of
ERISA, (v) Parent, either Borrower or any Commonly Controlled Entity shall,
or is reasonably likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan, (vi) the occurrence or expected occurrence of any event or condition
which results or is reasonably likely to result in Parent, either Borrower
or any Commonly Controlled Entity becoming responsible for any liability in
respect of a Former Plan, (vii) with respect to any Foreign Benefit Plans,
any material noncompliance with applicable foreign law or the incurrence of
any material liability, or (viii) any other event or condition shall occur
or exist with respect to a Plan; and in each case in clauses (i) through
(viii) above, such event or condition, together with all other such events
or conditions, if any, would be reasonably expected to result in liability
which would have a Material Adverse Effect;
(g) one or more judgments or decrees shall be entered against Parent,
either Borrower or any of its Active Subsidiaries involving in the
aggregate a liability (net of any insurance or indemnity payments actually
received in respect thereof prior to or within 60 days from the entry
thereof, or to be received in respect thereof, in the event any appeal
thereof shall be unsuccessful) of $5,000,000 or more, and all such
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days from the entry thereof;
(h) (i) any of the Security Documents or Guarantee Agreements shall
cease, for any reason, to be in full force and effect other than pursuant
to the terms hereof or thereof, or Parent, either Borrower or any other
Loan Party which is a party to any of the Security Documents or Guarantee
Agreements shall so assert in writing or (ii) the Lien created by any of
the Security Documents shall cease to be enforceable and of the same effect
as to perfection and priority purported to be created thereby with respect
to any significant portion of the Collateral (other than in connection with
any termination of such Lien in respect of any Collateral as permitted
hereby or by any Security Document), and such failure of such Lien to be
perfected and enforceable with such priority shall have continued
unremedied for a period of 20 days;
(i) the Subordinated Notes, for any reason, shall not be or shall
cease to be validly subordinated as provided therein and in the
Subordinated Note Documents to the obligations of any Loan Party under this
Agreement and the other Loan Documents;
(j) a cash equity contribution (including from the sale of any
capital stock of Parent) to Parent shall fail to be made within 120 days
after the Closing Date in an amount at least equal to the difference
between (i) $80,000,000 and (ii) the cash equity contribution made to
Parent on the Closing Date; or
(k) a Change in Control shall have occurred;
then, and in any such event, either or both of the following actions may be
taken:
<PAGE>
86
(i) with the consent of the Required Lenders, the
Administrative Agent may, or upon the request of the Required Lenders,
the Administrative Agent shall, by notice to the Borrowers, declare
the Commitments to be terminated forthwith, whereupon the Commitments
shall immediately terminate; and
(ii) with the consent of the Required Lenders, the
Administrative Agent may, or upon the request of the Required Lenders,
the Administrative Agent shall, by notice to the Borrowers, declare
the Loans hereunder (with accrued interest thereon) and all other
amounts owing on account thereof under this Agreement (including all
amounts due in respect of Letters of Credit, whether or not the
beneficiaries of the then outstanding Letters of Credit shall have
presented the documents required thereunder) to be due and payable
forthwith, whereupon the same shall immediately become due and
payable.
ARTICLE VIII
The Administrative Agent and the Collateral Agent
SECTION 8.01. Appointment. Each of the Lenders and the Issuing Bank
hereby irrevocably designates and appoints each of the Administrative Agent and
the Collateral Agent (for purposes of this Article VIII, the Administrative
Agent and the Collateral Agent are referred to collectively as the "Agents") as
the agents of such Lender under this Agreement and the other Loan Documents, and
each such Lender irrevocably authorizes the Agents to take such action on behalf
of such Lender or the Issuing Bank under the provisions of this Agreement and
the other Loan Documents and to exercise such powers and perform such duties as
are expressly delegated to the Agents by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Agents shall not have any duties or responsibilities, except
those expressly set forth herein, or any fiduciary relationship with any Lender,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agents. The Administrative Agent is hereby
expressly authorized by the Lenders and the Issuing Bank, without hereby
limiting any implied authority, (a) to receive on behalf of the Lenders and the
Issuing Bank all payments of principal of and interest on the Loans, all
payments in respect of L/C Disbursements and all other amounts due to the
Lenders and the Issuing Bank hereunder, and promptly to distribute to each
Lender or the Issuing Bank its proper share of each payment so received, (b) to
give notice on behalf of each of the Lenders to the Borrowers of any Event of
Default specified in this Agreement of which the Administrative Agent has actual
knowledge acquired in connection with its agency hereunder, and (c) to
distribute to each Lender copies of all notices, financial statements and other
materials delivered by the Borrowers or any other Loan Party pursuant to this
Agreement or the other Loan Documents as received by the Administrative Agent.
Without limiting the generality of the foregoing, the Agents are hereby
expressly authorized to execute any and all documents (including releases) with
respect to the Collateral and the rights of the Secured Parties with respect
thereto, as contemplated by and in accordance with the provisions of this
Agreement and the Security Documents.
<PAGE>
87
SECTION 8.02. Delegation of Duties. Each of the Agents may execute
any and all of their respective duties under this Agreement and the other Loan
Documents by or through agents or attorneys-in-fact and shall be entitled to the
advice of counsel concerning all matters pertaining to such duties. Neither
Agent shall be responsible for the negligence or misconduct of any agent or
attorney-in-fact selected by it with reasonable care.
SECTION 8.03. Exculpatory Provisions. Neither Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any other Loan Document
(except for its or such Person's own gross negligence or willful misconduct) or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by Parent, either Borrower or any
officer thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by, either Agent under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of Parent or either Borrower to perform its obligations
hereunder or thereunder. Neither Agent shall be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of Parent, either
Borrower or any other Loan Party.
SECTION 8.04. Reliance by Agents. Each Agent shall be entitled to
rely, and shall be fully protected in relying, upon any writing, resolution,
notice, consent, certificate, affidavit, letter, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including counsel to
Parent or either Borrower), independent accountants and other experts selected
by the Administrative Agent. Each Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless it shall first receive such advice or concurrence of the Required Lenders
as it deems appropriate or it shall first be indemnified to its satisfaction by
the Lenders against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action. Each Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement and the other Loan Documents in accordance with a request of the
Required Lenders (or such larger number of Lenders as may be explicitly required
hereunder), and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Loans.
SECTION 8.05. Notice of Default. The Administrative Agent shall not
be deemed to have knowledge or notice of the occurrence of any Default or Event
of Default hereunder unless the Administrative Agent has received notice from a
Lender, Parent or either Borrower referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that the Administrative Agent receives such a notice,
the Administrative Agent shall give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders,
provided that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with
<PAGE>
88
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
SECTION 8.06. Acknowledgments and Representations by Lenders. Each
Lender expressly acknowledges that neither Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by either Agent hereinafter
taken, including any review of the affairs of Parent or either Borrower, shall
be deemed to constitute any representation or warranty by such Agent to any
Lender. Each Lender represents to each other party hereto that it has,
independently and without reliance upon the Agents or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of Parent and the Borrowers
and made its own decision to make its Loans hereunder and enter into this
Agreement. Each Lender also represents to each other party hereto that it will,
independently and without reliance upon either Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of Parent and the Borrowers. Each Lender represents to each
other party hereto that it is a bank, savings and loan association or other
similar savings institution, insurance company, investment fund or company or
other financial institution that makes or acquires commercial loans in the
ordinary course of its business, that it is participating hereunder as a Lender
for such commercial purposes, and that it has the knowledge and experience to be
and is capable of evaluating the merits and risks of being a Lender hereunder.
Except for notices, reports and other documents expressly required to be
furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
Parent or either Borrower which may come into the possession of the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
SECTION 8.07. Expense Reimbursement; Indemnification. Each Lender
agrees (a) to reimburse the Agents, on demand, in the amount of its pro rata
share (based on its Commitments hereunder) of any expenses incurred for the
benefit of the Lenders by the Agents, including counsel fees and compensation of
agents and employees paid for services rendered on behalf of the Lenders, that
shall not have been reimbursed by the Borrowers and (b) to indemnify and hold
harmless each Agent and any of its directors, officers, employees or agents, on
demand, in the amount of such pro rata share, from and against any and all
liabilities, taxes, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever that
may be imposed on, incurred by or asserted against it in its capacity as Agent
or any of them in any way relating to or arising out of this Agreement or any
other Loan Document or any action taken or omitted by it or any of them under
this Agreement or any other Loan Document, to the extent the same shall not have
been reimbursed by the Borrowers or any other Loan Party, provided that no
Lender shall be liable to an Agent or any such other indemnified Person for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements as are determined by a court
of competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or willful misconduct of such Agent or any of its
directors, officers, employees or agents.
<PAGE>
89
Each Revolving Credit Lender agrees to reimburse each of the Issuing Bank and
its directors, employees and agents, in each case, to the same extent and
subject to the same limitations as provided above for the Agents.
SECTION 8.08. Agents in their Individual Capacities. Each of the
Agents and its Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with Parent, either Borrower or any Subsidiary or
Affiliate thereof as though such Agent were not an Agent hereunder and under the
other Loan Documents. With respect to the Loans made by it, each of the Agents
shall have the same rights and powers under this Agreement and the other Loan
Documents as any Lender and may exercise the same as though it were not such
Agent and the terms "Lender" and "Lenders" shall include each of the Agents in
its respective individual capacity.
SECTION 8.09. Successor Agents. Subject to the appointment and
acceptance of a successor Agent as provided below, the Administrative Agent may
resign upon ten days' notice to the Lenders by notifying the Lenders and the
Borrowers. Upon any such resignation, the Required Lenders shall have the right
to appoint a successor Agent (provided that, to the extent that no Default or
Event of Default is continuing at the time of such appointment, such Agent shall
have been approved by the Borrowers). If no successor Agent shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent gives notice of its resignation, then
the retiring Agent may, on behalf of the Lenders, appoint a successor Agent
which shall be a Lender and be a bank with an office in New York, New York,
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as the Agent hereunder by a successor bank, such
successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent and the retiring Agent shall be
discharged from its duties and obligations hereunder. After an Agent's
resignation hereunder, the provisions of this Article and Section 9.06 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Agent. Without the consent of the
Borrowers, the Administrative Agent and the Collateral Agent may not be
different Persons.
(b) Upon appointment of the retiring Collateral Agent (the "Retiring
Collateral Agent"), such Retiring Collateral Agent shall promptly (i) deliver to
the new Collateral Agent all Collateral held by such Retiring Collateral Agent,
(ii) execute and file uniform commercial code financing statements, naming the
new Collateral Agent as assignee, in each jurisdiction financing statements have
been filed in connection with any Loan Document, (iii) take all such actions
required or requested by either Borrower to name the new Collateral Agent as
mortgagee under the Mortgages and (iv) take all such other actions required or
requested by either Borrower to perfect the pledge or lien pursuant to the
Security Documents in the name of the new Collateral Agent.
ARTICLE IX
Miscellaneous
SECTION 9.01. Amendments and Waivers. (a) Neither this Agreement
nor any other Loan Document, nor any terms hereof or thereof may be waived,
amended, supplemented or modified except in accordance with the provisions of
this Section 9.01.
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(b) Except as set forth in the succeeding paragraphs of this Section
9.01, the Required Lenders may, or, with the written consent of the Required
Lenders, the Administrative Agent may, from time to time, (i) enter into with
the Loan Parties written amendments, supplements or modifications hereto and to
the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of the Loan Parties hereunder or thereunder or (ii) waive at any
Loan Party's request on such terms and conditions as the Required Lenders or the
Administrative Agent, as the case may be, may specify in such instrument, any of
the requirements of this Agreement or the other Loan Documents or any Default or
Event of Default and its consequences (any such amendment, supplement,
modification or waiver, a "Specified Change"); provided, however, that (x)
without the written consent of the Issuing Bank, no Specified Change shall
amend, supplement or otherwise modify any provisions of or directly applicable
to any Letter of Credit, (y) without the written consent of the Swingline
Lender, no Specified Change shall amend, modify or waive any provision of
Section 2.23 or any other provision of this Agreement governing the rights or
obligations of the Swingline Lender, and (z) without the written consent of the
then Administrative Agent and Collateral Agent, no Specified Change shall amend,
modify or waive any provision of Article VIII, or, without the prior written
consent of the then Administrative or the then Collateral Agent, as applicable,
no Specified Change shall amend, modify or waive any other provision of this
Agreement governing the rights or obligations of the Administrative Agent or the
Collateral Agent.
(c) Without the written consent of the Required Lenders, no Specified
Change shall (i) waive any of the conditions precedent to the funding of the
initial Loans and extensions of credit set forth in Section 4.02 (except that
the making of the initial extensions of credit by any Lender on the Closing Date
shall be deemed to constitute a waiver of such conditions precedent by such
Lender), (ii) waive any Default or Event of Default under Section 7.01 and its
consequences or (iii) amend, supplement or otherwise modify any provisions of
Section 7.01.
(d) Without the written consent of the Collateral Release Lenders, no
Specified Change shall take any action which has the effect of releasing all or
substantially all of the Collateral, Parent or either Borrower from its
Guarantee or all or substantially all of the Subsidiary Guarantors from their
Guarantees in respect hereof (except as permitted hereby or by any Security
Document).
(e) Without the written consent of each Lender directly affected
thereby, no Specified Change shall (i) reduce the amount or extend the scheduled
date of maturity of any Loan or of any installment thereof, (ii) reduce the
stated rate of any interest or fee payable or extend the scheduled date of any
payment thereof, (iii) increase the amount or extend the expiration date of any
Lender's Commitments or (iv) amend, modify or waive any provision of this
Section 9.01.
(f) Without the written consent of all the Lenders, no Specified
Change shall amend or modify the pro rata requirements of Section 2.17 or reduce
the percentage specified in the definition of "Required Lenders".
(g) Any such waiver and any such amendment, supplement or modification
shall apply equally to each of the Lenders and shall be binding upon the
Lenders, the Administrative Agent, all future holders of the Loans and the Loan
Parties signatories thereto. In the case of any waiver, each of the Loan
Parties, the Lenders and the
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Administrative Agent shall be restored to their former positions and rights
hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any right consequent thereon.
SECTION 9.02. Notices. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
when delivered, (b) in the case of delivery by mail, three days after being
deposited in the mails, first class postage prepaid, (c) in the case of delivery
by a nationally recognized overnight courier, when received, or (d) in the case
of delivery by facsimile transmission, when sent and receipt has been confirmed,
addressed as follows in the case of Parent, either Borrower, the Administrative
Agent, the Collateral Agent or the Issuing Bank, and in the case of a Lender, to
it at its address (or facsimile number) set forth on Schedule 2.01 or in the
Assignment and Acceptance pursuant to which such Lender shall have become a
party hereto, or to such other address as may be hereafter notified by the
respective parties hereto and any future holders of the Loans:
Parent, JCI and JCISA: c/o Jafra Cosmetics International, Inc.
2451 Townsgate Road
Westlake Village, California 91361
Attention: Corporate Secretary
Facsimile: (805) 449 3270
Telephone: (805) 449-3000
In the case of notices Debevoise & Plimpton
to Parent, JCI or JCISA, 875 Third Avenue
with a copy to: New York, New York 10022
Attention: William B. Beekman, Esq.
Facsimile: (212) 909-6836
Telephone: (212) 909-6000
Administrative Agent, Credit Suisse First Boston
Collateral Agent and Eleven Madison Avenue
Issuing Bank: New York, New York 10011
Attention: Yvette McQueen
Facsimile: (212) 325-8304
Telephone: (212) 325-9934
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to Section 2.03, 2.09(c), 2.10, 2.12(a), 2.17, 2.22(b)
or 2.23(b), shall not be effective until received.
SECTION 9.03. No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Administrative Agent, the Issuing
Bank, any Lender or any Loan Party, any right, remedy, power or privilege
hereunder or under the other Loan Documents shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
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powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
SECTION 9.04. Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Loan Documents and
in any certificate delivered pursuant hereto or in connection herewith shall
survive the execution and delivery of this Agreement and the making of the Loans
hereunder.
SECTION 9.05. Successors and Assigns. (a) This Agreement shall be
binding upon and inure to the benefit of Parent, each Borrower, the Lenders, the
Issuing Bank, the Collateral Agent, the Administrative Agent and their
respective successors and assigns, except that neither Parent nor either
Borrower may assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of each Lender and any attempted
assignment without such consent shall be null and void.
(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any Loan
owing to such Lender, any Commitment of such Lender or any other interest of
such Lender hereunder and under the other Loan Documents, provided that (unless
the Borrowers, the Administrative Agent and, in the case of any assignment of a
Revolving Credit Commitment, the Issuing Bank and the Swingline Lender otherwise
consent in writing) no such participating interests shall be in an aggregate
principal amount of less than $5,000,000 in the aggregate (or, if less, the full
amount of such selling Lender's Loans and Commitments). In the event of any such
sale by a Lender of a participating interest to a Participant, such Lender's
obligations under this Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Loan for
all purposes under this Agreement and the other Loan Documents, and the Loan
Parties, the Administrative Agent, the Issuing Bank and the Collateral Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and the other Loan
Documents. Any agreement pursuant to which any Lender shall sell any such
participating interest shall provide that such Lender shall retain the sole
right and responsibility to exercise such Lender's rights and enforce Parent's
and each Borrower's respective obligations hereunder, including the right to
consent to any amendment, supplement, modification or waiver of any provision of
this Agreement or any of the other Loan Documents, and no Lender shall be
entitled to create in favor of any Participant, in the participation agreement
pursuant to which such Participant's participating interest shall be created or
otherwise, any right to vote on, consent to or approve any matter relating to
this Agreement or any other Loan Document, provided that such participation
agreement may provide that, without the consent of the Participant, such Lender
will not agree to any amendment, supplement, modification or waiver, specified
in Section 9.01(e) or (f). The Borrowers also agree that each Lender shall be
entitled to the benefits of Sections 2.14, 2.16 and 2.20 without regard to
whether it has granted any participating interests, and that all amounts payable
to a Lender under Sections 2.14, 2.16 and 2.20 shall be determined as if such
Lender had not granted any such participating interests.
(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time and from time to
time assign to (i) any Lender or any Affiliate thereof or (ii) with the prior
written consent of the Administrative Agent and the Borrowers (and, in the case
of any assignment of a Revolving Credit Commitment, the Issuing Bank and the
Swingline Lender) (which, in each case, shall not be
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unreasonably withheld), to any additional bank or financial institution (any
such assignee described in clause (i) or (ii), an "Assignee") all or any part of
its rights and obligations under this Agreement and the other Loan Documents
pursuant to an Assignment and Acceptance executed by such Assignee, such
assigning Lender and the Administrative Agent (and, to the extent required
pursuant to clause (ii) above, by the Borrowers, the Swingline Lender and the
Issuing Bank) and delivered to the Administrative Agent for its acceptance and
recording in the Register (as defined below), provided that (x) unless the
Borrowers, the Administrative Agent and, in the case of any assignment of a
Revolving Credit Commitment, the Issuing Bank and the Swingline Lender otherwise
consent in writing, no such assignment shall be in an aggregate principal amount
of less than $5,000,000 in the aggregate (or, if less, the full amount of such
selling Lender's Loans and Commitments), (y) any assignment of all or any
portion of a Lender's Revolving Credit Commitment or Term Loans shall be
accompanied by the assignment to the same Assignee of a ratable share of the
other and (z) if any Lender assigns all or any part of its rights and
obligations under this Agreement to one of its Affiliates in connection with or
in contemplation of the sale or other disposition of its interest in such
Affiliate, the Borrowers' prior written consent shall be required for such
assignment. Upon such execution, delivery, acceptance and recording, from and
after the effective date determined pursuant to such Assignment and Acceptance,
(x) the Assignee thereunder shall be a party hereto and, to the extent provided
in such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with a Commitment as set forth therein and (y) the assigning Lender
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such assigning Lender
shall cease to be a party hereto). Notwithstanding the foregoing, no Assignee,
which as of the date of any assignment to it pursuant to this Section 9.05(c)
would be entitled to receive any greater payment under Section 2.14 or 2.20 than
the assigning Lender would have been entitled to receive as of such date under
such Sections with respect to the rights assigned, shall be entitled to receive
such payments unless the Borrowers have consented in writing to the assignment
and agreed in writing to waive the benefit of this sentence.
(d) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the Assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Term Loan Commitment and Revolving Credit Commitment, and the outstanding
balances of its Term Loans and Revolving Loans, in each case without giving
effect to assignments thereof which have not become effective, are as set forth
in such Assignment and Acceptance, (ii) except as set forth in (i) above, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or document furnished pursuant
hereto, or the financial condition of either Borrower or any Subsidiary or the
performance or observance by either Borrower or any Subsidiary of any of its
obligations under this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto; (iii) such Assignee represents
and warrants that it is legally authorized to enter into such Assignment and
Acceptance; (iv) such Assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent financial statements referred
to in Section 3.01(b) or delivered pursuant to Section 5.01 and such other
documents and information as it has deemed appropriate to make its own credit
analysis and
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decision to enter into such Assignment and Acceptance; (v) such Assignee
confirms the Lender acknowledgements and representations set forth in Section
8.06; (vi) such Assignee appoints and authorizes the Administrative Agent and
the Collateral Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Administrative Agent
and the Collateral Agent, respectively, by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vii) such Assignee agrees that
it will perform in accordance with their terms all the obligations which by the
terms of this Agreement are required to be performed by it as a Lender.
(e) The Administrative Agent, on behalf of the Borrowers, shall maintain
at the address of the Administrative Agent referred to in Section 9.02 a copy of
each Assignment and Acceptance delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Lenders and the
Commitments of, and principal amounts of the Loans owing to, each Lender from
time to time. The entries in the Register shall be conclusive and the Borrowers,
the Administrative Agent, the Issuing Bank, the Collateral Agent and the Lenders
may (and, in the case of any Loan or other obligation hereunder not evidenced by
a Note, shall) treat each Person whose name is recorded in the Register as the
owner of a Loan or other obligation hereunder as the owner thereof for all
purposes of this Agreement and the other Loan Documents, notwithstanding any
notice to the contrary. Any assignment of any Loan or other obligation hereunder
not evidenced by a Note shall be effective only upon appropriate entries with
respect thereto being made in the Register. The Register shall be available for
inspection by the Borrowers, the Collateral Agent or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(f) Upon its receipt of (i) an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an Affiliate thereof, by the Borrowers, the Administrative
Agent, the Issuing Bank or the Swingline Lender, as applicable), (ii) a duly
completed Administrative Questionnaire, (iii) payment to the Administrative
Agent of a registration and processing fee of $3,500 and (iv) all necessary
written consents to such assignment, the Administrative Agent shall (x) promptly
accept such Assignment and Acceptance, (y) on the effective date determined
pursuant thereto record the information contained therein in the Register and
(z) give notice of such acceptance and recordation to the Borrowers. On or prior
to such effective date, the assigning Lender shall surrender any outstanding
Notes held by it all or a portion of which are being assigned, and the
Borrowers, at their own expense, shall, upon the request to the Administrative
Agent made at the time of such assignment by the assigning Lender or the
Assignee, as applicable, execute and deliver to the Administrative Agent (in
exchange for the outstanding Notes of the assigning Lender) a new Note to the
order of such Assignee in an amount equal to (i) in the case of an assigned
Revolving Loan, the lesser of (A) the amount of such Assignee's Revolving Credit
Commitment and (B) the aggregate principal amount of all Revolving Loans made by
such Assignee and (ii) in the case of an assigned Term Loan, the amount of such
Assignee's Term Loan, in each case with respect to the relevant Loan after
giving effect to such Assignment and Acceptance and, if the assigning Lender has
retained a Loan hereunder, a new Note, as the case may be, to the order of the
assigning Lender in an amount equal to (i) in the case of a retained Revolving
Credit Loan, the lesser of (A) the amount of such Lender's Revolving Credit
Commitment and (B) the aggregate principal amount of all Revolving Loans made by
such Lender and (ii) in the case of a retained Term Loan, the amount of such
Lender's Term Loan, in each case with respect to the relevant Loan after giving
effect to such Assignment and Acceptance. Any such new Notes shall be dated the
Closing Date and shall otherwise be in the form of the Note replaced
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thereby. Any Notes surrendered by the assigning Lender shall be returned by the
Administrative Agent to the applicable Borrower marked "canceled".
(g) Each Borrower authorizes each Lender to disclose to any Participant or
Assignee (each, a "Transferee") and any prospective Transferee, subject to the
provisions of Section 9.17, any and all financial information in such Lender's
possession concerning the Borrowers and their Affiliates which has been
delivered to such Lender by or on behalf of the Borrowers pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Borrowers in connection with such Lender's credit evaluation of the Borrowers
and their Affiliates prior to becoming a party to this Agreement. No assignment
or participation made or purported to be made to any Transferee shall be
effective without the prior written consent of the Borrowers if it would require
the Borrowers to make any filing with any Governmental Authority or qualify any
Loan or Note under the laws of any jurisdiction, and the Borrowers shall be
entitled to request and receive such information and assurances as it may
reasonably request from any Lender or any Transferee to determine whether any
such filing or qualification is required or whether any assignment or
participation is otherwise in accordance with applicable law.
(h) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this Section 9.05 concerning assignments of Loans and
Notes do not prohibit any pledge by a Lender of any Loan or Note to any Federal
Reserve Bank in accordance with applicable law, provided that no such assignment
shall release a Lender from any of its obligations hereunder or substitute any
such Bank for such Lender as a party hereto.
SECTION 9.06. Payment of Expenses and Taxes. Each Borrower agrees
(a) to pay or reimburse each of the Administrative Agent, the Collateral Agent
and the Issuing Bank for all reasonable out-of-pocket costs and expenses
incurred in connection with the preparation and execution of, and any amendment,
supplement, modification to, or waiver of the provisions of, this Agreement and
the other Loan Documents and any other documents prepared in connection herewith
or therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including the reasonable fees and disbursements
of counsel (including local counsel) to the Administrative Agent and the
Collateral Agent, (b) to pay or reimburse each Lender, the Administrative Agent
and the Collateral Agent for all its reasonable costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the other Loan Documents and any such other documents, including the
reasonable fees and disbursements of any local counsel to the Administrative
Agent, the Collateral Agent and the several Lenders, (c) to pay, indemnify and
hold each Lender, the Collateral Agent, the Issuing Bank and the Administrative
Agent (each such Person being called an "Indemnitee") harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other similar taxes, if
any, which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of or
any waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents and (d) except as provided in Section
8.09(b), to pay, indemnify and hold each Indemnitee harmless from and against
any and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the other Loan Documents and any such other
documents or the use of the proceeds of the Loans and other extensions of credit
hereunder, including any of the foregoing relating to the
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violation of, noncompliance with or liability under, any Environmental Law
applicable to the operations of either Borrower, any of the Subsidiaries or any
of the Properties (all the foregoing in this clause (d) collectively the
"Indemnified Liabilities"), provided that Borrowers shall have no obligation
hereunder to any Indemnitee with respect to Indemnified Liabilities arising from
(i) the gross negligence or willful misconduct of any Indemnitee (or any of
their respective directors, trustees, officers, employees, agents, successors
and assigns) or (ii) claims made or legal proceedings commenced against any
Indemnitee by any securityholder or creditor thereof arising out of and based
upon rights afforded any such securityholder or creditor solely in its capacity
as such. Notwithstanding the foregoing, except as provided in clauses (b) and
(c) above, the Borrowers shall have no obligation under this Section 9.06 to any
Indemnitee with respect to any tax, levy, impost, duty, charge, fee, deduction
or withholding imposed, levied, collected, withheld or assessed by any
Governmental Authority.
The agreements in this Section 9.06 shall survive repayment of the
Loans and all other amounts payable hereunder.
SECTION 9.07. Set-off. In addition to any rights and remedies of the
Lenders provided by law, each Lender shall have the right, without prior notice
to Parent and the Borrowers (any such notice being expressly waived by the
Borrowers to the extent permitted by applicable law), upon the occurrence of an
Event of Default under Section 7.02(a) to set off and appropriate and apply
against any amount then due and payable any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender or any branch or agency thereof to or for the credit or the
account of either Borrower. Each Lender agrees promptly to notify Parent, the
Borrowers and the Administrative Agent after any such set-off and application
made by such Lender, provided that the failure to give such notice shall not
affect the validity of such set-off and application.
SECTION 9.08. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any Loan
or participation in any L/C Disbursement, together with all fees, charges and
other amounts which are treated as interest on such Loan or participation in
such L/C Disbursement under applicable law (collectively the "Charges"), shall
exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan or
participation in accordance with applicable law, the rate of interest payable in
respect of such Loan or participation hereunder, together with all Charges
payable in respect thereof, shall be limited to the Maximum Rate and, to the
extent lawful, the interest and Charges that would have been payable in respect
of such Loan or participation but were not payable as a result of the operation
of this Section 9.08 shall be cumulated and the interest and Charges payable to
such Lender in respect of other Loans or participations or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon at the Federal Funds Effective Rate to the date
of repayment, shall have been received by such Lender.
SECTION 9.09. Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by facsimile transmission), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set of the
copies of this Agreement signed by all the parties shall be delivered to Parent,
the Borrowers and the Administrative Agent.
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SECTION 9.10. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 9.11. Integration. This Agreement and the other Loan
Documents represent the agreement among the parties with respect to the subject
matter hereof, and there are no promises, undertakings, representations or
warranties by any of the parties hereto relative to the subject matter hereof
not expressly set forth or referred to herein or in the other Loan Documents.
SECTION 9.12. Headings. Article and Section headings and the Table
of Contents used herein are for convenience of reference only, are not part of
this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 9.13. Applicable Law. THIS AGREEMENT AND ANY NOTES AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND ANY NOTES SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICTS
OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION.
SECTION 9.14. Submission to Jurisdiction; Waivers. Each party
hereto hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts of any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient forum and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to Parent,
either Borrower or the applicable Lender at its address set forth in
Section 9.02 or at such other address of which the Administrative Agent,
any such Lender, Parent and the Borrowers shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
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(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section 9.14 any punitive damages.
SECTION 9.15. Acknowledgments. Each of Parent and each Borrower
hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) none of the Administrative Agent, the Collateral Agent, the
Issuing Bank or any Lender has any fiduciary relationship with or duty to
Parent or either Borrower arising out of or in connection with this
Agreement or any of the other Loan Documents, and the relationship between
the Administrative Agent, the Collateral Agent, the Issuing Bank and the
Lenders, on the one hand, and Parent and the Borrowers, on the other hand,
in connection herewith or therewith is solely that of debtor and creditor;
and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among Parent, the Borrowers and the Lenders.
SECTION 9.16. Waivers of Jury Trial. EACH PARTY HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
SECTION 9.17. Confidentiality. Each Lender (including the Swingline
Lender), the Administrative Agent, the Collateral Agent and the Issuing Bank
agrees (on behalf of itself and each of its affiliates, directors, officers,
employees, agents, advisors and representatives) to keep confidential any
Confidential Information (as defined below), and in connection therewith comply
with their customary procedures for handling confidential information of this
nature and with safe and sound banking practices, provided that nothing herein
shall limit its disclosure of any such information (a) to such of its respective
officers, directors or employees as need to know such Confidential Information,
(b) to the extent required by statute, rule, regulation or judicial process, (c)
to counsel for any of the Lenders or such Lender's auditors or accountants, (d)
to bank examiners or insurance commissioners having jurisdiction over the
disclosing Lender, (e) to the Administrative Agent, the Collateral Agent, the
Issuing Bank or any other Lender, (f) by the Administrative Agent, the
Collateral Agent, the Issuing Bank or any Lender to an Affiliate thereof, (g) in
connection with any enforcement of any of the Loan Documents or (h) to any
Transferee, or prospective Transferee that agrees to comply with this Section
9.17 and (in the case of any such Person that at the time of such disclosure has
not yet become a Lender) executes and delivers to Parent and the Borrowers a
written instrument in favor of Parent and the Borrowers confirming such
agreement, in form and substance reasonably satisfactory to Parent and the
Borrowers, provided that (i) in the case of the preceding clauses (b) and (d),
such Lender shall, to the extent legally permissible, notify the Borrowers of
the proposed disclosure as far in advance as is reasonably practicable under the
circumstances, (ii) in the case of the preceding clause (c), such Lender shall
inform each such counsel, auditor or accountant of the agreement under this
Section 9.17 and take reasonable actions to cause compliance by
<PAGE>
99
any such Person with this agreement (including, where appropriate, to cause any
such Person to acknowledge its agreement to be bound by the agreement under this
Section 9.17) and (iii) in the case of the preceding clause (f), such Lender,
the Collateral Agent, the Issuing Bank or the Administrative Agent shall be
responsible for any failure by such Affiliate of the Lender, the Collateral
Agent, the Issuing Bank or the Administrative Agent to comply with this Section
9.17. For purposes of this Section 9.17, "Confidential Information" shall mean,
with respect to the Administrative Agent, the Collateral Agent, the Issuing Bank
or any Lender (each an "Affected Party"), information delivered to such Affected
Party by or on behalf of Parent, either Borrower or any Subsidiary, the
Administrative Agent or any other Lender in connection with the transactions
contemplated by or otherwise pursuant to this Agreement or information obtained
by the Affected Party in the course of any review of the books or records of
Parent, either Borrower or any Subsidiary, provided that such term shall not
include information (i) that was publicly known or otherwise known to such
Affected Party prior to the time of such disclosure on a nonconfidential basis
without a duty of confidentiality to Parent, either Borrower or any Subsidiary
being violated, (ii) that subsequently becomes publicly known through no act or
omission by any Affected Party or any Person acting on the Affected Party's
behalf, (iii) that becomes known to such Affected Party on a nonconfidential
basis without a duty of confidentiality to Parent, either Borrower or any
Subsidiary being violated and, other than through disclosure by or on behalf of
Parent or either Borrower or (iv) that constitutes financial information
delivered to any Affected Party that is otherwise publicly available through no
act or omission of any Affected Party or Person acting on such Affected Party's
behalf.
SECTION 9.18. Judgment Currency. (a) If for the purpose of
obtaining judgment in any court it is necessary to convert a sum due hereunder
in one currency into another currency, the parties hereto agree, to the fullest
extent that they may effectively do so, that the rate of exchange used shall be
that at which in accordance with normal banking procedures the Administrative
Agent could purchase the first currency with such other currency on the Business
Day preceding the day on which final judgment is given.
(b) The obligations of Parent and the Borrowers in respect of this
Agreement, the other Loan Documents and any Note due to any party hereto shall,
notwithstanding any judgment in a currency (the "judgment currency") other than
the currency in which the sum originally due to such party is denominated (the
"original currency"), be discharged only to the extent that on the Business Day
following receipt by such party of any sum adjudged to be so due in the judgment
currency such party may in accordance with normal banking procedures purchase
the original currency with the judgment currency; if the amount of the original
currency so purchased is less than the sum originally due to such party in the
original currency, Parent or such Borrower agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify such party against such loss,
and if the amount of the original currency so purchased exceeds the sum
originally due to any party to this Agreement, such party, agrees to remit to
Parent or such Borrower, as applicable, such excess. This covenant shall
survive the termination of this Agreement and payment of the Loans and all other
amounts payable hereunder.
SECTION 9.19. European Monetary Union. If, as a result of the
implementation of European monetary union, (a) any currency ceases to be lawful
currency of the nation issuing the same and is replaced by a European common
currency, then any amount payable hereunder by any party hereto in such currency
shall instead be payable in the European common currency and the amount so
payable shall be determined by translating the amount payable in such currency
to such European common currency at the
<PAGE>
100
exchange rate recognized by the European Central Bank for the purpose of
implementing European monetary union, or (b) any currency and a European common
currency are at the same time recognized by the central bank or comparable
authority of the nation issuing such currency as lawful currency of such nation,
then (i) any Loan made at such time shall be made in such European common
currency and (ii) any other amount payable by any party hereto in such currency
shall be payable in such currency or in such European common currency (in an
amount determined as set forth in clause (a)), at the election of the obligor.
Prior to the occurrence of the event or events described in clause (a) or (b) of
the preceding sentence, each amount payable hereunder in any currency will
continue to be payable only in that currency. Parent and each Borrower agrees,
at the request of the Required Lenders, and the Lenders, the Issuing Bank and
the Administrative Agent agree, at the request of the Borrowers, at the time of
or at any time following the implementation of European monetary union, to enter
into an agreement amending this Agreement in such manner as the Required Lenders
or the Borrowers, as the case may be, shall reasonably request in order to avoid
any unfair burden or disadvantage resulting from the implementation of such
monetary union and to place the parties hereto in the position they would have
been in had such monetary union not been implemented, the intent being that
neither party will be adversely affected economically as a result of such
implementation and that reasonable provisions may be adopted to govern the
borrowing, maintenance and repayment of Loans denominated in any Alternative
Currency or a European common currency after the occurrence of the event or
events described in clause (a) or (b) of the preceding sentence.
SECTION 9.20. Calculations; Computations. Except as otherwise
expressly provided herein, to the extent that the determination of compliance
with any covenant contained herein or other provision hereof requires the
conversion to Dollars of foreign currency amounts, such Dollar amount shall be
the Dollar Equivalent of the amount of such foreign currency at the time such
item is to be calculated or is to be or was incurred, created or suffered or
permitted to exist or assumed or transferred or sold for purposes of this
Agreement (except if such item was incurred, created or assumed, or suffered or
permitted to exist or transferred prior to the date hereof, such conversion
shall be made based on the Dollar Equivalent of the amounts of such foreign
currency at the date hereof).
SECTION 9.21. Covenant to Pay. In order to effect the pledge of (a)
the shares of CDRJ Europe Holding Company, B.V. by JCI and (b) the shares of
CDRJ Latin America Holding Company, B.V. by CDRJ North Atlantic (Lux) Sarl, a
Deed of Pledge (the "Dutch Deed of Pledge") governed by the laws of The
Netherlands will be executed and will be issued in favor of the Collateral
Agent. Solely in connection with the Dutch Deed of Pledge:
(i) for value received, the Borrowers agree and covenant (the
"Covenant to Pay") that they shall pay to the Collateral Agent (for its own
account and as agent for the Lenders) on demand all amounts that the
Borrowers are now or may at any time and from time to time hereafter be
obligated to pay to the Collateral Agent, the Lenders or any one or more of
them, pursuant to this Agreement or the other Loan Documents, if and when
such amounts become due and payable; and
(ii) the Borrowers and the Collateral Agent agree and acknowledge
that the Borrowers' obligations under the Covenant to Pay consist of
obligations and liabilities of the Borrowers to the Collateral Agent,
separate and independent from and without prejudice to the underlying
liabilities and obligations that the Borrowers have or may have at any time
to the Lenders or the Collateral Agent under any other
<PAGE>
101
provisions of this Agreement or the other Loan Documents or otherwise,
provided that any payment by either Borrower of any portion of the
Borrowers' obligations under the Covenant to Pay shall discharge and
satisfy a like amount of such underlying liabilities and obligations.
<PAGE>
102
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
CDRJ ACQUISITION CORPORATION
By /s/ Ralph S. Mason
--------------------------------------
Name: Ralph S. Mason
Title: Vice Chairman and EVP
JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V.
By /s/ David A. Novak
---------------------------------------
Name: David A. Novak
Title: VP
CDRJ INVESTMENTS (LUX) S.A.
By /s/ Ralph S. Mason
---------------------------------------
Name: Ralph S. Mason
Title: Vice Chairman and EVP
By /s/ David A. Novak
---------------------------------------
Name: David A. Novak
Title: Secretary and Director
CREDIT SUISSE FIRST BOSTON, individually and as
Administrative Agent, Collateral Agent and
Swingline Lender
By /s/ David Kratovil
---------------------------------------
Name: David Kratovil
Title: Director
/s/ Heather Suggitt
HEATHER SUGGITT
VICE PRESIDENT
<PAGE>
103
THE CHASE MANHATTAN BANK,
by /s/ William J. Caggiano
---------------------------------------
WILLIAM J. CAGGIANO
MANAGING DIRECTOR
<PAGE>
104
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION,
by /s/ David Gilio
---------------------------------------
David Gilio
Managing Director
<PAGE>
105
THE BANK OF NOVA SCOTIA,
by /s/ R.P. Reynolds
---------------------------------------
R.P. Reynolds
Relationship Manager
<PAGE>
106
MARINE MIDLAND BANK,
by /s/ Christopher French
-------------------------
Christopher French
Authorized Signatory
<PAGE>
107
UNION BANK OF CALIFORNIA N.A.,
by /s/ J. Scott Jessup
----------------------------
J. Scott Jessup
Vice President
<PAGE>
108
THE BANK OF NEW YORK,
by /s/ Elizabeth Ying
--------------------------
Elizabeth Ying
Vice President
<PAGE>
SCHEDULE 1.01(a)
Inactive Subsidiaries
---------------------
None
<PAGE>
SCHEDULE 1.01(b)
Subsidiary Guarantors
---------------------
JCI Subsidiary Guarantors
- -------------------------
None
JCISA Subsidiary Guarantors
- ---------------------------
Reday, S.A. de C.V.
Distribuidora Venus, S.A. de C.V.
Dirsamex, S.A. de C.V.
Qualifax, S.A. de C.V.
Jafra Cosmetics, S. de R.L. de C.V.
Consultoria Jafra, S.A. de C.V.
<PAGE>
SCHEDULE 1.01(c)
Mortgaged Properties
--------------------
<TABLE>
<CAPTION>
Title Holder Country Location Type
- ------------ ------- -------- ----
<S> <C> <C> <C>
Reday, S.A. de C.V. Mexico Bld. M. Azila Camacho, 515 Office
Col. Tlacopac
San Angel, Mexico, D.F.
Reday, S.A. de C.V. Mexico Victoria #25 Manufacturing
Fracc. Industrial
Alce Blanco
Col. Industrial
Naucalpan, Edo. de Mexico
Jafra Cosmetics U.S.A. 2451 Townsgate Road Office/Manufacturing
International, Inc. Westlake Village, CA
</TABLE>
<PAGE>
SCHEDULE 2.01
COMMITMENTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF CONTACT PERSON, TELEPHONE AND COMMITMENTS
------------------- ----------------------------- -----------
LENDER TELECOPY NUMBERS
------ ----------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Credit Suisse First Boston Contact: Yvette McQueen R/C: $10,833,333.34
11 Madison Avenue Telephone No.: (212) 325-9934 Term: 4,166,666.66
New York, NY 10010 Telecopy No.: (212) 325-8304
Secondary Contact: Maria Cabrera
Telephone No.: (212) 325-9938
Telecopy No.: (212) 325-8304
- -----------------------------------------------------------------------------------------------------------------------------------
The Chase Manhattan Bank Contact: Clifford L. Rooke R/C: $10,472,222.22
270 Park Avenue Telephone No.: (212) 270-5808 Term: 4,027,777.78
New York, NY 10017 Telecopy No.: (212) 972-0009
- -----------------------------------------------------------------------------------------------------------------------------------
Bank of America National Trust Contact: Debra Seiter R/C: $9,750,000.00
& Savings Association Telephone No.: (212) 503-7815 Term: 3,750,000.00
1850 Gateway Blvd. Telecopy No.: (212) 503-7502
Concord, CA 94520
335 Madison Avenue
New York, Ny 10017
- -----------------------------------------------------------------------------------------------------------------------------------
The Bank of Nova Scotia Contact: Rob Reynolds R/C: $9,750,000.00
580 California Street Telephone No.: (415) 986-1100 Term: 3,750,000.00
Suite 2100 Telecopy No.: (415) 397-0791
San Francisco, CA 94104
- -----------------------------------------------------------------------------------------------------------------------------------
Marine Midland Bank Contact: Christopher French R/C: $9,750,000.00
140 Broadway Telephone No.: (212) 658-2742 Term: 3,750,000.00
5th Floor Telecopy No.: (212) 658-2586
New York, NY 10005
- -----------------------------------------------------------------------------------------------------------------------------------
Union Bank of California, N.A. Contact: Scott Jessup R/C: $7,222,222.22
445 South Figueroa Street Telephone No.: (213) 236-4023 Term: 2,777,777.78
16th Floor Telecopy No.: (213) 236-7814
Los Angeles, California 90071
- -----------------------------------------------------------------------------------------------------------------------------------
The Bank of New York Contact: Greg Owens R/C: $7,222,222.22
One Wall Street Telephone No.: (212) 635-1130 Term: 2,777,777.78
15th Floor Telecopy No.: (212) 635-1698
New York, NY 10286
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL R/C: $65,000,000.00
-----
TERM: 25,000,000.00
TOTAL 90,000,000.00
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 3.04(a)
Consents, Authorizations, Notices and Filings
---------------------------------------------
None
<PAGE>
SCHEDULE 3.06
Litigation
----------
None
<PAGE>
SCHEDULE 3.08
Intellectual Property
---------------------
None
<PAGE>
SCHEDULE 3.10
Tax Liens
---------
None
<PAGE>
SCHEDULE 3.14
Subsidiaries
------------
After giving effect to the Transactions:
Subsidiary Jurisdiction of Incorporation
- ---------- -----------------------------
CDRJ North Atlantic (Lux) Sarl Luxembourg
Jafra Cosmetics International, Inc. Delaware
CDRJ Europe Holding Company B.V. Netherlands
Jafra Cosmetics Handelsgesellschaft mbH Austria
Jafra Cosmetics A.G. Switzerland
Jafra Cosmetics S.p.A. Italy
CDRJ Europe Holding Company GmbH Germany
Jafra Cosmetics International B.V. Netherlands
CDRJ Germany Holding Company GmbH Germany
Jafra Cosmetics GmbH Germany
CDRJ Latin America Holding Company B.V. Netherlands
Latin Cosmetics Holdings B.V. Netherlands
Regional Cosmetics Holding B.V. Netherlands
Southern Cosmetics Holdings B.V. Netherlands
CDRJ Mexico Holding Company B.V. Netherlands
Jafra Cosmetics, Ltda. Brazil
CDRJ Latin America Holding Company GmbH Germany
Jafra Poland, Sp. zo.o. Poland
Jafra Cosmetics S.R.L. Argentina
Jafra Cosmetics International, S.A. de C.V. Mexico
Jafra Cosmetics Colombia, S.A. Colombia
Jafra Cosmetics Venezuela, S.A. Venezuela
<PAGE>
Jafra Cosmetics, S. de R.L. de C.V. Mexico
Consultoria Jafra, S.A. de C.V. Mexico
Distribuidora Venus, S.A. de C.V. Mexico
Dirsamex, S.A. de C.V. Mexico
Reday, S.A. de C.V. Mexico
Qualifax, S.A. de C.V. Mexico
<PAGE>
SCHEDULE 3.20
UCC Filings
- -----------
STATE FILING OFFICE
- ----- -------------
California Secretary of State
California Ventura County
New Jersey Secretary of State
New Jersey Gloucester County
<PAGE>
SCHEDULE 3.21(a)
Owned Real Property
- -------------------
<TABLE>
<CAPTION>
Title Holder Country Location Type
- ------------ ------- -------- ----
<S> <C> <C> <C>
Reday, S.A. de C.V. Mexico Bld. M. Azila Camacho, 515 Office
Col. Tlacopac
San Angel, Mexico, D.F.
Reday, S.A. de C.V. Mexico Victoria #25 Manufacturing
Fracc. Industrial
Alce Blanco
Col. Industrial
Naucalpan, Edo. de Mexico
Jafra Cosmetics U.S.A. 2451 Townsgate Road Office/Manufacturing
International, Inc. Westlake Village, CA
</TABLE>
<PAGE>
SCHEDULE 3.21(b)
Leased Real Property
- --------------------
<TABLE>
<CAPTION>
Tenant Country Location Type
- ------ -------- -------- ----
<S> <C> <C> <C>
Jafra Cosmetic S.R.L. Argentina Federico Lacroze 2262 (1426) Office
Capital Federal (Buenos Aires)
Jafra Cosmetics Austria Wienerbergstrasse 7, Part D1, Office
Handelsgesellschaft 12th Floor, A - 1100 Wien
mbH [Vienna]
Jafra Cosmetics Columbia Calle 81 No. 20-52
Columbia, S.A. Santa Fe de Bogota D.C.
Jafra Cosmetics Columbia Avenida 13 No. 81-28 Offices 101, 201, 202,
Columbia, S.A. Santa Fe de Bogota D.C. 301, 302, 401 & other
premises & parking
pursuant to 8 different
leases
Jafra Cosmetics Columbia Avenida 13 No. 81-24
Columbia, S.A. Santa Fe de Bogota D.C.
Jafra Cosmetics Columbia Avenida 13 No. 81-26
Columbia, S.A. Santa Fe de Bogota D.C.
[Jafra Cosmetics Columbia Transv. 39A No. 71-93, P.2
Columbia, S.A. Medellin]
Jafra Cosmetics Columbia Cra. 38 No. 42-48, Bucaramanga
Columbia, S.A.
Jafra Cosmetics Columbia Cra. 44 No.5A-3?, Cali
Columbia, S.A.
Jafra Cosmetics GmbH Germany Munich Office
Jafra Cosmetics GmbH Germany Kaufbeuren Warehouse and Office
Jafra Cosmetics S.p.A. Italy Via Pirelli 18, Milan Office (Sublease)
Jafra Cosmetics S.p.A. Italy Via Como no. 25/27, Rovellasca Warehouse
Dirsamex, S.A. de C.V. Mexico Avenida Dr. Ignacio Morones Office
Prieto No. 2400, Colonia Los
Doctores, Monterrey, Nuevo
Leon
</TABLE>
<PAGE>
<TABLE>
Tenant Country Location Type
- ------ ------- -------- ----
<S> <C> <C> <C>
Dirsamex, S.A. de C.V. Mexico Avenida Lazaro Cardenas 3,447, Office
Sector Juarez, Guadalajara,
Jalisco
Dirsamex, S.A. de C.V. Mexico (Avenida Paseo Tabasco No. Office
1000, Colonia Jesus Garcia,
Villa Hermosa, Tabasco
Reday, de C.V. Mexico 10 Calle Cuatro Street, Alco Braun Manufacturing
Blanco Suburb, Naucalpan de Plant
Juarez, State of Mexico
Grupo Jafra, S.A. de Mexico Various storage leases throughout Mexico
C.V. or one of its
subsidiaries
Jafra Cosmetics Netherlands Visseringlaan 24, Rijswijk Office
International B.V
Jafra Cosmetics A.G. Switzerland Riedstrasse 5, 633, Chiam Office/warehouse
Jafra Cosmetics United States 605 Heron Drive, Bridgewater, Warehouse
International, Inc. New Jersey
Jafra Cosmetics Venezuela Boleita Norte, Avenida Office
Venezuela, S.A. Patrocinio con Calle Miraima,
Edifcio Draza floors 1&2,
Caracas, Miranda State
Jafra Cosmetics Venezuela Inside the storage facilities Office sublease inside
Venezuela, S.A. located in Parcela No 318, storage area
Galpon B, Calle Para, Zona
Industrial La Cumaca de
Paracotos, Estado Miranda
</TABLE>
<PAGE>
SCHEDULE 4.02(a)
Local Counsel
- -------------
Joseph P. Heffernan
Loeb & Loeb LLP
Suite 1800
1000 Wilshire Boulevard
Los Angeles, CA 90017-2475
<PAGE>
SCHEDULE 4.02(i)
Mortgage Filing Offices
- -----------------------
<TABLE>
<CAPTION>
Property Filing Office
- -------- -------------
<S> <C>
Mexican Office Facility Public Registry of Property, Federal District
Mexican Manufacturing Facility Public Registry of Property, State of Mexico
Westlake Village, CA Office/Manufacturing Facility Ventura County Recorder's Office
</TABLE>
<PAGE>
SCHEDULE 6.01(a)
Indebtedness
- ------------
JCISA is the primary obligor with respect to an employee credit card
program in Mexico.
<PAGE>
SCHEDULE 6.02(a)
Liens
- -----
None
<PAGE>
SCHEDULE 6.03(a)
Investments
- -----------
None
<PAGE>
SCHEDULE 6.05(f)
Specified Subsidiaries
- ----------------------
None
<PAGE>
SCHEDULE 6.07(iii)
Permitted Indemnification and Contribution
- ------------------------------------------
CD&R, Fund V and their respective Affiliates.
<PAGE>
SCHEDULE 6.07(iv)
Affiliate Transactions
- ----------------------
1. Registration and Participation Agreement, dated as of the Closing
Date, by and between Parent, CD&R Fund V, and each Management Investor.
2. Stock Subscription Agreement, dated as of the Closing Date, between
Parent and CD&R Fund V relating to the purchase of shares in Parent by CD&R Fund
V.
3. Consulting Agreement, dated as of the Closing Date, among CD&R, JCI,
JCISA, and Parent
4. Indemnification Agreement, dated as of the Closing Date, among CD&R,
CD&R Fund V, CD&R Associates V Limited Partnership, CD&R Investment Associates
II, Inc. members of the boards of directors of Parent, and certain other parties
5. Registration Rights Agreement, dated on or about the Closing Date,
among JCI, JCISA, the other Guarantors and the Initial Purchasers (as defined in
the Confidential Preliminary Offering Circular prepared in connection with the
Subordinated Notes).
6. Repurchase rights of CD&R Group in connection with stock offerings by
Parent.
7. The sale by Parent and its Subsidiaries of CDRJ Brazil Holding Company
B.V. to an affiliate of CD&R.
8. The contribution by Fund V of CDRJ Holding Company to Parent and its
Subsidiaries.
9. The purchase by an Affiliate of CD&R of CDRJ Worldwide (Lux) Sarl.
<PAGE>
EXHIBIT A
to CREDIT AGREEMENT
<TABLE>
<S> <C>
CREDIT FIRST
SUISSE BOSTON
ADMINISTRATIVE DETAILS - JAFRA COSMETICS
- -----------------------------------------------------------------------------------------------------
LENDING INSTITUTION:_________________________________________________________________________________
Name for Signature Pages:____________________________________________________________________________
Will sign Credit Agreement: [X]
Will come in via Assignment: [X] Number of Days post Closing: ____________
Name for Publicity: ____________________________________________________________________________
Address: ____________________________________________________________________________
____________________________________________________________________________
Main Telephone: ____________________________ Telex No./Answerback: ________________________
- -----------------------------------------------------------------------------------------------------
U.S. DOLLAR CONTACT INFORMATION
- -----------------------------------------------------------------------------------------------------
CONTACT - Credit Name:__________________________________________________________________
Address:__________________________________________________________________
__________________________________________________________________
Telephone:__________________________________________________________________
Fax:__________________________________________________________________
CONTACT - Operations Name:__________________________________________________________________
Address:__________________________________________________________________
__________________________________________________________________
Telephone:__________________________________________________________________
Fax:__________________________________________________________________
U.S. DOLLAR WIRE INSTRUCTIONS
Bank Name: ____________________________________________________________________________
ABA/Routing No. ____________________________________________________________________________
Account Name: ____________________________________________________________________________
Account Number: ____________________________________________________________________________
For further credit: ____________________________________________________________________________
Account Number: ____________________________________________________________________________
Attention: ____________________________________________________________________________
Reference: ____________________________________________________________________________
</TABLE>
Page 1 of 3
<PAGE>
CREDIT FIRST
SUISSE BOSTON
- --------------------------------------------------------------------------------
POUND STERLING - CONTACT INFORMATION
- --------------------------------------------------------------------------------
CONTACT - Credit Name:________________________________________________
Address:________________________________________________
________________________________________________
Telephone:________________________________________________
Fax:________________________________________________
CONTACT - Operations Name:________________________________________________
Address:________________________________________________
________________________________________________
Telephone:________________________________________________
Fax:________________________________________________
POUND STERLING - WIRE INSTRUCTIONS
Bank Name: ____________________________________________________________
Bank Address: ____________________________________________________________
____________________________________________________________
Routing Number: ____________________________________________________________
Beneficiary: ____________________________________________________________
Account Number: ____________________________________________________________
Attention: ____________________________________________________________
Reference: ____________________________________________________________
- --------------------------------------------------------------------------------
DEUTSCHE MARK - CONTACT INFORMATION)
- --------------------------------------------------------------------------------
CONTACT - Credit Name:________________________________________________
Address:________________________________________________
________________________________________________
Telephone:________________________________________________
Fax:________________________________________________
CONTACT - Operations Name:________________________________________________
Address:________________________________________________
________________________________________________
Telephone:________________________________________________
Fax:________________________________________________
DEUTSCHE MARK - WIRE INSTRUCTIONS
Bank Name: ____________________________________________________________
Bank Address: ____________________________________________________________
____________________________________________________________
Routing Number: ____________________________________________________________
Beneficiary: ____________________________________________________________
Account Number: ____________________________________________________________
Attention: ____________________________________________________________
Reference: ____________________________________________________________
Page 2 of 3
<PAGE>
- --------------------------------------------------------------------------------
CREDIT SUISSE FIRST BOSTON ADMINISTRATIVE DETAILS
- --------------------------------------------------------------------------------
CREDIT SUISSE FIRST BOSTON Account Administrator Secondary Contact
--------------------- -----------------
11 Madison Avenue Yvette McQueen Maria Cabrera
New York, NY 10010 Tel: (212) 325-9934 Tel: (212) 325-9938
Main Telephone: (212) 325-9000 Fax: (212) 325-8304 Fax: (212) 325-8304
Wire Instructions: The Agent's wire instructions will be disclosed at the time
of closing.
Page 3 of 3
<PAGE>
EXHIBIT B
to CREDIT AGREEMENT
[Form of]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of April 30, 1998 (the
"Credit Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe
anonyme, Jafra Cosmetics International, Inc. (formerly named CDRJ Acquisition
Corporation), a Delaware corporation ("JCI"), Jafra Cosmetics International,
S.A. de C.V., a sociedad anonima de capital variable organized under the laws of
the United Mexican States ("JCISA" and together with JCI, the "Borrowers"), the
lenders from time to time party thereto (the "Lenders"), the Issuing Bank (as
defined therein) and Credit Suisse First Boston, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), as swingline lender (in
such capacity, the "Swingline Lender") and as collateral agent (in such
capacity, the "Collateral Agent") for the Lenders. Terms defined in the Credit
Agreement are used herein with the same meanings.
1. The Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes, without recourse, from
the Assignor, effective as of the Effective Date set forth below (the "Effective
Date") (provided that the provisions of Section 9.05 of the Credit Agreement are
complied with), the interests set forth below (the "Assigned Interest") in the
Assignor's rights and obligations under the Credit Agreement and the other Loan
Documents, including, without limitation, the amounts and percentages set forth
below of (i) the Commitments of the Assignor on the Effective Date, (ii) the
Loans owing to the Assignor which are outstanding on the Effective Date and
(iii) participations in Letters of Credit and Swingline Loans which are
outstanding on the Effective Date. Each of the Assignor and the Assignee hereby
makes and agrees to be bound by all the representations, warranties and
agreements set forth in Section 9.05(d) of the Credit Agreement, a copy of which
has been received by each such party. From and after the Effective Date (i) the
Assignee shall be a party to and be bound by the provisions of the Credit
Agreement and, to the extent of the interests assigned by this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
Loan Documents and (ii) the Assignor shall, to the extent of the interests
assigned by this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
2. This Assignment and Acceptance is being delivered to the Administrative
Agent together with (i) if the Assignee is organized under the laws of a
jurisdiction outside the United States, the forms specified in Section 2.20(c)
of the Credit Agreement, duly completed and executed by such Assignee, (ii) if
the Assignee is not already a Lender under the Credit Agreement, an
Administrative Questionnaire in the form of Exhibit A to the Credit Agreement
and (iii) a processing and recordation fee of $3,500.
3. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of New York.
Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
Effective Date of Assignment
(may not be fewer than 5 Business
Days after the Date of Assignment):
<PAGE>
2
<TABLE>
<CAPTION>
Percentage Assigned of
Applicable Facility/Commitment
(set forth, to at least 8 decimals,
as a percentage of the Facility
Principal and the aggregate Commitments
Facility/Commitment Amount Assigned /1/ of all Lenders thereunder)/1/
- ------------------- ------------------- ----------------------------------
<S> <C> <C>
Term Loan to JCI $ %
Term Loan to JCISA $
Revolving Credit Commitment
Assigned $
U.S.$ Revolving Loans to JCI: $
U.S.$ Revolving Loans to $
JCISA:
Alternative Currency Loans to
JCI:/2/
Alternative Currency Loans to
JCISA:/2/
</TABLE>
_______________________
/1/ Percentage Assigned must be the same for each Loan and Commitment listed in
the left-most column.
/2/ Each Alternative Currency Loan assigned should be listed separately and
denominated in the applicable Alternative Currency.
<PAGE>
3
The terms set forth above are
hereby agreed to: Accepted
_________________, as Assignor, CREDIT SUISSE FIRST BOSTON,
as Administrative Agent, Collateral Agent
and Swingline Lender,*/
-
by___________________________ by_________________________
Name: Name:
Title: Title:
by_________________________
Name:
Title:
_________________, as Assignee, CREDIT SUISSE FIRST BOSTON, [Other Lender]
as Issuing Bank,*/
-
by_________________________
by___________________________ Name:
Name: Title:
Title:
[JAFRA COSMETICS INTERNATIONAL, INC.,*/
-
by_________________________
Name:
Title:]
[JAFRA COSMETICS INTERNATIONAL, S.A. DE
C.V.,*/
-
by_________________________
Name:
Title:]
_________________________
*/ If required by Section 9.05(b) of the Credit Agreement.
- -
<PAGE>
EXHIBIT C
to CREDIT AGREEMENT
FORM OF BORROWING REQUEST
Credit Suisse First Boston, as Administrative Agent for
the Lenders referred to below,
Eleven Madison Avenue
New York, NY 10010
Attention of Yvette McQueen
[Date]
Ladies and Gentlemen:
The undersigned, [Jafra Cosmetics International, Inc.] [Jafra Cosmetics
International, S.A. de C.V.] (the "Company"), refers to the Credit Agreement
dated as of April 30, 1998 (the "Credit Agreement"), among CDRJ Investments
(Lux) S.A., the Company, [Jafra Cosmetics International, S.A. de C.V.
("JCISA"),] [CDRJ Acquisition Corporation ([to be] renamed Jafra Cosmetics
International, Inc., ("JCI")),] the lenders from time to time party thereto (the
"Lenders"), the Issuing Bank (as defined therein) and Credit Suisse First
Boston, as administrative agent for the Lenders (in such capacity, the "Agent"),
as swingline lender and as collateral agent. Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms in
the Credit Agreement. The Company hereby gives you notice pursuant to Section
2.03 of the Credit Agreement that it requests a Borrowing under the Credit
Agreement, and in that connection sets forth below the terms on which such
Borrowing is requested to be made:
(A) Date of Borrowing
(which is a Business Day) _______________________
(B) Currency of Borrowing 1/ _______________________
-
(C) Principal Amount of
Borrowing 2/ _______________________
-
(D) Interest Rate Basis 3/ _______________________
-
(E) Interest Period and the last
day thereof 4/ ______________________
-
_______________________________
1/ Specify Dollars or an Alternative Currency.
- -
2/ Specify amount of Borrowing in Dollars, even if an Alternative Currency
- -
Borrowing is requested. Not less than $5,000,000 (or the Alternative Currency
Equivalent thereof) and in an integral multiple of $1,000,000 (or the
Alternative Currency Equivalent thereof).
3/ Specify (a) Term Borrowing or Revolving Credit Borrowing and (b)
- -
Eurocurrency Borrowing or ABR Borrowing.
4/ Which shall be subject to the definition of "Interest Period" and end
- -
not later than the Maturity Date (applicable only for Eurocurrency Borrowings).
<PAGE>
2
(F) Funds are requested to be disbursed to the Company's account with:
Bank Name: ___________________
Bank Address: ___________________
Account Number: ___________________
Upon acceptance of any or all of the Loans offered by the Lenders in
response to this request, the Company shall be deemed to have represented and
warranted that the conditions to lending specified in Sections 4.01(b) and (c)
of the Credit Agreement have been satisfied.
[JAFRA COSMETICS INTERNATIONAL,
INC.] [JAFRA COSMETICS INTERNATIONAL,
S.A. DE C.V.],
by______________________________
Name:
Title:
<PAGE>
EXHIBIT D
to CREDIT AGREEMENT
INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT dated as
of April 30, 1998, among JAFRA COSMETICS INTERNATIONAL, S.A. DE
C.V., a sociedad anonima de capital variable organized under the
laws of the United Mexican States ("JCISA"), each Subsidiary of
JCISA listed on Schedule I hereto (the "Guarantors") and CREDIT
SUISSE FIRST BOSTON, a bank organized under the laws of
Switzerland, acting through its New York branch, as collateral
agent (in such capacity, the "Collateral Agent") for the Secured
Parties (as defined in the Credit Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of April 30, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme,
CDRJ Acquisition Corporation (to be renamed Jafra Cosmetics International,
Inc.), a Delaware corporation ("JCI"), JCISA (together with JCI, the
"Borrowers"), the lenders from time to time party thereto (the "Lenders"), the
Issuing Bank (as defined therein) and Credit Suisse First Boston, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), as swingline lender and as Collateral Agent, and (b) the JCISA
Subsidiary Guarantee Agreement dated as of April 30, 1998, among the Guarantors
and the Collateral Agent (the "JCISA Subsidiary Guarantee Agreement").
Capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in the Credit Agreement.
The Lenders have agreed to make Loans to JCISA and the Issuing Bank has
agreed to issue Letters of Credit for the account of JCISA pursuant to, and upon
the terms and subject to the conditions specified in, the Credit Agreement. The
Guarantors have guaranteed such Loans and the other Obligations (as defined in
the Guarantee Agreement) of JCISA pursuant to the JCISA Subsidiary Guarantee
Agreement; certain Guarantors have granted Liens on and security interests in
certain of their assets to secure such guarantees. The obligations of the
Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are
conditioned on, among other things, the execution and delivery by JCISA and the
Guarantors of an agreement in the form hereof.
Accordingly, JCISA, each Guarantor and the Collateral Agent agree as
follows:
SECTION 1. Indemnity and Subrogation. In addition to all such rights of
indemnity and subrogation as the Guarantors may have under applicable law (but
subject to Section 3), JCISA agrees that (a) in the event a payment shall be
made by any Guarantor under the JCISA Subsidiary Guarantee Agreement, JCISA
shall indemnify such Guarantor for the full amount of such payment and such
Guarantor shall be subrogated to the rights of the Person to whom such payment
shall have been made to the extent of such payment and (b) in the event any
assets of any Guarantor shall be sold pursuant to any Security Document to
satisfy a claim of any Secured Party, JCISA shall indemnify such Guarantor in an
amount equal to the greater of the book value or the fair market value of the
assets so sold.
SECTION 2. Contribution and Subrogation. Each Guarantor (a "Contributing
Guarantor") agrees (subject to Section 3) that, in the event a payment shall be
made by any other Guarantor under the Guarantee Agreement or assets of any other
Guarantor shall be sold pursuant to any Security Document to satisfy a claim of
any Secured Party and such other Guarantor (the "Claiming Guarantor") shall not
have been fully indemnified by JCISA as provided in Section 1, the Contributing
Guarantor shall indemnify the Claiming Guarantor in an amount equal to the
amount of such payment or the greater of the book value or the fair market value
of such assets, as the case may be, in each case multiplied by a fraction of
which the numerator shall be the net worth of the Contributing Guarantor on the
date hereof and the denominator shall be the aggregate net worth of all the
Guarantors on the date hereof (or, in the case of any Guarantor becoming a party
hereto pursuant to Section 12, the date of the Supplement hereto executed and
delivered by such Guarantor). Any Contributing Guarantor making any payment to a
Claiming Guarantor pursuant to this Section 2
<PAGE>
2
shall be subrogated to the rights of such Claiming Guarantor under Section 1 to
the extent of such payment.
SECTION 3. Subordination. Notwithstanding any provision of this Agreement
to the contrary, all rights of the Guarantors under Sections 1 and 2 and all
other rights of indemnity, contribution or subrogation under applicable law or
otherwise shall be fully subordinated to the indefeasible payment in full in
cash of the Obligations. No failure on the part of JCISA or any Guarantor to
make the payments required by Sections 1 and 2 (or any other payments required
under applicable law or otherwise) shall in any respect limit the obligations
and liabilities of any Guarantor with respect to its obligations hereunder, and
each Guarantor shall remain liable for the full amount of the obligations of
such Guarantor hereunder.
SECTION 4. Termination. This Agreement shall survive and be in full force
and effect so long as any Obligation is outstanding and has not been paid in
full, and so long as the L/C Exposure has not been reduced to zero or any of the
Commitments under the Credit Agreement have not been terminated, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any Obligation is rescinded or must otherwise
be restored by any Secured Party or any Guarantor upon the bankruptcy or
reorganization of JCISA, any Guarantor or otherwise. Notwithstanding the
foregoing, at the time any Guarantor is released from its obligations under the
Guarantee Agreement in accordance with such Guarantee Agreement or the Credit
Agreement, such Guarantor will cease to have any rights or obligations under
this Agreement.
SECTION 5. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH
PRINCIPLES OR RULES WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
SECTION 6. No Waiver; Amendment. (a) No failure on the part of the
Collateral Agent, JCISA or any Guarantor to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy by the Collateral Agent or any Guarantor preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. All
remedies hereunder are cumulative and are not exclusive of any other remedies
provided by law. None of the Collateral Agent, JCISA and the Guarantors shall
be deemed to have waived any rights hereunder unless such waiver shall be in
writing and signed by such parties.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between JCISA,
the Guarantors and the Collateral Agent, with (if required by the Credit
Agreement) the prior written consent of the Required Lenders.
SECTION 7. Notices. All communications and notices hereunder shall be in
writing and given as provided in the JCISA Subsidiary Guarantee Agreement and
addressed as specified therein or with respect to JCISA as provided in the
Credit Agreement.
SECTION 8. Binding Agreement; Assignments. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of the parties that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and assigns.
Neither JCISA nor any Guarantor may assign or transfer any of its rights or
obligations hereunder without the prior written consent of the Collateral
Agent.
SECTION 9. Survival of Agreement; Severability. (a) All covenants and
agreements made by JCISA and each Guarantor herein shall survive the making by
the Lenders of the Loans and the issuance of the Letters of Credit by the
Issuing Bank.
<PAGE>
3
(b) Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 10. Counterparts. This Agreement may be executed by one or more
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. This Agreement shall be
effective with respect to any Guarantor when a counterpart bearing the signature
of such Guarantor shall have been delivered to the Collateral Agent.
SECTION 11. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 12. Additional Guarantors. Pursuant to Section 5.11 of the Credit
Agreement, certain Subsidiaries of JCISA are required to become parties to the
JCISA Subsidiary Guarantee Agreement and this Agreement. Upon execution and
delivery, after the date hereof, by the Collateral Agent and such Subsidiary of
an instrument in the form of Annex 1 hereto, such Subsidiary shall become a
Guarantor hereunder with the same force and effect as if originally named as a
Guarantor hereunder. The execution and delivery of any instrument adding an
additional Guarantor as a party to this Agreement shall not require the consent
of any Guarantor hereunder. The rights and obligations of each Guarantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Guarantor as a party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first appearing above.
JAFRA COSMETICS INTERNATIONAL, S.A.
DE C.V.,
by_______________________________________
Name:
Title:
EACH OF THE SUBSIDIARIES LISTED ON
SCHEDULE I, as a Guarantor,
by_____________________________________
Authorized Officer:
CREDIT SUISSE FIRST BOSTON, as Collateral
Agent,
by_____________________________________
Name:
Title:
by_____________________________________
Name:
Title:
<PAGE>
SCHEDULE I
to the Indemnity, Subrogation
and Contribution Agreement
Guarantors
----------
Name Address
- ---- -------
Reday, S.A. de C.V. [DEBEVOISE TO PROVIDE]
Distribuidora Venus, S.A. de C.V.
Dirsamex, S.A. de C.V.
Qualifax, S.A. de C.V.
Jafra Cosmetics, S. de RL. de C.V.
Consultoria Jafra, S.A. de C.V.
<PAGE>
Annex 1 to
the Indemnity, Subrogation and
Contribution Agreement
SUPPLEMENT NO. dated as of , to the Indemnity,
Subrogation and Contribution Agreement dated as of April 30, 1998
(as the same may be amended, supplemented or otherwise modified
from time to time, the "Indemnity, Subrogation and Contribution
Agreement"), among JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V., a
sociedad anonima de capital variable organized under the laws of
the United Mexican States ("JCISA"), each Subsidiary of JCISA
listed on Schedule I thereto (the "Guarantors"), and CREDIT
SUISSE FIRST BOSTON, a bank organized under the laws of
Switzerland acting through its New York branch, as collateral
agent (the "Collateral Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
A. Reference is made to (a) the Credit Agreement dated as of April 30,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe
anonyme, CDRJ Acquisition Corporation ([to be] renamed Jafra Cosmetics
International, Inc.), a Delaware corporation ("JCI"), JCISA (together with JCI,
the "Borrowers"), the lenders from time to time party thereto (the "Lenders"),
the Issuing Bank (as defined therein) and Credit Suisse First Boston, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), as swingline lender and as Collateral Agent, and (b) the JCISA
Subsidiary Guarantee Agreement dated as of April 30, 1998, among the Guarantors
and the Collateral Agent (the "JCISA Subsidiary Guarantee Agreement").
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Indemnity, Subrogation and
Contribution Agreement and the Credit Agreement.
C. JCISA and the Guarantors have entered into the Indemnity, Subrogation
and Contribution Agreement in order to induce the Lenders to make Loans and the
Issuing Bank to issue Letters of Credit. Pursuant to Section 5.11 of the Credit
Agreement, certain Subsidiaries of JCISA are required to become parties to the
JCISA Subsidiary Guarantee Agreement and this Agreement. Section 12 of the
Indemnity, Subrogation and Contribution Agreement provides that additional
Subsidiaries of JCISA may become Guarantors under the Indemnity, Subrogation and
Contribution Agreement by execution and delivery of an instrument in the form of
this Supplement. The undersigned Subsidiary of JCISA (the "New Guarantor") is
executing this Supplement in accordance with the requirements of the Credit
Agreement to become a Guarantor under the Indemnity, Subrogation and
Contribution Agreement in order to induce the Lenders to make additional Loans
and the Issuing Bank to issue additional Letters of Credit and as consideration
for Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Guarantor agree as follows:
SECTION 1. In accordance with Section 12 of the Indemnity, Subrogation and
Contribution Agreement, the New Guarantor by its signature below becomes a
Guarantor under the Indemnity, Subrogation and Contribution Agreement with the
same force and effect as if originally named therein as a Guarantor and the New
Guarantor hereby agrees to all the terms and provisions of the Indemnity,
Subrogation and Contribution Agreement applicable to it as a Guarantor
thereunder. Each reference to a "Guarantor" in the Indemnity, Subrogation and
Contribution Agreement shall be deemed to include the New Guarantor. The
Indemnity, Subrogation and Contribution Agreement is hereby incorporated herein
by reference.
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, or similar laws relating to or affecting creditors'
rights generally and by
<PAGE>
2
general equitable principles (regardless of whether enforcement is sought in a
proceeding in equity or at law).
SECTION 3. This Supplement may be executed by one or more parties to this
Supplement on any number of separate counterparts (including by facsimile
transmission), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. This Supplement shall become effective
when the Collateral Agent shall have received counterparts of this Supplement
that, when taken together, bear the signatures of the New Guarantor and the
Collateral Agent.
SECTION 4. Except as expressly supplemented hereby, the Indemnity,
Subrogation and Contribution Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES
WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
SECTION 6. Any provision of this Supplement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 7 of the Indemnity, Subrogation and
Contribution Agreement. All communications and notices hereunder to the New
Guarantor shall be given to it at the address set forth under its signature.
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly
executed this Supplement to the Indemnity, Subrogation and Contribution
Agreement as of the day and year first above written.
[Name of New Guarantor],
by_____________________________________
Name:
Title:
Address:
CREDIT SUISSE FIRST BOSTON, as Collateral
Agent,
by_____________________________________
Name:
Title:
Address:
by_____________________________________
Name:
Title:
Address:
<PAGE>
SCHEDULE I
to Supplement No.___ to the Indemnity,
Subrogation and Contribution Agreement
Guarantors
----------
Name Address
- ---- -------
<PAGE>
EXHIBIT E
to CREDIT AGREEMENT
JCI GUARANTEE AGREEMENT dated as of April 30, 1998, between
CDRJ ACQUISITION CORPORATION (to be renamed Jafra Cosmetics
International, Inc.), a Delaware corporation (the "Guarantor"),
and CREDIT SUISSE FIRST BOSTON, a bank organized under the laws
of Switzerland, acting through its New York branch, as collateral
agent (the "Collateral Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
Reference is made to the Credit Agreement dated as of April 30, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme,
the Guarantor, Jafra Cosmetics International, S.A. de C.V., a sociedad anonima
de capital variable organized under the laws of the United Mexican States
("JCISA" and, together with the Guarantor, the "Borrowers"), the lenders from
time to time party thereto (the "Lenders"), the Issuing Bank (as defined
therein) and Credit Suisse First Boston, as administrative agent for the Lenders
(in such capacity, the "Administrative Agent"), as swingline lender and as
Collateral Agent. Capitalized terms used herein and not defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrowers and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrowers pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. The Guarantor acknowledges that it will derive substantial benefit
from the making of the Loans by the Lenders and the issuance of the Letters of
Credit by the Issuing Bank. The obligations of the Lenders to make Loans and of
the Issuing Bank to issue Letters of Credit are conditioned on, among other
things, the execution and delivery by the Guarantor of a Guarantee Agreement in
the form hereof. As consideration therefor and in order to induce the Lenders
to make Loans and the Issuing Bank to issue Letters of Credit, the Guarantor is
willing to execute this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. The Guarantor unconditionally guarantees, as a
primary obligor and not merely as a surety, all obligations of JCISA:
(a) under the Credit Agreement, including (a) the due and punctual
payment of (i) the principal of and premium, if any, and interest
(including interest accruing at the applicable rate provided in the Credit
Agreement during the pendency of any bankruptcy, insolvency, receivership
or other similar proceeding, regardless of whether allowed or allowable in
such proceeding) on the Loans to JCISA, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (ii) each payment required to be made by JCISA under the Credit
Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements and interest thereon
and (iii) all other monetary obligations, including fees, costs, expenses
and indemnities, whether direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), of JCISA to the Secured Parties
under the Credit Agreement and the other Loan Documents;
(b) for the due and punctual performance of all covenants, agreements,
obligations and liabilities of JCISA under or pursuant to the Credit
Agreement and the other Loan Documents;
(c) unless otherwise agreed upon in writing by the counterparty
thereto, for the due and punctual payment and performance of all
obligations of JCISA, monetary or otherwise,
<PAGE>
2
under each Hedging Agreement entered into with a counterparty (whether or
not a Lender or an Affiliate thereof); and
(d) for the due and punctual payment and performance of all guarantee
obligations of JCISA referred to in Section 6.01(d)(ii) of the Credit
Agreement as to which any Lender or any Affiliate thereof is originally a
beneficiary (all the monetary and other obligations referred to in the
preceding clauses (a) through (d) being collectively called the
"Obligations");
provided, however, that no legal proceedings or other remedial actions to
enforce the guarantee of the Obligations hereunder may be initiated or taken
until the earlier to occur of (a) 30 days after written demand for payment or
performance thereof has been made by the Collateral Agent to the Guarantor and
(b) an event specified in Section 7.01 of the Credit Agreement with respect to
the Guarantor.
The Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice to or further assent from it, and
that it will remain bound upon its guarantee notwithstanding any extension or
renewal of any Obligation.
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, the Guarantor waives presentment to, demand of payment from and
protest to JCISA of any of the Obligations, and also waives notice of acceptance
of its guarantee and notice of protest for nonpayment. To the fullest extent
permitted by applicable law, the obligations of the Guarantor hereunder shall
not be affected by (a) the failure of the Collateral Agent or any other Secured
Party to assert any claim or demand or to enforce or exercise any right or
remedy against JCISA or any other guarantor of the Obligations under the
provisions of the Credit Agreement, any other Loan Document or otherwise, (b)
any rescission, waiver, amendment or modification of, or any release from any of
the terms or provisions of this Agreement, any other Loan Document, any
Guarantee or any other agreement, including with respect to any other guarantor
of the Obligations or (c) the failure to perfect any security interest in, or
the release of, any of the security held by or on behalf of the Collateral Agent
or any other Secured Party.
SECTION 3. Security. The Guarantor authorizes the Collateral Agent, for
the ratable benefit of the Secured Parties, to (a) take and hold security
pursuant to the terms of the Credit Agreement, the Pledge Agreement and the
other Security Documents for the payment of this guarantee and the Obligations
and exchange, enforce, waive and release any such security, (b) apply such
security and direct the order or manner of sale thereof pursuant to the terms
of the Credit Agreement, the Pledge Agreement and the other Security Documents
and (c) release or substitute any one or more endorsees, other guarantors or
other obligors.
SECTION 4. Guarantee of Payment. The Guarantor further agrees that its
guarantee constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Collateral Agent or
any other Secured Party to any of the security held for payment of the
Obligations or to any balance of any deposit account or credit on the books of
the Collateral Agent or any other Secured Party in favor of JCISA or any other
Person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of
the Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the performance or payment
in full of the Obligations, as the case may be), including any claim of waiver,
release, surrender, alteration or compromise of any of the Obligations, and
shall not be subject to any defense or set off, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of the Guarantor hereunder shall
not be discharged or impaired or otherwise affected by the failure of the
Collateral Agent or any other Secured Party to assert any claim or demand or to
enforce any remedy under the Credit Agreement, any other Loan Document or any
other agreement, by any waiver or modification of any provision of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
Obligations, or by any
<PAGE>
3
other act or omission that may or might in any manner or to any extent vary the
risk of the Guarantor or that would otherwise operate as a discharge of the
Guarantor as a matter of law or equity (other than the performance or payment in
full of all the Obligations, as the case may be).
SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted
by applicable law, the Guarantor waives any defense based on or arising out of
any defense of JCISA or the unenforceability of the Obligations or any part
thereof from any cause, or the cessation from any cause of the liability of
JCISA, other than the performance or payment in full of the Obligations then due
and owing. The Collateral Agent, for the ratable benefit of the Secured
Parties, may, at its election, foreclose on any security held by one or more of
them by one or more judicial or nonjudicial sales, accept an assignment of any
such security in lieu of foreclosure, compromise or adjust any part of the
Obligations, make any other accommodation with JCISA or any other guarantor or
exercise any other right or remedy available to them against JCISA or any other
guarantor, without affecting or impairing in any way the liability of the
Guarantor hereunder except to the extent the Obligations then due and owing have
been fully paid.
SECTION 7. Agreement to Pay; Subrogation. In furtherance of the foregoing
and not in limitation of any other right that the Collateral Agent or any other
Secured Party has at law or in equity against the Guarantor by virtue hereof,
upon the failure of JCISA or any other Loan Party to pay any Obligation when and
as the same shall become due, whether at maturity, by acceleration, after notice
of prepayment or otherwise, the Guarantor hereby promises to and will forthwith
pay, or cause to be paid, to the Collateral Agent the amount of such unpaid
Obligations. Upon payment by the Guarantor of any sums to the Collateral Agent
as provided above, all rights of the Guarantor against JCISA arising as a result
thereof by way of right of subrogation, contribution, reimbursement, indemnity
or otherwise shall in all respects be subordinate and junior in right of payment
to the prior payment in full of all the Obligations. If any amount shall
erroneously be paid to the Guarantor on account of such subrogation,
contribution, reimbursement, indemnity or similar right, such amount shall be
held in trust for the benefit of the Secured Parties and shall forthwith be paid
to the Collateral Agent to be credited against the payment of the Obligations,
whether matured or unmatured, in accordance with the terms of the Loan
Documents.
SECTION 8. Information. The Guarantor assumes all responsibility for
being and keeping itself informed of JCISA's financial condition and assets, and
of all other circumstances bearing upon the risk of nonpayment of the
Obligations and the nature, scope and extent of the risks that the Guarantor
assumes and incurs hereunder, and agrees that none of the Collateral Agent or
the other Secured Parties will have any duty to advise the Guarantor of
information known to it or any of them regarding such circumstances or risks.
SECTION 9. Termination. The Guarantee made hereunder (a) shall terminate
when all the Obligations have been paid in full and the Lenders have no further
commitment to lend under the Credit Agreement, the L/C Exposure has been reduced
to zero and the Issuing Bank has no further obligation to issue Letters of
Credit under the Credit Agreement and (b) shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by any Secured Party
or the Guarantor upon the bankruptcy or reorganization of JCISA, the Guarantor
or otherwise.
SECTION 10. Binding Agreement; Assignments. Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the Guarantor that are contained in this
Agreement shall bind and inure to the benefit of each party hereto and their
respective successors and assigns. This Agreement shall become effective when a
counterpart hereof executed on behalf of the Guarantor shall have been delivered
to the Collateral Agent and a counterpart hereof shall have been executed on
behalf of the Collateral Agent, and thereafter shall be binding upon the
Guarantor and the Collateral Agent and their respective successors and assigns,
and shall inure to the benefit of the Guarantor, the Collateral Agent and the
other Secured Parties, and their respective successors and assigns, except that
the Guarantor shall not have the right to assign its
<PAGE>
4
rights or obligations hereunder or any interest herein except with the written
consent of the Collateral Agent (and any such attempted assignment shall be
void).
SECTION 11. Waivers; Amendment. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and
of the other Secured Parties under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of this Agreement or consent to any departure by the
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on the Guarantor in any case shall entitle the Guarantor to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Guarantor and the Collateral Agent, with the prior written consent of the
Required Lenders (except as otherwise provided in the Credit Agreement).
SECTION 12. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH
PRINCIPLES OR RULES WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
SECTION 13. Notices. All communications and notices hereunder shall be in
writing (including by facsimile transmission) and given as provided in Section
9.02 of the Credit Agreement.
SECTION 14. Survival of Agreement. All covenants and agreements made by
the Guarantors herein shall survive the making by the Lenders of the Loans and
the issuance of the Letters of Credit by the Issuing Bank.
SECTION 15. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 10. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 16. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 17. Integration. This Agreement represents the agreement between
the parties with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by any of the parties
hereto relative to the subject matter hereof not expressly set forth or referred
to herein or in the other Loan Documents.
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
JAFRA COSMETICS INTERNATIONAL, INC.,
as Guarantor,
by_____________________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON, as Collateral
Agent,
by_____________________________________
Name:
Title:
by_____________________________________
Name:
Title:
<PAGE>
EXHIBIT F
to CREDIT AGREEMENT
JCI SUBSIDIARY GUARANTEE AGREEMENT dated as of April 30,
1998, between [_________] (each such subsidiary individually, a
"Guarantor" and collectively, the "Guarantors") of CDRJ
ACQUISITION CORPORATION (to be renamed Jafra Cosmetics
International, Inc.), a Delaware corporation ("JCI"), and CREDIT
SUISSE FIRST BOSTON, a bank organized under the laws of
Switzerland, acting through its New York branch, as collateral
agent (the "Collateral Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
Reference is made to the Credit Agreement dated as of April 30, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme,
JCI, Jafra Cosmetics International, S.A. de C.V., a sociedad anonima de capital
variable organized under the laws of the United Mexican States ("JCISA" and,
together with JCI, the "Borrowers"), the lenders from time to time party thereto
(the "Lenders"), the Issuing Bank (as defined therein) and Credit Suisse First
Boston, as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"), as swingline lender and as Collateral Agent.
Capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrowers and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrowers pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. Each of the Guarantors is a wholly owned Domestic Subsidiary of JCI
and acknowledges that it will derive substantial benefit from the making of the
Loans by the Lenders and the issuance of the Letters of Credit by the Issuing
Bank. The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit are conditioned on, among other things, the execution
and delivery by the Guarantors of a Guarantee Agreement in the form hereof. As
consideration therefor and in order to induce the Lenders to make Loans and the
Issuing Bank to issue Letters of Credit, the Guarantors are willing to execute
this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. Each Guarantor unconditionally guarantees,
severally, as a primary obligor and not merely as a surety, all obligations of
JCI:
(a) under the Credit Agreement and the JCI Guarantee Agreement,
including (a) the due and punctual payment of (i) the principal of and
premium, if any, and interest (including interest accruing at the
applicable rate provided in the Credit Agreement during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on the Loans
to JCI, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, (ii) each payment required to
be made by JCI under the Credit Agreement in respect of any Letter of
Credit, when and as due, including payments in respect of reimbursement of
disbursements and interest thereon and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether
direct, contingent, fixed or otherwise(including monetary obligations
incurred during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in
such proceeding), of JCI to the Secured Parties under the Credit Agreement,
the JCI Guarantee Agreement and the other Loan Documents,
(b) for the due and punctual performance of all covenants, agreements,
obligations and liabilities of JCI under or pursuant to the Credit
Agreement, the JCI Guarantee Agreement and the other Loan Documents,
<PAGE>
2
(c) for unless otherwise agreed upon in writing by the counterparty
thereto, the due and punctual payment and performance of all obligations of
JCI, monetary or otherwise, under each Hedging Agreement entered into with
a counterparty (whether or not a Lender or an Affiliate thereof) and
(d) for the due and punctual payment and performance of all guarantee
obligations of JCISA referred to in Section 6.01(d)(ii) of the Credit
Agreement as to which any Lender or any Affiliate thereof is originally a
beneficiary (all the monetary and other obligations referred to in the
preceding clauses (a) through (d) being collectively called the
"Obligations"). Each Guarantor further agrees that the Obligations may be
extended or renewed, in whole or in part, without notice to or further
assent from it, and that it will remain bound upon its guarantee
notwithstanding any extension or renewal of any Obligation.
Anything contained in this Agreement to the contrary notwithstanding, the
obligations of each Guarantor hereunder shall be limited to a maximum aggregate
amount equal to the greatest amount that would not render such Guarantor's
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
provisions of applicable state law (collectively, the "Fraudulent Transfer
Laws"), in each case after giving effect to all other liabilities of such
Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (a) in respect of intercompany indebtedness to JCI or Affiliates of
JCI to the extent that such indebtedness would be discharged in an amount equal
to the amount paid by such Guarantor hereunder and (b) under any Guarantee of
senior unsecured indebtedness or Indebtedness subordinated in right of payment
to the Obligations which Guarantee contains a limitation as to maximum amount
similar to that set forth in this paragraph, pursuant to which the liability of
such Guarantor hereunder is included in the liabilities taken into account in
determining such maximum amount) and after giving effect as assets to the value
(as determined under the applicable provisions of the Fraudulent Transfer Laws)
of any rights to subrogation, contribution, reimbursement, indemnity or similar
rights of such Guarantor pursuant to (i) applicable law or (ii) any agreement
providing for an equitable allocation among such Guarantor and other Affiliates
of JCI of obligations arising under Guarantees by such parties.
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, each Guarantor waives presentment to, demand of payment from and
protest to JCI of any of the Obligations, and also waives notice of acceptance
of its guarantee and notice of protest for nonpayment. To the fullest extent
permitted by applicable law, the obligations of each Guarantor hereunder shall
not be affected by (a) the failure of the Collateral Agent or any other Secured
Party to assert any claim or demand or to enforce or exercise any right or
remedy against the Borrower or any other Guarantor under the provisions of the
Credit Agreement, any other Loan Document or otherwise, (b) any rescission,
waiver, amendment or modification of, or any release from any of the terms or
provisions of this Agreement, any other Loan Document, any Guarantee or any
other agreement, including with respect to any other Guarantor under this
Agreement or (c) the failure to perfect any security interest in, or the release
of, any of the security held by or on behalf of the Collateral Agent or any
other Secured Party.
SECTION 3. Security. Each of the Guarantors authorizes the Collateral
Agent to (a) take and hold security pursuant to the terms of the Credit
Agreement, the Pledge Agreement and the other Security Documents for the payment
of this guarantee and the Obligations and exchange, enforce, waive and release
any such security, (b) apply such security and direct the order or manner of
sale thereof pursuant to the terms of the Credit Agreement, the Pledge Agreement
and the other Security Documents and (c) release or substitute any one or more
endorsees, other guarantors of other obligors.
SECTION 4. Guarantee of Payment. Each Guarantor further agrees that its
guarantee constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Collateral Agent or
any other Secured Party to any of the security held for
<PAGE>
3
payment of the Obligations or to any balance of any deposit account or credit on
the books of the Collateral Agent or any other Secured Party in favor of JCI or
any other Person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of
each Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the performance or payment
in full of the Obligations, as the case may be), including any claim of waiver,
release, surrender, alteration or compromise of any of the Obligations, and
shall not be subject to any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Guarantor hereunder shall
not be discharged or impaired or otherwise affected by the failure of the
Collateral Agent or any other Secured Party to assert any claim or demand or to
enforce any remedy under the Credit Agreement, any other Loan Document or any
other agreement, by any waiver or modification of any provision of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
Obligations, or by any other act or omission that may or might in any manner or
to any extent vary the risk of any Guarantor or that would otherwise operate as
a discharge of each Guarantor as a matter of law or equity (other than the
performance or payment in full of all the Obligations, as the case may be).
SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted
by applicable law, each of the Guarantors waives any defense based on or arising
out of any defense of JCI or the unenforceability of the Obligations or any part
thereof from any cause, or the cessation from any cause of the liability of JCI,
other than the performance or payment in full of the Obligations then due and
owing. The Collateral Agent may, at its election, foreclose on any security
held by one or more of them by one or more judicial or nonjudicial sales, accept
an assignment of any such security in lieu of foreclosure, compromise or adjust
any part of the Obligations, make any other accommodation with JCI or any other
guarantor or exercise any other right or remedy available to them against JCI or
any other guarantor, without affecting or impairing in any way the liability of
any Guarantor hereunder except to the extent the Obligations then due and owing
have been fully paid.
SECTION 7. Agreement to Pay; Subordination. In furtherance of the
foregoing and not in limitation of any other right that the Collateral Agent or
any other Secured Party has at law or in equity against any Guarantor by virtue
hereof, upon the failure of JCI or any other Loan Party to pay any Obligation
when and as the same shall become due, whether at maturity, by acceleration,
after notice of prepayment or otherwise, each Guarantor hereby promises to and
will forthwith pay, or cause to be paid, to the Collateral Agent in cash the
amount of such unpaid Obligations. Upon payment by any Guarantor of any sums to
the Collateral Agent or any other Secured Party as provided above, all rights of
such Guarantor against JCI arising as a result thereof by way of right of
subrogation, contribution, reimbursement, indemnity or otherwise shall in all
respects be subordinate and junior in right of payment to the prior payment in
full of all the Obligations. If any amount shall erroneously be paid to any
Guarantor on account of such subrogation, contribution, reimbursement, indemnity
or similar right, such amount shall be held in trust for the benefit of the
Secured Parties and shall forthwith be paid to the Collateral Agent to be
credited against the payment of the Obligations, whether matured or unmatured,
in accordance with the terms of the Loan Documents.
SECTION 8. Information. Each of the Guarantors assumes all responsibility
for being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks that such
Guarantor assumes and incurs hereunder, and agrees that none of the Collateral
Agent or the other Secured Parties will have any duty to advise any of the
Guarantors of information known to it or any of them regarding such
circumstances or risks.
SECTION 9. Representations and Warranties. Each of the Guarantors
represents and warrants as to itself that all representations and warranties
relating to it contained in the Credit Agreement are true and correct, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
<PAGE>
4
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
SECTION 10. Termination. The Guarantees made hereunder (a) shall
terminate when all the Obligations have been paid in full and the Lenders have
no further commitment to lend under the Credit Agreement, the L/C Exposure has
been reduced to zero and the Issuing Bank has no further obligation to issue
Letters of Credit under the Credit Agreement and (b) shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any Obligation is rescinded or must otherwise be restored by
any Secured Party or any Guarantor upon the bankruptcy or reorganization of JCI,
any Guarantor or otherwise.
SECTION 11. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Guarantors that are contained in
this Agreement shall bind and inure to the benefit of each party hereto and
their respective successors and assigns. This Agreement shall become effective
as to any Guarantor when a counterpart hereof executed on behalf of such
Guarantor shall have been delivered to the Collateral Agent, and a counterpart
hereof shall have been executed on behalf of the Collateral Agent, and
thereafter shall be binding upon such Guarantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Guarantor, the Collateral Agent and the other Secured Parties, and their
respective successors and assigns, except that no Guarantor shall have the right
to assign its rights or obligations hereunder or any interest herein (and any
such attempted assignment shall be void), except with the written consent of the
Collateral Agent. If all of the capital stock of a Guarantor is sold,
transferred or otherwise disposed of pursuant to a transaction permitted by
Section 6.04 of the Credit Agreement, such Guarantor shall be released from its
obligations under this Agreement without further action. This Agreement shall
be construed as a separate agreement with respect to each Guarantor and may be
amended, modified, supplemented, waived or released with respect to any
Guarantor without the approval of any other Guarantor and without affecting the
obligations of any other Guarantor hereunder.
SECTION 12. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the other Secured Parties under the other Loan Documents are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of this Agreement or consent to any departure by any
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on any Guarantor in any case shall entitle such Guarantor to
any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Guarantors with respect to which such waiver, amendment or modification relates
and the Collateral Agent, with the prior written consent of the Required Lenders
(except as otherwise provided in the Credit Agreement).
SECTION 13. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH
PRINCIPLES OR RULES WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
<PAGE>
5
SECTION 14. Notices. All communications and notices hereunder shall be in
writing (including facsimile transmission) and given as provided in Section 9.02
of the Credit Agreement. All communications and notices hereunder to each
Guarantor shall be given to it in care of JCI.
SECTION 15. Survival of Agreement; Severability. (a) All covenants and
agreements made by the Guarantors herein shall survive the making by the Lenders
of the Loans and the issuance of the Letters of Credit by the Issuing Bank.
(b) In the event any one or more of the provisions contained in this
Agreement or in any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 16. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 11. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 17. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 18. Integration. This Agreement represents the agreement between
the parties with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by any of the parties
hereto relative to the subject matter hereof not expressly set forth or referred
to herein or in the other Loan Documents.
SECTION 19. Jurisdiction; Consent to Service of Process. Each party hereto
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or proceeding
relating to this Agreement, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts of any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient forum and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to the applicable party at
the address specified in Section 7.01 or at such other address of which the
parties hereto shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
Section 19 any punitive damages.
<PAGE>
6
SECTION 20. Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 21. Additional Guarantors. Pursuant to Section 5.11 of the Credit
Agreement, certain Domestic Subsidiaries of JCI are required to become
Subsidiary Guarantors hereunder. Upon execution and delivery after the date
hereof by the Collateral Agent and such Domestic Subsidiary of an instrument in
the form of Annex 1, such Domestic Subsidiary shall become a Guarantor hereunder
with the same force and effect as if originally named as a Guarantor herein.
The execution and delivery of any instrument adding an additional Guarantor as a
party to this Agreement shall not require the consent of any other Guarantor
hereunder. The rights and obligations of each Guarantor hereunder shall remain
in full force and effect notwithstanding the addition of any new Guarantor as a
party to this Agreement.
SECTION 22. Right of Setoff. If an Event of Default under Section 7.02(a)
of the Credit Agreement shall have occurred and be continuing, each Secured
Party shall have the right to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
Indebtedness at any time owing by such Secured Party to or for the credit or the
account of such Guarantor against any or all the obligations of such Guarantor
now or hereafter existing under this Agreement and the other Loan Documents held
by such Secured Party, irrespective of whether or not such Secured Party shall
have made any demand under this Agreement or any other Loan Document and
although such obligations may be unmatured. Each Secured Party agrees promptly
to notify the Borrowers, the Administrative Agent and the applicable Guarantor
after any such set-off and application made by such Secured Party, provided that
the failure to give such notice shall not affect the validity of such set-off
and application. The rights of each Secured Party under this Section 22 are in
addition to other rights and remedies (including other rights of setoff) which
such Secured Party may have.
<PAGE>
7
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
[_________________],
by_________________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON, as Collateral Agent,
by_________________________________
Name:
Title:
by_________________________________
Name:
Title:
<PAGE>
EXHIBIT G
to CREDIT AGREEMENT
JCISA GUARANTEE AGREEMENT dated as of April 30, 1998,
between JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V., a sociedad
anonima de capital variable organized under the laws of the
United Mexican States (the "Guarantor") and CREDIT SUISSE FIRST
BOSTON, a bank organized under the laws of Switzerland, acting
through its New York branch, as collateral agent (the "Collateral
Agent") for the Secured Parties (as defined in the Credit
Agreement referred to below).
Reference is made to the Credit Agreement dated as of April 30, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme,
CDRJ Acquisition Corporation (to be renamed Jafra Cosmetics International,
Inc.), a Delaware corporation ("JCI" and, together with the Guarantor, the
"Borrowers"), the Guarantor, the lenders from time to time party thereto (the
"Lenders"), the Issuing Bank (as defined therein) and Credit Suisse First
Boston, as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"), as swingline lender and as Collateral Agent.
Capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrowers and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrowers pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. The Guarantor acknowledges that it will derive substantial benefit
from the making of the Loans by the Lenders and the issuance of the Letters of
Credit by the Issuing Bank. The obligations of the Lenders to make Loans and of
the Issuing Bank to issue Letters of Credit are conditioned on, among other
things, the execution and delivery by the Guarantor of a Guarantee Agreement in
the form hereof. As consideration therefor and in order to induce the Lenders
to make Loans and the Issuing Bank to issue Letters of Credit, the Guarantor is
willing to execute this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. The Guarantor unconditionally guarantees, as a
primary obligor and not merely as a surety, all obligations of JCI:
(a) under the Credit Agreement, including (a) the due and punctual
payment of (i) the principal of and premium, if any, and interest
(including interest accruing at the applicable rate provided in the Credit
Agreement during the pendency of any bankruptcy, insolvency, receivership
or other similar proceeding, regardless of whether allowed or allowable in
such proceeding) on the Loans to JCI, when and as due, whether at maturity,
by acceleration, upon one or more dates set for prepayment or otherwise,
(ii) each payment required to be made by JCI under the Credit Agreement in
respect of any Letter of Credit, when and as due, including payments in
respect of reimbursement of disbursements and interest thereon and (iii)
all other monetary obligations, including fees, costs, expenses and
indemnities, whether direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), of JCI to the Secured Parties
under the Credit Agreement and the other Loan Documents;
(b) for the due and punctual performance of all covenants,
agreements, obligations and liabilities of JCI under or pursuant to the
Credit Agreement and the other Loan Documents;
(c) for unless otherwise agreed upon in writing by the counterparty
thereto, the due and punctual payment and performance of all obligations of
JCI, monetary or otherwise,
<PAGE>
2
under each Hedging Agreement entered into with a counterparty (whether or
not a Lender or an Affiliate thereof); and
(d) for the due and punctual payment and performance of all guarantee
obligations of JCI referred to in Section 6.01(d)(ii) of the Credit
Agreement as to which any Lender or any Affiliate thereof originally is a
beneficiary (all the monetary and other obligations referred to in the
preceding clauses (a) through (d) being collectively called the
"Obligations");
provided, however, that no legal proceedings or other remedial actions to
enforce the guarantee of the Obligations hereunder may be initiated or taken
until the earlier to occur of (a) 30 days after written demand for payment or
performance thereof has been made by the Collateral Agent to the Guarantor and
(b) an event specified in Section 7.01 of the Credit Agreement with respect to
the Guarantor.
The Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice to or further assent from it, and
that it will remain bound upon its guarantee notwithstanding any extension or
renewal of any Obligation.
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, the Guarantor waives presentment to, demand of payment from and
protest to JCI of any of the Obligations, and also waives notice of acceptance
of its guarantee and notice of protest for nonpayment. To the fullest extent
permitted by applicable law, the obligations of the Guarantor hereunder shall
not be affected by (a) the failure of the Collateral Agent or any other Secured
Party to assert any claim or demand or to enforce or exercise any right or
remedy against JCI or any other guarantor of the Obligations under the
provisions of the Credit Agreement, any other Loan Document or otherwise, (b)
any rescission, waiver, amendment or modification of, or any release from any of
the terms or provisions of this Agreement, any other Loan Document, any
Guarantee or any other agreement, including with respect to any other guarantor
of the Obligations or (c) the failure to perfect any security interest in, or
the release of, any of the security held by or on behalf of the Collateral Agent
or any other Secured Party.
SECTION 3. Security. The Guarantor authorizes the Collateral Agent, for
the ratable benefit of the Secured Parties, to (a) take and hold security for
the payment of this guarantee and the Obligations and exchange, enforce, waive
and release any such security, (b) apply such security and direct the order or
manner of sale thereof as they in their sole discretion may determine and (c)
release or substitute any one or more endorsees, other guarantors or other
obligors.
SECTION 4. Guarantee of Payment. The Guarantor further agrees that its
guarantee constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Collateral Agent or
any other Secured Party to any of the security held for payment of the
Obligations or to any balance of any deposit account or credit on the books of
the Collateral Agent or any other Secured Party in favor of JCI or any other
Person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of
the Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the performance or payment
in full of the Obligations, as the case may be), including any claim of waiver,
release, surrender, alteration or compromise of any of the Obligations, and
shall not be subject to any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of the Guarantor hereunder shall
not be discharged or impaired or otherwise affected by the failure of the
Collateral Agent or any other Secured Party to assert any claim or demand or to
enforce any remedy under the Credit Agreement, any other Loan Document or any
other agreement, by any waiver or modification of any provision of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
Obligations, or by any other act or omission that may or might in any manner or
to any extent vary the risk of the Guarantor
<PAGE>
3
or that would otherwise operate as a discharge of the Guarantor as a matter of
law or equity (other than the performance or payment in full in cash of all the
Obligations, as the case may be).
SECTION 6. Defenses of JCI Waived. To the fullest extent permitted by
applicable law, the Guarantor waives any defense based on or arising out of any
defense of JCI or the unenforceability of the Obligations or any part thereof
from any cause, or the cessation from any cause of the liability of JCI, other
than the performance or payment in full of the Obligations then due and owing.
The Collateral Agent, for the ratable benefit of the Secured Parties, may, at
its election, foreclose on any security held by one or more of them by one or
more judicial or nonjudicial sales, accept an assignment of any such security in
lieu of foreclosure, compromise or adjust any part of the Obligations, make any
other accommodation with JCI or any other guarantor or exercise any other right
or remedy available to them against JCI or any other guarantor, without
affecting or impairing in any way the liability of the Guarantor hereunder
except to the extent the Obligations then due and owing have been fully paid.
SECTION 7. Agreement to Pay; Subrogation. In furtherance of the foregoing
and not in limitation of any other right that the Collateral Agent or any other
Secured Party has at law or in equity against the Guarantor by virtue hereof,
upon the failure of JCI or any other Loan Party to pay any Obligation when and
as the same shall become due, whether at maturity, by acceleration, after notice
of prepayment or otherwise, the Guarantor hereby promises to and will forthwith
pay, or cause to be paid, to the Collateral Agent in cash the amount of such
unpaid Obligations. Upon payment by the Guarantor of any sums to the Collateral
Agent as provided above, all rights of the Guarantor against JCI arising as a
result thereof by way of right of subrogation, contribution, reimbursement,
indemnity or otherwise shall in all respects be subordinate and junior in right
of payment to the prior payment in full of all the Obligations. If any amount
shall erroneously be paid to the Guarantor on account of such subrogation,
contribution, reimbursement, indemnity or similar right, such amount shall be
held in trust for the benefit of the Secured Parties and shall forthwith be paid
to the Collateral Agent to be credited against the payment of the Obligations,
whether matured or unmatured, in accordance with the terms of the Loan
Documents.
SECTION 8. Information. The Guarantor assumes all responsibility for
being and keeping itself informed of JCI's financial condition and assets, and
of all other circumstances bearing upon the risk of nonpayment of the
Obligations and the nature, scope and extent of the risks that the Guarantor
assumes and incurs hereunder, and agrees that none of the Collateral Agent or
the other Secured Parties will have any duty to advise the Guarantor of
information known to it or any of them regarding such circumstances or risks.
SECTION 9. Termination. The Guarantee made hereunder (a) shall terminate
when all the Obligations have been paid in full and the Lenders have no further
commitment to lend under the Credit Agreement, the L/C Exposure has been reduced
to zero and the Issuing Bank has no further obligation to issue Letters of
Credit under the Credit Agreement and (b) shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by any Secured Party
or the Guarantor upon the bankruptcy or reorganization of JCI, the Guarantor or
otherwise.
SECTION 10. Binding Agreement; Assignments. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of the Guarantor that are contained in this Agreement
shall bind and inure to the benefit of each party hereto and their respective
successors and assigns. This Agreement shall become effective when a counterpart
hereof executed on behalf of the Guarantor shall have been delivered to the
Collateral Agent and a counterpart hereof shall have been executed on behalf of
the Collateral Agent, and thereafter shall be binding upon the Guarantor and the
Collateral Agent and their respective successors and assigns, and shall inure to
the benefit of the Guarantor, the Collateral Agent and the other Secured
Parties, and their respective successors and assigns, except that the Guarantor
shall not have the right to assign its
<PAGE>
4
rights or obligations hereunder or any interest herein except with the written
consent of the Collateral Agent (and any such attempted assignment shall be
void).
SECTION 11. Waivers; Amendment. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and
of the other Secured Parties under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of this Agreement or consent to any departure by the
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on the Guarantor in any case shall entitle the Guarantor to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Guarantor and the Collateral Agent, with the prior written consent of the
Required Lenders (except as otherwise provided in the Credit Agreement).
SECTION 12. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH
PRINCIPLES OR RULES WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
SECTION 13. Notices. All communications and notices hereunder shall be in
writing (including by facsimile transmission) and given as provided in Section
9.02 of the Credit Agreement.
SECTION 14. Survival of Agreement. All covenants and agreements made by
the Guarantors herein shall survive the making by the Lenders of the Loans and
the issuance of the Letters of Credit by the Issuing Bank.
SECTION 15. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 10. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 16. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 17. Integration. This Agreement represents the agreement between
the parties with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by any of the parties
hereto relative to the subject matter hereof not expressly set forth or referred
to herein or in the other Loan Documents.
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V., as
Guarantor,
by ______________________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON, as Collateral Agent,
by ______________________________________
Name:
Title:
by ______________________________________
Name:
Title:
<PAGE>
EXHIBIT H
to CREDIT AGREEMENT
JCISA SUBSIDIARY GUARANTEE AGREEMENT dated as of April 30,
1998, among each of the subsidiaries listed on Schedule I hereto
(each such subsidiary individually, a "Guarantor" and
collectively, the "Guarantors") of Jafra Cosmetics International,
S.A. de C.V., a sociedad anonima de capital variable organized
under the laws of the United Mexican States ("JCISA"), and CREDIT
SUISSE FIRST BOSTON, a bank organized under the laws of
Switzerland, acting through its New York branch, as collateral
agent (the "Collateral Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
Reference is made to the Credit Agreement dated as of April 30, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme,
CDRJ Acquisition Corporation (to be renamed Jafra Cosmetics International,
Inc.), a Delaware corporation ("JCI"), JCISA (together with JCI, the
"Borrowers"), the lenders from time to time party thereto (the "Lenders"), the
Issuing Bank (as defined therein) and Credit Suisse First Boston, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), as swingline lender and as Collateral Agent. Capitalized terms used
herein and not defined herein shall have the meanings assigned to such terms in
the Credit Agreement.
The Lenders have agreed to make Loans to the Borrowers and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrowers pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. Each of the Guarantors is a wholly owned Subsidiary of JCISA and
acknowledges that it will derive substantial benefit from the making of the
Loans by the Lenders and the issuance of the Letters of Credit by the Issuing
Bank. The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit are conditioned on, among other things, the execution
and delivery by the Guarantors of a Guarantee Agreement in the form hereof. As
consideration therefor and in order to induce the Lenders to make Loans and the
Issuing Bank to issue Letters of Credit, the Guarantors are willing to execute
this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. Each Guarantor unconditionally guarantees,
severally, as a primary obligor and not merely as a surety, all obligations of
JCISA:
(a) under the Credit Agreement and the JCISA Guarantee Agreement,
including the due and punctual payment of (i) the principal of and premium,
if any, and interest (including interest accruing at the applicable rate
provided in the Credit Agreement during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the Loans to JCISA, when and as
due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, (ii) each payment required to be made by JCISA
under the Credit Agreement in respect of any Letter of Credit, when and as
due, including payments in respect of reimbursement of disbursements and
interest thereon and (iii) all other monetary obligations, including fees,
costs, expenses and indemnities, whether direct, contingent, fixed or
otherwise (including monetary obligations incurred during the pendency of
any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding), of JCISA to
the Secured Parties under the Credit Agreement, the JCISA Guarantee
Agreement and the other Loan Documents;
(b) for the due and punctual performance of all covenants, agreements,
obligations and liabilities of JCISA under or pursuant to the Credit
Agreement and the other Loan Documents;
<PAGE>
2
(c) unless otherwise agreed upon in writing by the applicable
counterparty thereto, for the due and punctual payment and performance of
all obligations of JCISA, monetary or otherwise, under each Hedging
Agreement entered into with a counterparty (whether or not a Lender or an
Affiliate thereof); and
(d) the due and punctual payment and performance of all guarantee
obligations of JCISA referred to in Section 6.01(d)(ii) of the Credit
Agreement as to which any Lender or any Affiliate thereof originally is a
beneficiary (all the monetary and other obligations referred to in the
preceding clauses (a) through (d) being collectively called the
"Obligations").
Each Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice to or further assent from it, and
that it will remain bound upon its guarantee notwithstanding any extension or
renewal of any Obligation.
Anything contained in this Agreement to the contrary notwithstanding, the
obligations of each Guarantor hereunder shall be limited to a maximum aggregate
amount equal to the greatest amount that would not render such Guarantor's
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
provisions of applicable state or foreign law (collectively, the "Fraudulent
Transfer Laws"), in each case after giving effect to all other liabilities of
such Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (a) in respect of intercompany indebtedness to JCISA or Affiliates of
JCISA to the extent that such indebtedness would be discharged in an amount
equal to the amount paid by such Guarantor hereunder and (b) under any Guarantee
of senior unsecured indebtedness or Indebtedness subordinated in right of
payment to the Obligations which Guarantee contains a limitation as to maximum
amount similar to that set forth in this paragraph, pursuant to which the
liability of such Guarantor hereunder is included in the liabilities taken into
account in determining such maximum amount) and after giving effect as assets to
the value (as determined under the applicable provisions of the Fraudulent
Transfer Laws) of any rights to subrogation, contribution, reimbursement,
indemnity or similar rights of such Guarantor pursuant to (i) applicable law or
(ii) any agreement providing for an equitable allocation among such Guarantor
and other Affiliates of JCISA of obligations arising under Guarantees by such
parties (including the Indemnity, Subrogation and Contribution Agreement).
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, each Guarantor waives presentment to, demand of payment from and
protest to JCISA of any of the Obligations, and also waives notice of acceptance
of its guarantee and notice of protest for nonpayment. To the fullest extent
permitted by applicable law, the obligations of each Guarantor hereunder shall
not be affected by (a) the failure of the Collateral Agent or any other Secured
Party to assert any claim or demand or to enforce or exercise any right or
remedy against the Borrower or any other Guarantor under the provisions of the
Credit Agreement, any other Loan Document or otherwise, (b) any rescission,
waiver, amendment or modification of, or any release from any of the terms or
provisions of this Agreement, any other Loan Document, any Guarantee or any
other agreement, including with respect to any other Guarantor under this
Agreement or (c) the failure to perfect any security interest in, or the release
of, any of the security held by or on behalf of the Collateral Agent or any
other Secured Party.
SECTION 3. Security. Each of the Guarantors authorizes the Collateral
Agent to (a) take and hold security pursuant to the terms of the Credit
Agreement, the Pledge Agreement and the other Security Documents for the payment
of this guarantee and the Obligations and exchange, enforce, waive and release
any such security, (b) apply such security and direct the order or manner of
sale thereof pursuant to the terms of the Credit Agreement, the Pledge Agreement
and the other Security Documents and (c) release or substitute any one or more
endorsees, other guarantors of other obligors.
<PAGE>
3
SECTION 4. Guarantee of Payment. Each Guarantor further agrees that its
guarantee constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Collateral Agent or
any other Secured Party to any of the security held for payment of the
Obligations or to any balance of any deposit account or credit on the books of
the Collateral Agent or any other Secured Party in favor of JCISA or any other
Person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of
each Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the performance or payment
in full of the Obligations, as the case may be), including any claim of waiver,
release, surrender, alteration or compromise of any of the Obligations, and
shall not be subject to any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Guarantor hereunder shall
not be discharged or impaired or otherwise affected by the failure of the
Collateral Agent or any other Secured Party to assert any claim or demand or to
enforce any remedy under the Credit Agreement, any other Loan Document or any
other agreement, by any waiver or modification of any provision of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
Obligations, or by any other act or omission that may or might in any manner or
to any extent vary the risk of any Guarantor or that would otherwise operate as
a discharge of each Guarantor as a matter of law or equity (other than the
performance or payment in full of all the Obligations, as the case may be).
SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted
by applicable law, each of the Guarantors waives any defense based on or arising
out of any defense of JCISA or the unenforceability of the Obligations or any
part thereof from any cause, or the cessation from any cause of the liability of
JCISA, other than the performance or payment in full of the Obligations then due
and owing. The Collateral Agent may, at its election, foreclose on any security
held by one or more of them by one or more judicial or nonjudicial sales, accept
an assignment of any such security in lieu of foreclosure, compromise or adjust
any part of the Obligations, make any other accommodation with JCISA or any
other guarantor or exercise any other right or remedy available to them against
JCISA or any other guarantor, without affecting or impairing in any way the
liability of any Guarantor hereunder except to the extent the Obligations then
due and owing have been fully paid.
SECTION 7. Agreement to Pay; Subordination. In furtherance of the
foregoing and not in limitation of any other right that the Collateral Agent or
any other Secured Party has at law or in equity against any Guarantor by virtue
hereof, upon the failure of JCISA or any other Loan Party to pay any Obligation
when and as the same shall become due, whether at maturity, by acceleration,
after notice of prepayment or otherwise, each Guarantor hereby promises to and
will forthwith pay, or cause to be paid, to the Collateral Agent in cash the
amount of such unpaid Obligations. Upon payment by any Guarantor of any sums to
the Collateral Agent as provided above, all rights of such Guarantor against
JCISA arising as a result thereof by way of right of subrogation, contribution,
reimbursement, indemnity or otherwise shall in all respects be subordinate and
junior in right of payment to the prior payment in full of all the Obligations.
If any amount shall erroneously be paid to any Guarantor on account of such
subrogation, contribution, reimbursement, indemnity or similar right, such
amount shall be held in trust for the benefit of the Secured Parties and shall
forthwith be paid to the Collateral Agent to be credited against the payment of
the Obligations, whether matured or unmatured, in accordance with the terms of
the Loan Documents.
SECTION 8. Information. Each of the Guarantors assumes all responsibility
for being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks that such
Guarantor assumes and incurs hereunder, and agrees that none of the Collateral
Agent or the other Secured Parties will have any duty to advise any of the
Guarantors of information known to it or any of them regarding such
circumstances or risks.
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4
SECTION 9. Representations and Warranties. Each of the Guarantors
represents and warrants as to itself that all representations and warranties
relating to it contained in the Credit Agreement are true and correct, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
SECTION 10. Termination. The Guarantees made hereunder (a) shall terminate
when all the Obligations have been paid in full and the Lenders have no further
commitment to lend under the Credit Agreement, the L/C Exposure has been reduced
to zero and the Issuing Bank has no further obligation to issue Letters of
Credit under the Credit Agreement and (b) shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by any Secured Party
or any Guarantor upon the bankruptcy or reorganization of JCISA, any Guarantor
or otherwise.
SECTION 11. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Guarantors that are contained in
this Agreement shall bind and inure to the benefit of each party hereto and
their respective successors and assigns. This Agreement shall become effective
as to any Guarantor when a counterpart hereof executed on behalf of such
Guarantor shall have been delivered to the Collateral Agent, and a counterpart
hereof shall have been executed on behalf of the Collateral Agent, and
thereafter shall be binding upon such Guarantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Guarantor, the Collateral Agent and the other Secured Parties, and their
respective successors and assigns, except that no Guarantor shall have the right
to assign its rights or obligations hereunder or any interest herein (and any
such attempted assignment shall be void), except with the written consent of the
Collateral Agent. If all of the capital stock of a Guarantor is sold,
transferred or otherwise disposed of pursuant to a transaction permitted by
Section 6.04 of the Credit Agreement, such Guarantor shall be released from its
obligations under this Agreement without further action. This Agreement shall
be construed as a separate agreement with respect to each Guarantor and may be
amended, modified, supplemented, waived or released with respect to any
Guarantor without the approval of any other Guarantor and without affecting the
obligations of any other Guarantor hereunder.
SECTION 12. Waivers; Amendment. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and of
the other Secured Parties under the other Loan Documents are cumulative and are
not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of this Agreement or consent to any departure by any
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on any Guarantor in any case shall entitle such Guarantor to
any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Guarantors with respect to which such waiver, amendment or modification relates
and the Collateral Agent, with the prior written consent of the Required Lenders
(except as otherwise provided in the Credit Agreement).
SECTION 13. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ITS PRINCIPLES OR
<PAGE>
5
RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
SECTION 14. Notices. All communications and notices hereunder shall be in
writing (including by facsimile transmission) and given as provided in Section
9.02 of the Credit Agreement. All communications and notices hereunder to each
Guarantor shall be given to it in care of JCI.
SECTION 15. Survival of Agreement; Severability. (a) All covenants and
agreements made by the Guarantors herein shall survive the making by the Lenders
of the Loans and the issuance of the Letters of Credit by the Issuing Bank.
(b) In the event any one or more of the provisions contained in this
Agreement or in any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 16. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 11. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 17. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 18. Integration. This Agreement represents the agreement between
the parties with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by any of the parties
hereto relative to the subject matter hereof not expressly set forth or referred
to herein or in the other Loan Documents.
SECTION 19. Jurisdiction; Consent to Service of Process. Each party hereto
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or proceeding
relating to this Agreement, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts of any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient forum and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to the applicable party at
the address specified in Section 7.01 or at such other address of which the
parties hereto shall have been notified pursuant thereto.
(d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and
<PAGE>
6
(e) waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
Section 19 any punitive damages.
SECTION 20. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 21. Additional Guarantors. Pursuant to Section 5.11 of the Credit
Agreement, certain Subsidiaries of JCISA are required to become Subsidiary
Grantors hereunder. Upon execution and delivery after the date hereof by the
Collateral Agent and such Subsidiary of an instrument in the form of Annex 1,
such Subsidiary shall become a Guarantor hereunder with the same force and
effect as if originally named as a Guarantor herein. The execution and delivery
of any instrument adding an additional Guarantor as a party to this Agreement
shall not require the consent of any other Guarantor hereunder. The rights and
obligations of each Guarantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Guarantor as a party to this Agreement.
SECTION 22. Right of Setoff. If an Event of Default under Section 7.02(a)
of the Credit Agreement shall have occurred and be continuing, each Secured
Party shall have the right to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
Indebtedness at any time owing by such Secured Party to or for the credit or the
account of such Guarantor against any or all the obligations of such Guarantor
now or hereafter existing under this Agreement and the other Loan Documents held
by such Secured Party, irrespective of whether or not such Secured Party shall
have made any demand under this Agreement or any other Loan Document and
although such obligations may be unmatured. Each Secured Party agrees promptly
to notify the Borrowers, the Administrative Agent and the applicable Guarantor
after any such set-off and application made by such Secured Party, provided that
the failure to give such notice shall not affect the validity of such set-off
and application. The rights of each Secured Party under this Section 22 are in
addition to other rights and remedies (including other rights of setoff) which
such Secured Party may have.
<PAGE>
7
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
EACH OF THE GUARANTORS LISTED ON
SCHEDULE I HERETO,
by_____________________________
Authorized Officer:
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by_____________________________
Name:
Title:
by_____________________________
Name:
Title:
<PAGE>
Schedule I to the
Guarantee Agreement
Guarantor Address
--------- -------
Reday, S.A. de C.V. [DEBEVOISE TO PROVIDE]
Distribuidora Venus, S.A. de C.V.
Dirsamex, S.A. de C.V.
Qualifax, S.A. de C.V.
Jafra Cosmetics, S. de RL. de C.V.
Consultoria Jafra, S.A. de C.V.
<PAGE>
Annex 1 to the
Subsidiary Guarantee Agreement
SUPPLEMENT NO. dated as of , to the JCISA
Subsidiary Guarantee Agreement dated as of April 30, 1998, among
each of the subsidiaries listed on Schedule I thereto (each such
subsidiary individually, a "Guarantor" and collectively, the
"Guarantors") of Jafra Cosmetics International, S.A. de C.V., a
sociedad anonima de capital variable organized under the laws of
the United Mexican States ("JCISA"), and CREDIT SUISSE FIRST
BOSTON, a bank organized under the laws of Switzerland, acting
through its New York branch, as collateral agent (the "Collateral
Agent") for the Secured Parties (as defined in the Credit
Agreement referred to below).
A. Reference is made to the Credit Agreement dated as of April 30, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme,
CDRJ Acquisition Corporation ([to be] renamed Jafra Cosmetics International,
Inc.), a Delaware corporation ("JCI"), JCISA (together with JCI, the
"Borrowers"), the lenders from time to time party thereto (the "Lenders"), the
Issuing Bank (as defined therein) and Credit Suisse First Boston, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), as swingline lender and as Collateral Agent. Capitalized terms used
herein and not defined herein shall have the meanings assigned to such terms in
the Credit Agreement.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Guarantee Agreement and the
Credit Agreement.
C. The Guarantors have entered into the Guarantee Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Pursuant to Section 5.11 of the Credit Agreement, certain Subsidiaries
of JCISA are required to become Subsidiary Guarantors hereunder. Section 21 of
the Guarantee Agreement provides that additional Subsidiaries of JCISA may
become Guarantors under the Guarantee Agreement by execution and delivery of an
instrument in the form of this Supplement. The undersigned Subsidiary of JCISA
(the "New Guarantor") is executing this Supplement in accordance with the
requirements of the Credit Agreement to become a Guarantor under the Guarantee
Agreement in order to induce the Lenders to make additional Loans and the
Issuing Bank to issue additional Letters of Credit and as consideration for
Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Guarantor agree as follows:
SECTION 1. In accordance with Section 21 of the Guarantee Agreement, the
New Guarantor by its signature below becomes a Guarantor under the Guarantee
Agreement with the same force and effect as if originally named therein as a
Guarantor and the New Guarantor hereby (a) agrees to all the terms and
provisions of the Guarantee Agreement applicable to it as a Guarantor thereunder
and (b) represents and warrants that the representations and warranties made by
it as a Guarantor thereunder are true and correct on and as of the date hereof.
Each reference to a "Guarantor" in the Guarantee Agreement shall be deemed to
include the New Guarantor. The Guarantee Agreement is hereby incorporated
herein by reference.
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed by one or more parties to this
Supplement on any number of separate counterparts (including by facsimile
transmission), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. This
<PAGE>
2
Supplement shall become effective when the Collateral Agent shall have received
counterparts of this Supplement that, when taken together, bear the signatures
of the New Guarantor and the Collateral Agent.
SECTION 4. Except as expressly supplemented hereby, the Guarantee
Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES
WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
SECTION 6. Any provision of this Supplement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 14 of the Guarantee Agreement. All
communications and notices hereunder to the New Guarantor shall be given to it
at the address set forth under its signature below, with a copy to the
Borrowers.
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly
executed this Supplement to the Guarantee Agreement as of the day and year first
above written.
[Name Of New Guarantor],
by_____________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by_____________________________
Name:
Title:
by_____________________________
Name:
Title:
<PAGE>
EXHIBIT I
to CREDIT AGREEMENT
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attn: Janet Lewis, Esq.
______________________________________________________________________
DEED OF TRUST, WITH ASSIGNMENT OF LEASES AND RENTS, FIXTURE FILING
AND SECURITY AGREEMENT
______________________________________________________________________
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, FIXTURE FILING AND
SECURITY AGREEMENT
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
FIXTURE FILING AND SECURITY AGREEMENT dated as of April 30,
1998 (this "Deed of Trust"), by Jafra Cosmetics
-------------
International, Inc., a Delaware corporation, having an
office at 2451 Townsgate Road, Westlake Village, California
91361 (the "Grantor"), to TitleServ Agency of New York City,
-------
Inc., as trustee ("Trustee") for the benefit of Credit
-------
Suisse First Boston, a bank organized under the laws of
Switzerland, acting through its New York branch (the
"Beneficiary"), having an office at 11 Madison Avenue New
-----------
York, New York 10010, as
<PAGE>
Collateral Agent under the Credit Agreement (as defined).
W I T N E S S E T H T H A T :
A. Reference is made to the Credit Agreement dated as of April
30, 1998, (and as the same may be amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among CDRJ
----------------
Investments (Lux) S.A., a Luxembourg societe anonyme (the "Parent"),
------
Grantor, Jafra Cosmetics International, S.A. de C.V., a company
organized under the laws of the United Mexican States (the "Other
Borrower"), Beneficiary and such other respective entities that from
time to time become parties thereto pursuant to which Grantor has
requested that Beneficiary make term loans and revolving credit loans
in an aggregate principal amount of $90,000,000 (the "Loans") to
-----
Grantor and the Other Borrower for the purpose of (a) financing the
Acquisition, (b) providing funds for the payment of certain fees and
expenses incurred in connection therewith and (c) general corporate
expenses. Each term used herein and not otherwise defined herein shall
have the meaning given to it in the Credit Agreement.
B. The obligations of the Beneficiary to make the Loans under the
Credit Agreement are conditioned upon, among other things, the
execution and delivery by the Grantor of this Deed of Trust in the
form hereof, to secure (a) the due and punctual payment of (i) the
principal of and premium, if any, and interest (including interest
accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, to the extent permitted
under Applicable Law) on the Loans to Grantor when and as due, whether
at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, and (ii) all other monetary obligations,
including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, to the extent
permitted under Applicable
2
<PAGE>
Law), of the Grantor under the Credit Agreement, this Deed of Trust
and the other Loan Documents to which the Grantor is or is to be a
party, (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Grantor under or
pursuant to the Credit Agreement, this Deed of Trust and the other
Loan Documents, and (c) the payment of such additional sums and the
performance of all other obligations now or hereafter owing from
Grantor to Beneficiary, whether otherwise secured or not, payable to
or otherwise acquired by Beneficiary, when the document evidencing
such obligation specifically recites the recording information
appearing on this Deed of Trust and that it is intended to be secured
hereby (all the obligations referred to in this paragraph B being
referred to collectively, as the "Obligations").
-----------
C. This Deed of Trust secures not only existing indebtedness, but
also future or additional advances made pursuant hereto or to the
Credit Agreement, whether such advances are obligatory or optional and
whether such advances are readvances after payments permitted under
the Credit Agreement.
D. Pursuant to the requirements of the Credit Agreement, the
Grantor is entering into this Deed of Trust to create a security
interest in the Trust Property (as defined herein) to secure the
performance and payment by the Grantor of the Obligations. The Credit
Agreement also requires the granting by Borrowers (other than Grantor)
of deeds of trust creating security interests in certain property
(other than the Trust Property) to secure the performance of the
Obligations.
3
<PAGE>
Granting Clauses
----------------
NOW THEREFORE, IN CONSIDERATION OF the foregoing and in order to
secure (A) the due and punctual payment and performance of the
Obligations, (B) the due and punctual payment by the Grantor of all
real estate taxes and insurance premiums relating to the Trust
Property and (C) all disbursements made by Beneficiary for the payment
of real estate taxes, common area charges or insurance premiums, all
fees, expenses or advances in connection with or relating to the Trust
Property pursuant to the Credit Agreement and the other Loan
Documents, and interest on such disbursements and other amounts not
timely paid in accordance with the terms of the Credit Agreement, this
Deed of Trust and the other Loan Documents, (D) the due and punctual
payment and performance of the Grantor's obligations under the Fee and
Guarantee Agreement, dated as of the date hereof, among The Chase
Manhattan Bank, the Grantor and related entities and (E) unless
otherwise agreed to in writing by the applicable counterparty thereto,
the due and punctual payment and performance of all obligations of the
Grantor under each Hedging Agreement entered into with any
counterparty (whether or not a Lender or an Affiliate thereof) (the
obligations specified in clauses (a) through (E), collectively, the
"Mortgaged Obligations"), Grantor hereby grants, conveys, mortgages,
---------------------
assigns and pledges to the Trustee, IN TRUST FOREVER, with power of
sale, for the benefit of Beneficiary, a security interest in, all the
following described property, excluding any and all property and
assets excluded from the definition of "Collateral" (and each defined
----------
term used in the definition of such term) in the Security Agreement
(the "Trust Property") whether now owned or held
--------------
or hereafter acquired:
(1) all Grantor's right, title and interest in all the fee
estate in the land more particularly described on Exhibit A
hereto (the "Land"), together with all rights appurtenant
----
thereto, including the easements over certain other adjoining
land granted by any easement agreements,
4
<PAGE>
covenant or restrictive agreements, if any, and all air rights,
mineral rights, water rights, oil and gas rights and development
rights, if any, of every kind and description relating thereto,
including, without limitation, any water rights, and also
together with all of the other easements, rights, privileges,
interests, hereditaments and appurtenances thereunto belonging or
in anyway appertaining and all of the estate, right, title,
interest, claim or demand whatsoever of Grantor therein and in
the streets and ways adjacent thereto, either in law or in
equity, in possession or expectancy, now or hereafter acquired
(the "Premises");
--------
(2) all Grantor's right, title and interest in all
buildings, improvements, structures, paving, parking areas,
roads, utilities, walkways, landscaping and other infrastructure
and betterments now or hereafter erected or located upon the
Land, and all fixtures of every kind and type affixed to the
Premises or attached to or forming part of any structures,
buildings or improvements and replacements thereof now or
hereafter erected or located upon the Land (the "Improvements");
------------
(3) all Grantor's right, title and interest in all
apparatus, movable appliances, building materials, equipment,
fittings, furnishings, furniture, machinery and other articles of
tangible personal property of every kind and nature, and
replacements thereof, now or at any time hereafter placed upon or
used in any way in connection with the use, enjoyment, occupancy
or operation of the Improvements or the Premises, including all
of Grantor's books and records relating thereto and including all
pumps, tanks, goods, machinery, tools, equipment, lifts
(including fire sprinklers and alarm systems, fire prevention or
control systems, cleaning rigs, air conditioning, heating,
boilers, refrigerating, electronic monitoring, water, loading,
unloading,
5
<PAGE>
lighting, power, sanitation, waste removal, entertainment,
communications, computers, recreational, window or structural,
maintenance, truck or car repair and all other equipment of every
kind), restaurant, bar and all other indoor or outdoor furniture
(including tables, chairs, booths, serving stands, planters,
desks, sofas, racks, shelves, lockers and cabinets), bar
equipment, glasses, cutlery, uniforms, linens, memorabilia and
other decorative items, furnishings, appliances, supplies,
inventory, rugs, carpets and other floor coverings, draperies,
drapery rods and brackets, awnings, venetian blinds, partitions,
chandeliers and other lighting fixtures, freezers, refrigerators,
walk-in coolers, signs (indoor and outdoor), computer systems,
cash registers and inventory control systems, and all other
apparatus, equipment, furniture, furnishings, and articles used
in connection with the use or operation of the Improvements or
the Premises, excluding any and all property and assets excluded
from the definition of "Collateral" (and each defined term used
----------
in the definition of such term) in the Security Agreement, it
being understood that the enumeration of any specific articles of
property shall in no way result in or be held to exclude any
items of property not specifically mentioned (the property
referred to in this subparagraph (3), the "Personal Property");
-----------------
(4) all Grantor's right, title and interest in all general
intangibles relating to design, development, operation,
management and use of the Premises or the Improvements, all
certificates of occupancy, entitlements, tract maps, zoning
variances, building, use or other permits, approvals,
authorizations and consents obtained from and all materials
prepared for filing or filed with any Governmental Authority in
connection with the development, use, operation or management of
the Premises and Improvements, all construction, service,
engineering, consulting,
6
<PAGE>
leasing, architectural and other similar contracts concerning the
design, construction, management, operation, occupancy and/or use
of the Premises and Improvements, all architectural drawings,
plans, specifications, soil tests, feasibility studies,
appraisals, environmental studies, engineering reports and
similar materials relating to any portion of or all of the
Premises and Improvements, all payment and performance bonds or
warranties or guarantees relating to the Premises or the
Improvements, all to the extent assignable (the "Permits, Plans
--------------
and Warranties");
--------------
(5) Grantor's interest in and rights under any and all now
or hereafter existing leases or licenses (under which Grantor is
landlord or licensor) and subleases (under which Grantor is
sublandlord), concession, management, mineral or other agreements
of a similar kind that permit the use or occupancy of the
Premises or the Improvements for any purpose in return for any
payment, or the extraction or taking of any gas, oil, water or
other minerals from the Premises in return for payment of any
fee, rent or royalty, including the leases described in Schedule
A to this Deed of Trust (collectively, "Leases"), and all
------
agreements or contracts for the sale or other disposition of all
or any part of the Premises or the Improvements, now or hereafter
entered into by Grantor, together with all charges, fees, income,
issues, profits, receipts, rents, revenues or royalties payable
thereunder ("Rents");
-----
(6) all Grantor's right, title and interest in and to all
real estate tax refunds and all proceeds of the conversion,
voluntary or involuntary, of any of the Trust Property into cash
or liquidated claims ("Proceeds"), including Proceeds of
--------
insurance maintained by the Grantor and condemnation awards, any
awards that may become due by reason of the taking by eminent
domain or any transfer in lieu thereof of the whole or any part
of the Premises or Improvements
7
<PAGE>
or any rights appurtenant thereto, and any awards for change of
grade of streets, together with any and all moneys now or
hereafter on deposit for the payment of real estate taxes,
assessments or common area charges levied against the Trust
Property, unearned premiums on policies of fire and other
insurance maintained by the Grantor covering any interest in the
Trust Property or required by the Credit Agreement;
(7) all choses in action and causes of action and other
intangible personal property of the Grantor, of every kind and
nature, including corporate or other business records,
indemnification claims, contract rights, goodwill, registrations,
franchises and any letter of credit, guarantee, claim, security
interest or other security held by or granted to the Grantor to
secure payment by any Person of any of the accounts receivable or
the performance by any purchaser or tenant under any lease of
Trust Property or any contract or other agreement for the sale of
Trust Property; and
(8) all Grantor's right, title and interest in and to all
extensions, improvements, betterments, renewals, substitutes and
replacements of and all additions and appurtenances to, the Land,
the Premises, the Improvements, the Personal Property, the
Permits, Plans and Warranties, the Leases, and any of the other
tangible or intangible property described above, whether now
owned or hereinafter acquired by or released to the Grantor or
constructed, assembled or placed by the Grantor on the Land, the
Premises or the Improvements, and all conversions of the security
constituted thereby, immediately upon such acquisition, release,
construction, assembling, placement or conversion, as the case
may be, and in each such case, without any further mortgage, deed
of trust, conveyance, assignment or other act by the Grantor, all
of which shall become subject to the lien of this
8
<PAGE>
Deed of Trust as fully and completely, and with the same effect,
as though now owned by the Grantor and specifically described
herein.
TO HAVE AND TO HOLD the Trust Property unto the Trustee, its
successors and assigns, for the benefit of Beneficiary, forever,
subject only to the liens set forth in Schedule 6.02(a) of the Credit
Agreement (the "Permitted Encumbrances") and to satisfaction and
----------------------
cancelation as provided in Section 3.04. IN TRUST NEVERTHELESS, upon
the terms and trust herein set forth for the benefit and security of
the Beneficiary.
ARTICLE I
Representations, Warranties and Covenants of Grantor
- ----------------------------------------------------
Grantor agrees, covenants, represents and/or warrants as follows:
SECTION 1.01. Title. (a) Grantor has insurable title to an
------
indefeasible fee estate in the Land and Improvements subject to no
lien, charge or encumbrance other than the Permitted Encumbrances, and
this Deed of Trust is and will remain a valid and enforceable first
and prior lien on the Premises, Improvements and the Rents subject
only to, in each case, the Permitted Encumbrances. The Permitted
Encumbrances do not materially interfere with the current use,
enjoyment or operation of the Trust Property.
(b) Except as set forth on Schedule A hereto, there are no leases
affecting Trust Property. Each Lease is in full force and effect, and,
except as set forth on Schedule A hereto or in any Tenant Estoppel
Certificate, Grantor has not given, nor to Grantor's knowledge has it
received, any uncured or unwaived notice of default with respect to
any material obligation under any Lease. Each Lease is subject to no
lien, charge or encumbrance other than this Deed of Trust and the
Permitted Encumbrances. Grantor has not
9
<PAGE>
received any written notice of any pending condemnation proceeding
affecting the Trust Property or any sale or disposition thereof in
lieu of condemnation except as would not reasonably be expected to
have a material adverse effect on the Trust Property. Grantor is not
obligated under any right of first refusal, option or other
contractual right to sell, assign or otherwise dispose of any Trust
Property or any interest therein.
(c) All easement agreements, covenant or restrictive agreements,
supplemental agreements and any other instruments hereinabove referred
to and mortgaged hereby (collectively, the "Agreements") are and will
----------
remain valid, subsisting and in full force and effect, unless the
failure to remain valid, subsisting and in full force and effect,
individually or in the aggregate, would not reasonably be expected to
have a material adverse effect on the Trust Property, and Grantor is
not in default thereunder and has fully performed the material terms
thereof required to be performed through the date hereof, and has no
knowledge of any default thereunder or failure to fully perform the
terms thereof by any other party, nor of the occurrence of any event
that after notice or the passage of time or both will constitute a
default thereunder. Except as otherwise permitted by the Credit
Agreement, Grantor is in compliance, and shall comply, with all
Agreements and requirements of law (including land use and zoning
ordinances, regulations and restrictions) affecting the Trust
Property, except where the absence of such compliance could not
reasonably be expected to have a material adverse effect on the Trust
Property.
(d) Grantor has good and lawful right and full power and
authority to mortgage the Trust Property and will forever warrant and
defend its title to the Trust Property, the rights of Beneficiary
therein under this Deed of Trust and the validity and priority of the
lien of this Deed of Trust thereon against the claims of all persons
and parties except those permitted under the Credit Agreement.
10
<PAGE>
(e) This Deed of Trust, when duly recorded in the appropriate public
records and when financing statements are duly filed in the appropriate public
records, will create a valid, perfected and enforceable lien upon and security
interest in all the Trust Property and there are not as of the date hereof,
defenses or offsets to this Deed of Trust that will be asserted by Grantor or
its Affiliates (or any third party defense or offset now known to Grantor or its
Affiliates).
SECTION 1.02. Credit Agreement; Certain Amounts. (a) This Deed of Trust is
----------------------------------
given pursuant to the Credit Agreement. Each and every term and provision of
the Credit Agreement including the rights, remedies, obligations, covenants,
conditions, agreements, indemnities, representations and warranties of the
parties thereto shall be considered as if a part of this Deed of Trust and are
incorporated herein by this reference and to the extent there is a specific
conflict between the terms hereof and the terms of the Credit Agreement, the
terms of the Credit Agreement shall control.
(b) If any remedy or right of Trustee or Beneficiary pursuant hereto is
acted upon by Trustee or Beneficiary or if any actions or proceedings (including
any bankruptcy, insolvency or reorganization proceedings) are commenced in which
Trustee or Beneficiary is made a party and is obliged to defend or uphold or
enforce this Deed of Trust or the rights of Trustee or Beneficiary hereunder or
the terms of any Lease, or if a condemnation proceeding is instituted affecting
the Trust Property, Grantor will pay all reasonable sums, including reasonable
attorneys' fees and disbursements, incurred by Trustee or Beneficiary related to
the exercise of any remedy or right of Trustee or Beneficiary pursuant hereto or
for the reasonable expense of any such action or proceeding together with all
statutory or other costs, disbursements and allowances, interest thereon from
the date of demand for payment thereof at the applicable rate specified in
Section 2.07 of the Credit Agreement
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(the "Default Interest Rate"), and such sums and the interest thereon shall, to
---------------------
the extent permissible by law, be a lien on the Trust Property prior to any
right, title to, interest in or claim upon the Trust Property attaching or
accruing subsequent to the recording of this Deed of Trust and shall be secured
by this Deed of Trust to the extent permitted by law. Any payment of amounts due
under this Deed of Trust not made on or before the due date for such payments
shall accrue interest daily without notice from the due date until paid at the
Default Interest Rate, and such interest at the Default Interest Rate shall be
immediately due upon demand by Trustee or Beneficiary.
SECTION 1.03. Payment of Taxes, Liens and Charges. (a) Except as may be
-----------------------------------
permitted by the Credit Agreement, Grantor will pay and discharge from time to
time prior to the time when the same shall become delinquent, and before any
interest or penalty accrues thereon or attaches thereto, all taxes of every kind
and nature, all general and special assessments, levies, permits, inspection and
license fees, all water and sewer rents, all vault charges, and all other public
charges, and all service charges, common area charges, private maintenance
charges, utility charges and all other private charges, whether of a like or
different nature, in all cases, if imposed upon or assessed against the Trust
Property or any part thereof or upon the Rents from the Trust Property or
arising in respect of the occupancy, use or possession thereof.
(b) In the event of the passage of any state, Federal, municipal or other
governmental law, order, rule or regulation subsequent to the date hereof (i)
deducting from the value of real property for the purpose of taxation any lien
or encumbrance thereon or in any manner changing or modifying the laws now in
force governing the taxation of this Deed of Trust or debts secured by mortgages
or deeds of trust (other than laws governing income, franchise and similar taxes
generally) or the manner of collecting taxes thereon and (ii) imposing a tax to
be paid by Beneficiary, either directly or indirectly, on this Deed of Trust or
12
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any payments due hereunder or to require an amount of taxes to be withheld or
deducted herefrom, Grantor will promptly notify Beneficiary of such event. In
such event Grantor shall (i) agree to enter into such further instruments as may
be reasonably necessary or desirable to obligate Grantor to make any applicable
additional payments and (ii) Grantor shall make such additional payments.
(c) At any time that an Event of Default shall occur hereunder and be
continuing, or if required by any law applicable to Grantor or to Beneficiary,
Beneficiary shall have the right to direct Grantor to make an initial deposit on
account of real estate taxes and assessments, insurance premiums and common area
charges, levied against or payable in respect of the Trust Property in advance
and thereafter semi-annually, each such deposit to be equal to one-half of any
such annual charges estimated in a reasonable manner by Beneficiary in order to
accumulate with Beneficiary sufficient funds to pay such taxes, assessments,
insurance premiums and charges.
SECTION 1.04. Payment of Closing Costs. Except as otherwise set forth in
-------------------------
the Credit Agreement, Grantor shall pay all costs in connection with, relating
to or arising out of the preparation, execution and recording of this Deed of
Trust, including title company premiums and charges, inspection costs, survey
costs, recording fees and taxes, reasonable attorneys', engineers', and
consultants' fees and disbursements and all other similar reasonable expenses of
every kind.
SECTION 1.05. Alterations and Waste; Plans. (a) Grantor will not,
-----------------------------
without the written consent of Beneficiary (i) alter or demolish or remove in
whole or in part any Improvements or (ii) erect any additions to the existing
Improvements, except where such alterations, removals, or additions, as the case
may be, would not reasonably be expected to have a material adverse effect on
the Trust Property. Grantor will not commit any waste on the Trust Property or
make any alteration to, or change in the use of, the Trust
13
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Property except as may be permitted under the Credit Agreement and where such
waste, alteration or change would not reasonably be expected to have a material
adverse effect on the Trust Property. Grantor will maintain and operate the
Improvements and Personal Property in good repair, working order and condition,
reasonable wear and tear excepted.
(b) To the extent the same exist on the date hereof or are obtained in
connection with Improvements permitted by the Credit Agreement, Grantor shall
maintain a complete set of final plans, specifications, blueprints and drawings
for the Trust Property either at the Trust Property or in a particular office at
the headquarters of Grantor within the continental United States.
SECTION 1.06. Insurance. Grantor will keep or cause to be kept the Trust
----------
Property insured against such risks, and in the manner, required by Section 5.06
of the Credit Agreement.
SECTION 1.07. Casualty and Condemnation. (a) Except as provided in clause
-------------------------
(b) below and subject to the following sentence, in connection with any casualty
or condemnation of any Trust Property, the Grantor shall have all rights to
negotiate and settle, and receive the proceeds of, any claim or award in
connection therewith. Notwithstanding the foregoing sentence, the Grantor agrees
to comply with the provisions of Section 2.13 of the Credit Agreement in
connection with any mandatory prepayment of the Loans.
(b) Upon the happening and during the continuance of an Event of
Default, the Beneficiary shall have the right (i) to negotiate and settle any
claim or award in connection with any casualty or condemnation of the Trust
Property and (ii) to receive the proceeds of any claim or award in connection
with a casualty or condemnation of the Trust Property. After the occurrence and
during the continuance of an Event of Default, if the Grantor shall receive any
award or claim in connection with a condemnation or taking of
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the Trust Property, the Grantor shall hold such funds in trust for the benefit
of the Beneficiary and shall promptly turn such proceeds over to the Beneficiary
in the form received. The Beneficiary shall apply such proceeds to the payment
in full of the Mortgaged Obligations.
SECTION 1.08. Assignment of Leases and Rents. (a) Grantor hereby
-------------------------------
irrevocably and absolutely grants, transfers and assigns to the Trustee for the
benefit of Beneficiary all of its right title and interest in all Leases,
together with any and all extensions and renewals thereof for purposes of
securing and discharging the performance by Grantor of the Mortgaged
Obligations. Grantor has not assigned or executed any assignment of, and will
not assign or execute any assignment of, any Lease or the Rents payable
thereunder to anyone other than to the Trustee for the benefit of Beneficiary.
(b) Without Beneficiary's prior written consent, not to be unreasonably
withheld, conditioned or delayed, unless otherwise permitted under the Credit
Agreement, Grantor will not (i) enter into any Lease, (ii) modify, amend,
terminate or consent to the cancelation or surrender of any Lease or (iii)
consent to an assignment of any tenant's interest in any Lease or to a
subletting thereof.
(c) Subject to Section 1.08(d), Grantor hereby assigns and transfers to the
Trustee for the benefit of Beneficiary all of Grantor's right, title and
interest in and to the Rents now or hereafter arising from each Lease heretofore
or hereafter made or agreed to by Grantor, it being intended that this
assignment establish, subject to Section 1.08(d), an absolute transfer and
assignment of all Rents and all Leases to Beneficiary and not merely to grant a
security interest therein. Subject to Section 1.08(d), Beneficiary may in
Grantor's name and stead (with or without first taking possession of any of the
Trust Property personally or by receiver as provided herein) operate the Trust
Property and rent, lease or let all or any
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portion of any of the Trust Property to any party or parties at such rental and
upon such terms as Beneficiary shall, in its sole discretion, determine, and may
collect and have the benefit of all of said Rents arising from or accruing at
any time thereafter or that may thereafter become due under any Lease.
(d) So long as an Event of Default shall not have occurred and be
continuing, Beneficiary will not exercise any of its rights under Section
1.08(c), and Grantor is hereby granted a revocable license to receive and
collect the Rents accruing under any Lease; but after the happening and during
the continuance of any Event of Default, Beneficiary may, at its option, revoke
such license and receive and collect all Rents to be held as additional
collateral and applied as set forth in Section 2.08. Grantor hereby irrevocably
authorizes and directs each tenant, if any, and each successor, if any, to the
interest of any tenant under any Lease, respectively, to rely upon any notice of
a claimed Event of Default sent by Beneficiary to any such tenant or any of such
tenant's successors in interest, and thereafter to pay Rents to Beneficiary
without any obligation or right to inquire as to whether an Event of Default
actually exists and even if some notice to the contrary is received from the
Grantor, who shall have no right or claim against any such tenant or successor
in interest for any such Rents so paid to Beneficiary. Each tenant or any of
such tenant's successors in interest from whom Beneficiary or any officer,
agent, attorney or employee of Beneficiary shall have collected any Rents, shall
be authorized to pay Rents to Grantor only after such tenant or any of their
successors in interest shall have received written notice from Beneficiary that
the Event of Default is no longer continuing, unless and until a further notice
of an Event of Default is given by Beneficiary to such tenant or any of its
successors in interest.
(e) Beneficiary will not become a mortgagee in possession as a result of
its exercise of any of its rights or remedies under this Section 1.08 with
respect
16
<PAGE>
to the Leases or Rents. In addition, Beneficiary shall not be responsible or
liable for performing any of the obligations of the landlord under any Lease,
for any waste by any tenant, or others, for any dangerous or defective
conditions of any of the Trust Property, for negligence in the management,
upkeep, repair or control of any of the Trust Property or any other act or
omission by any other person.
(f) Grantor shall furnish to Beneficiary, within 30 days after a request by
Beneficiary to do so, a written statement containing the names of all tenants,
subtenants and concessionaires of the Premises or Improvements, the terms of any
Lease, the space occupied and the rentals or license fees payable thereunder.
SECTION 1.09. Restrictions on Transfers and Encumbrances. Except as
-------------------------------------------
permitted by the Credit Agreement, Grantor shall not, directly or indirectly,
sell, convey, alienate, assign, lease, sublease, license, mortgage, pledge,
encumber or otherwise transfer any interest in the Land or the Improvements or
create, consent to or suffer the creation of any lien (other than the Permitted
Encumbrances), charges or any form of encumbrance upon any interest in or any
part of the Trust Property, or be divested of its title to the Trust Property or
any interest therein in any manner or way, whether voluntarily or involuntarily
(other than resulting from a condemnation), or engage in any common,
cooperative, joint, time-sharing or other congregate ownership of all or part of
the Trust Property.
SECTION 1.10. Security Agreement. This Deed of Trust is both a mortgage
-------------------
of real property and a grant of a security interest in personal property, and
shall constitute and serve as a "Security Agreement" and a "fixture filing"
within the meaning of the uniform commercial code as adopted in the state
wherein the Premises are located ("UCC"). Grantor has hereby granted unto
---
Beneficiary a security interest in and to all the Trust Property described in
this Deed of Trust
17
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that is not real property as further security for the payment and performance of
the Mortgaged Obligations, and this Deed of Trust shall constitute a financing
statement under the UCC, with Grantor as the "debtor" and Beneficiary as the
"secured party". Simultaneously with the recording of this Deed of Trust,
Grantor has filed or will file UCC financing statements, and will file
continuation statements prior to the lapse thereof, at the appropriate offices
in the state in which the Premises are located to perfect the security interest
granted by this Deed of Trust in all the Trust Property that is not real
property. Grantor hereby appoints Beneficiary as its true and lawful attorney-in
- -fact and agent, for Grantor and in its name, place and stead, in any and all
capacities, to execute any document and to file the same in the appropriate
offices to perfect the security interest contemplated by the preceding sentence
(to the extent it may lawfully do so), and to perform each and every act and
thing reasonably requisite and necessary to be done to perfect the security
interest contemplated by the preceding sentence. Prior to the occurrence of an
Event of Default, Beneficiary shall provide Grantor with the reasonable ability
to take the actions required by the previous sentence before acting pursuant to
the power of attorney granted pursuant hereto. Beneficiary shall have all rights
with respect to the part of the Trust Property that is the subject of a security
interest afforded by the UCC in addition to, but not in limitation of, the other
rights afforded Beneficiary hereunder and under the Security Agreement.
SECTION 1.11. Filing and Recording. Grantor will cause this Deed of
---------------------
Trust, any other security instrument creating a security interest in or
evidencing the lien hereof upon the Trust Property and each instrument of
further assurance to be filed, registered or recorded in such manner and in such
places as may be required by any present or future law in order to publish
notice of and fully to protect the lien hereof upon, and the security interest
of Beneficiary in, the Trust Property. Grantor will pay all filing,
registration or recording fees, and all reasonable expenses incidental
18
<PAGE>
to the execution and acknowledgment of this Deed of Trust, any mortgage
supplemental hereto, any security instrument with respect to the Personal
Property, and any instrument of further assurance and all Federal, state, county
and municipal recording, documentary or intangible taxes and other taxes,
duties, imposts, assessments and charges arising out of or in connection with
the execution, delivery and recording of this Deed of Trust, any mortgage
supplemental hereto, any security instrument with respect to the Personal
Property or any instrument of further assurance.
SECTION 1.12. Further Assurances. Upon demand by Beneficiary, Grantor
-------------------
will, at the cost of Grantor and without expense to Trustee or Beneficiary, do,
execute, acknowledge and deliver all such further acts, deeds, conveyances,
mortgages, assignments, notices of assignment, transfers and assurances as
Beneficiary shall from time to time reasonably require for the better assuring,
conveying, assigning, transferring and confirming unto Beneficiary the property
and rights hereby conveyed or assigned or intended now or hereafter so to be, or
which Grantor may be or may hereafter become bound to convey or assign to
Beneficiary, or for carrying out the intention or facilitating the performance
of the terms of this Deed of Trust, or for filing, registering or recording this
Deed of Trust, and on demand, Grantor will also execute and deliver and hereby
appoints Beneficiary as its true and lawful attorney-in-fact and agent, for
Grantor and in its name, place and stead, in any and all capacities, to execute
and file to the extent it may lawfully do so, one or more financing statements,
chattel mortgages or comparable security instruments reasonably requested by
Beneficiary to evidence more effectively the lien hereof upon the Personal
Property and to perform each and every act and thing requisite and necessary to
be done to accomplish the same.
SECTION 1.13. Additions to Trust Property. All right, title and interest
----------------------------
of Grantor in and to all extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and
19
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appurtenances to, the Trust Property hereafter acquired by or released to
Grantor or constructed, assembled or placed by Grantor upon the Premises or the
Improvements, and all conversions of the security constituted thereby,
immediately upon such acquisition, release, construction, assembling, placement
or conversion, as the case may be, and in each such case without any further
mortgage, conveyance, assignment or other act by Grantor, shall become subject
to the lien and security interest of this Deed of Trust as fully and completely
and with the same effect as though now owned by Grantor and specifically
described in the grant of the Trust Property above, but at any and all times
Grantor will execute and deliver to Beneficiary any and all such further
assurances, mortgages, conveyances or assignments thereof as Beneficiary may
reasonably require for the purpose of expressly and specifically subjecting the
same to the lien and security interest of this Deed of Trust.
SECTION 1.14. No Claims Against Trustee or Beneficiary. Nothing contained
-----------------------------------------
in this Deed of Trust shall constitute any consent or request by Trustee or
Beneficiary, express or implied, for the performance of any labor or services or
the furnishing of any materials or other property in respect of the Trust
Property or any part thereof, nor as giving Grantor any right, power or
authority to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
permit the making of any claim against Trustee or Beneficiary in respect
thereof.
SECTION 1.15. Fixture Filing. Certain of the Trust Property is or will
---------------
become "fixtures" (as that term is defined in the UCC) on the Land, and this
Deed of Trust upon being filed for record in the real estate records of the
county wherein such fixtures are situated shall operate also as a financing
statement filed as a fixture filing in accordance with the applicable provisions
of said UCC upon such of the Trust Property that is or may become fixtures.
20
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ARTICLE II
Defaults and Remedies
---------------------
SECTION 2.01. Events of Default. Any Event of Default under the Credit
-----------------
Agreement (as such term is defined therein) shall constitute an Event of Default
under this Deed of Trust.
SECTION 2.02. Demand for Payment. If an Event of Default shall occur and
------------------
be continuing, then, upon written demand of Beneficiary, Grantor will pay to
Beneficiary all amounts due hereunder and such further amount as shall be
sufficient to cover the costs and expenses of collection, including reasonable
attorneys' fees, disbursements and expenses incurred by Trustee or Beneficiary
and Trustee or Beneficiary shall be entitled and empowered to institute an
action or proceedings at law or in equity for the collection of the sums so due
and unpaid, to prosecute any such action or proceedings to judgment or final
decree, to enforce any such judgment or final decree against Grantor and to
collect, in any manner provided by law, all moneys adjudged or decreed to be
payable.
SECTION 2.03. Rights To Take Possession, Operate and Apply Revenues. (a)
-----------------------------------------------------
If an Event of Default shall occur and be continuing, Grantor shall, upon demand
of Beneficiary, forthwith surrender to Beneficiary actual possession of the
Trust Property and, if and to the extent not prohibited by applicable law,
Beneficiary itself, or by such officers or agents as it may appoint, may then
enter and take possession of all the Trust Property without the appointment of a
receiver or an application therefor, exclude Grantor and its agents and
employees wholly therefrom, and have access to the books, papers and accounts of
Grantor.
(b) If Grantor shall for any reason fail to surrender or deliver the Trust
Property or any part thereof after such demand by Beneficiary, Beneficiary may
to the extent not prohibited by applicable law, obtain a judgment or decree
conferring upon Beneficiary
21
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the right to immediate possession or requiring Grantor to deliver immediate
possession of the Trust Property to Beneficiary, to the entry of which judgment
or decree Grantor hereby specifically consents. Grantor will pay to
Beneficiary, upon demand, all reasonable expenses of obtaining such judgment or
decree, including reasonable compensation to Beneficiary's attorneys and agents
with interest thereon at the Default Interest Rate subject to Section 2.07 of
the Credit Agreement; and all such expenses and compensation shall, until paid,
be secured by this Deed of Trust.
(c) Upon every such entry or taking of possession, Beneficiary may, to the
extent not prohibited by applicable law, hold, store, use, operate, manage and
control the Trust Property, conduct the business thereof and, from time to time,
(i) make all necessary and proper maintenance, repairs, renewals, replacements,
additions, betterments and improvements thereto and thereon, (ii) purchase or
otherwise acquire additional fixtures, personalty and other property, (iii)
insure or keep the Trust Property insured, (iv) manage and operate the Trust
Property and exercise all the rights and powers of Grantor to the same extent as
Grantor could in its own name or otherwise with respect to the same, or (v)
enter into any and all agreements with respect to the exercise by others of any
of the powers herein granted Beneficiary, all as may from time to time be
directed or determined by Beneficiary to be in its best interest and Grantor
hereby appoints Beneficiary as its true and lawful attorney-in-fact and agent,
for Grantor and in its name, place and stead, in any and all capacities, to
perform any of the foregoing acts. Following and during the continuance of an
Event of Default, Beneficiary may collect and receive all the Rents, issues,
profits and revenues from the Trust Property, including those past due as well
as those accruing thereafter, and, after deducting (i) all expenses of taking,
holding, managing and operating the Trust Property (including reasonable
compensation for the services of all persons employed for such purposes),
22
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(ii) the reasonable costs of all such maintenance, repairs, renewals,
replacements, additions, betterments, improvements, purchases and acquisitions,
(iii) the reasonable costs of insurance, (iv) such taxes, assessments and other
similar charges as Beneficiary may at its option pay, (v) other proper charges
upon the Trust Property or any part thereof and (vi) the reasonable
compensation, expenses and disbursements of the attorneys and agents of
Beneficiary, Beneficiary shall apply the remainder of the moneys and proceeds so
received first to the payment of the Beneficiary for the satisfaction of the
Mortgaged Obligations, and second, if there is any surplus, to Grantor, subject
to the entitlement of others thereto under applicable law.
SECTION 2.04. Right To Cure Grantor's Failure to Perform. Should Grantor
------------------------------------------
fail in the payment, performance or observance of any term, covenant or
condition required by this Deed of Trust or the Credit Agreement (with respect
to the Trust Property), subject to the terms of the Credit Agreement,
Beneficiary may pay, perform or observe the same, and all payments made or costs
or expenses incurred by Beneficiary in connection therewith shall be secured
hereby and shall be, without demand, immediately repaid by Grantor to
Beneficiary with interest thereon at the Default Interest Rate, subject to
Section 2.07 of the Credit Agreement. Beneficiary shall be the judge using
reasonable discretion of the necessity for any such actions and of the amounts
to be paid. Beneficiary is hereby empowered to enter and to authorize others to
enter upon the Premises or the Improvements or any part thereof for the purpose
of performing or observing any such defaulted term, covenant or condition
without having any obligation to so perform or observe and without thereby
becoming liable to Grantor, to any person in possession holding under Grantor or
to any other person.
SECTION 2.05. Right to a Receiver. If an Event of Default shall have
-------------------
occurred and be continuing, Beneficiary, as a matter of right and without notice
to
23
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Grantor or to anyone claiming under Grantor, and without regard to the then
value of the Trust Property or any other security in favor of Beneficiary or the
interest of Grantor therein, shall have the right to apply to any court having
jurisdiction to appoint a receiver or receivers of the Trust Property, or any
portion thereof, and Grantor hereby irrevocably consents to such appointment and
waives notice of any application therefor. Grantor shall pay to Beneficiary
upon demand all reasonable expenses, including receiver's fees, reasonable
attorneys' fees and disbursements, costs and agents' compensation incurred
pursuant to the provisions of this Section 2.05; and all such expenses shall be
secured by this Deed of Trust and shall be, without demand, immediately repaid
by Grantor to Beneficiary with interest thereon at the Default Interest Rate.
SECTION 2.06. Foreclosure and Sale. (a) If an Event of Default shall occur
--------------------
and be continuing, Beneficiary may commence a judicial action to foreclose this
Deed of Trust or commence procedures to foreclose this Deed of Trust non-
judicially in accordance with the procedures of the State of California.
(b) Should Beneficiary elect to foreclose by exercise of the power of
sale contained herein, Beneficiary shall notify Trustee and shall, if
required, deposit with Trustee the original or a certified copy of this
Deed of Trust, and such other documents, receipts and evidences of
expenditures made and secured hereby as Trustee may require.
(c) Upon receipt of such notice from Beneficiary, Trustee shall cause
to be recorded and delivered to Grantor such notice as may then be required
by law and by this Deed of Trust. Trustee shall, without demand on Grantor,
after lapse of such time as may then be required by law and after
recordation of such notice of default and after notice of sale has been
given as required by law, sell the Trust Property at the
24
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time and place of sale fixed by it in said notice of sale, either as a
whole or in separate lots or parcels or items as Trustee shall deem
expedient, and in such order as it may determine, at public auction to the
highest bidder for cash in lawful money of the United States payable at the
time of sale. Trustee shall deliver to the purchaser or purchasers at such
sale its good and sufficient deed or deeds conveying the property so sold,
but without any covenant or warranty, express or implied. The recitals in
such deed of any matters or facts shall be conclusive proof of the
truthfulness thereof. Any person, including, without limitation, Grantor,
Trustee or Beneficiary, may purchase at such sale, and Grantor hereby
covenants to warrant and defend the title of such purchaser or purchasers.
(d) Trustee may postpone the sale of all or any portion of the Trust
Property from time to time in accordance with the laws of the State of
California.
(e) To the fullest extent allowed by law, Grantor hereby expressly
waives any right which it may have to direct the order in which any of the
Trust Property shall be sold in the event of any sale or sales pursuant to
this Deed of Trust.
(f) Beneficiary may from time to time rescind any notice of default
or notice of sale before any Trustee's sale as provided above in accordance
with the laws of the State of California. The exercise by Beneficiary of
such right of rescission shall not constitute a waiver of any breach or
default then existing or subsequently occurring, or impair the right of
Beneficiary to execute and deliver to Trustee, as above provided, other
declarations or notices of default to satisfy the obligations of this Deed
of Trust or secured hereby, nor otherwise affect any provision, covenant or
condition of any other Loan Document or any of the rights, obligations or
25
<PAGE>
remedies of Trustee or Beneficiary hereunder or thereunder.
(g) Any foreclosure or other sale of less than the whole of the Trust
Property or any defective or irregular sale made hereunder shall not
exhaust the power of foreclosure or of sale provided for herein; and
subsequent sales may be made hereunder until the Mortgaged Obligations have
been satisfied, or the entirety of the Trust Property has been sold.
(h) If an Event of Default shall occur and be continuing, Trustee or
Beneficiary may instead of, or in addition to, exercising the rights
described in Section 2.06(a) above and either with or without entry or
taking possession as herein permitted, proceed by a suit or suits in law or
in equity or by any other appropriate proceeding or remedy (i) to
specifically enforce payment of some or all of the Mortgaged Obligations,
or the performance of any term, covenant, condition or agreement of this
Deed of Trust or any other Loan Document or any other right, or (ii) to
pursue any other power, right or remedy under applicable law whether or not
specifically or generally granted or described in this Deed of Trust.
Nothing contained herein shall be construed to impair or to restrict such
powers, rights and remedies or to preclude any procedures or process
otherwise available to trustees or beneficiaries under deeds of trust in
the State of California. Trustee and Beneficiary, and each of them, shall
be entitled to enforce the payment and performance of any indebtedness or
obligations secured hereby and to exercise all rights and powers under this
Deed of Trust or under any other Loan Document or other agreement or any
laws now or hereafter in force, notwithstanding the fact that some or all
of the indebtedness and obligations secured hereby may now or hereafter be
otherwise secured, whether by mortgage, deed of trust, pledge, lien,
assignment or otherwise. Neither the acceptance of this Deed
26
<PAGE>
of Trust nor its enforcement, whether by court action or pursuant to the
power of sale or other powers contained herein, shall prejudice or in any
manner affect Trustee's or Beneficiary's right to realize upon or enforce
any other rights or security now or hereafter held by Trustee or
Beneficiary. Trustee and Beneficiary, and each of them, shall be entitled
to enforce this Deed of Trust and any other rights or security now or
hereafter held by Beneficiary or Trustee in such order and manner as they
or either of them may in their absolute discretion determine.
SECTION 2.07. Other Remedies. (a) In case an Event of Default shall occur
---------------
and be continuing, Beneficiary may also exercise, to the extent not prohibited
by law, any or all of the remedies available to a secured party under the UCC.
(b) In connection with a sale of the Trust Property or any Personal
Property and the application of the proceeds of sale as provided in Section
2.08, Beneficiary shall be entitled to enforce payment of and to receive up to
the principal amount of the Mortgaged Obligations, plus all other charges,
payments and costs due under this Deed of Trust, and to recover a deficiency
judgment against Grantor only (to the extent permitted by law) for any portion
of the aggregate principal amount of the Mortgaged Obligations remaining unpaid,
with interest at the rates set forth in the Credit Agreement.
SECTION 2.08. Application of Sale Proceeds and Rents. After any
---------------------------------------
foreclosure sale of all or any of the Trust Property, Trustee or Beneficiary
shall receive the proceeds of sale, no purchaser shall be required to see to the
application of the proceeds and Trustee or Beneficiary shall apply the proceeds
of the sale together with any Rents that may have been collected
27
<PAGE>
and any other sums that then may be held by Trustee or Beneficiary under this
Deed of Trust as follows:
FIRST, to the payment of the reasonable costs and expenses of such
sale, including compensation to Trustee or to Beneficiary's attorneys and
agents, and of any judicial proceedings wherein the same may be made, and
of all expenses, liabilities and advances made or incurred by Beneficiary
under this Deed of Trust, together with interest at the Default Interest
Rate on all advances made by Beneficiary, including all taxes or
assessments (except any taxes, assessments or other charges subject to
which the Trust Property shall have been sold) and the cost of removing any
encumbrance (except any Lien permitted under the Credit Agreement);
SECOND, to the Beneficiary for the satisfaction of the Mortgaged
Obligations; and
THIRD, to the person or persons legally entitled thereto.
The Beneficiary shall have absolute discretion as to the time of application of
any such proceeds, moneys or balances in accordance with this Deed of Trust.
Upon any sale of the Trust Property by the Trustee or Beneficiary (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Trustee or Beneficiary or of the officer making the sale
shall be a sufficient discharge to the purchaser or purchasers of the Trust
Property so sold and such purchaser or purchasers shall not be obligated to see
to the application of any part of the purchase money paid over to the Trustee or
Beneficiary or such officer or be answerable in any way for the misapplication
thereof.
SECTION 2.09. Grantor as Tenant Holding Over. If after any foreclosure
-------------------------------
sale by Trustee or Beneficiary Grantor remains in possession of any of the Trust
Property, at Beneficiary's election Grantor shall be
28
<PAGE>
deemed a tenant holding over and shall forthwith surrender possession to the
purchaser or purchasers at such sale or be summarily dispossessed or evicted
according to provisions of law applicable to tenants holding over.
SECTION 2.10. Waiver of Appraisement, Valuation, Stay, Extension and
------------------------------------------------------
Redemption Laws. Grantor waives, to the extent not prohibited by law and
- ----------------
subject to the Credit Agreement, (i) the benefit of all laws now existing or
that hereafter may be enacted providing for any appraisement of any portion of
the Trust Property, (ii) the benefit of all laws now existing or that may be
hereafter enacted in any way extending the time for the enforcement or the
collection of amounts due under any of the Mortgaged Obligations or creating or
extending a period of redemption from any sale made in collecting said debt or
any other amounts due Beneficiary, (iii) any right to at any time insist upon,
plead, claim or take the benefit or advantage of any law now or hereafter in
force providing for any appraisement, homestead exemption, valuation, stay,
statute of limitations, extension or redemption, or sale of the Trust Property
as separate tracts, units or estates or as a single parcel in the event of
foreclosure or notice of deficiency, and (iv) all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of or each of the Mortgaged Obligations and marshalling in
the event of foreclosure of this Deed of Trust.
SECTION 2.11. Discontinuance of Proceedings. In case Trustee or
------------------------------
Beneficiary shall proceed to enforce any right, power or remedy under this Deed
of Trust by foreclosure, entry or otherwise, and such proceedings shall be
discontinued or abandoned for any reason, or shall be determined adversely to
Trustee or Beneficiary, then and in every such case Grantor, Trustee and
Beneficiary shall be restored to their former positions and rights hereunder,
and all rights, powers and remedies of Trustee or Beneficiary shall continue as
if no such proceeding had been taken.
29
<PAGE>
SECTION 2.12. Suits To Protect the Trust Property. Trustee and/or
------------------------------------
Beneficiary shall have power (a) to institute and maintain suits and proceedings
to prevent any impairment of the Trust Property by any acts that may be unlawful
or in violation of this Deed of Trust, (b) to preserve or protect its interest
in the Trust Property and in the Rents arising therefrom and (c) to restrain the
enforcement of or compliance with any legislation or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid if
the enforcement of or compliance with such enactment, rule or order would impair
the security or be prejudicial to the interest of Trustee or Beneficiary
hereunder.
SECTION 2.13. Filing Proofs of Claim. In case of any receivership,
-----------------------
insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or
other proceedings affecting Grantor, Beneficiary shall, to the extent permitted
by law, be entitled to file such proofs of claim and other documents as may be
necessary or advisable in order to have the claims of Beneficiary allowed in
such proceedings for the Mortgaged Obligations secured by this Deed of Trust at
the date of the institution of such proceedings and for any interest accrued,
late charges and additional interest or other amounts due or that may become due
and payable hereunder after such date.
SECTION 2.14. Possession by Beneficiary. Notwithstanding the appointment
--------------------------
of any receiver, liquidator or trustee of Grantor, any of its property or the
Trust Property, Beneficiary shall be entitled, to the extent not prohibited by
law, to remain in possession and control of all parts of the Trust Property now
or hereafter granted under this Deed of Trust to Beneficiary in accordance with
the terms hereof and applicable law.
SECTION 2.15. Waiver. (a) No delay or failure by Trustee or Beneficiary
-------
to exercise any right, power or remedy accruing upon any breach or Event of
Default shall exhaust or impair any such right, power or remedy
30
<PAGE>
or be construed to be a waiver of any such breach or Event of Default or
acquiescence therein; and every right, power and remedy given by this Deed of
Trust to Trustee or Beneficiary may be exercised from time to time and as often
as may be deemed expedient by Trustee or Beneficiary. No consent or waiver by
Beneficiary to or of any breach or default by Grantor in the performance of the
Mortgaged Obligations shall be deemed or construed to be a consent or waiver to
or of any other breach or Event of Default in the performance of the same or any
other Mortgaged Obligations by Grantor hereunder. No failure on the part of
Beneficiary to complain of any act or failure to act or to declare an Event of
Default, irrespective of how long such failure continues, shall constitute a
waiver by Beneficiary of its rights hereunder or impair any rights, powers or
remedies consequent on any future Event of Default by Grantor.
(b) Even if Beneficiary (i) grants some forbearance or an extension of time
for the payment of any sums secured hereby, (ii) takes other or additional
security for the payment of any sums secured hereby, (iii) waives or does not
exercise some right granted herein or under the Loan Documents, (iv) releases a
part of the Trust Property from this Deed of Trust, (v) agrees to change some of
the terms, covenants, conditions or agreements of any of the Loan Documents,
(vi) consents to the filing of a map, plat or replat affecting the Premises,
(vii) consents to the granting of an easement or other right affecting the
Premises or (viii) makes or consents to an agreement subordinating Beneficiary's
lien on the Trust Property hereunder; no such act or omission shall preclude
Beneficiary from exercising any other right, power or privilege herein granted
or intended to be granted in the event of any breach or Event of Default then
made or of any subsequent default; nor, except as otherwise expressly provided
in an instrument executed by Trustee and Beneficiary, shall this Deed of Trust
be altered thereby. In the event of the sale or transfer by operation of law or
otherwise of all or part of the Trust Property, Beneficiary is hereby authorized
and
31
<PAGE>
empowered to deal with any vendee or transferee with reference to the Trust
Property secured hereby, or with reference to any of the terms, covenants,
conditions or agreements hereof, as fully and to the same extent as it might
deal with the original parties hereto and without in any way releasing or
discharging any liabilities, obligations or undertakings.
SECTION 2.16. Remedies Cumulative. No right, power or remedy conferred
--------------------
upon or reserved to Trustee or Beneficiary by this Deed of Trust is intended to
be exclusive of any other right, power or remedy, and each and every such right,
power and remedy shall be cumulative and concurrent and in addition to any other
right, power and remedy given hereunder or now or hereafter existing at law or
in equity or by statute.
SECTION 2.17 Substitution of Trustee. Beneficiary may, from time to time
------------------------
by written instrument executed and acknowledged by Beneficiary and recorded in
the county or counties where the Property is located, and by otherwise complying
with the provisions of any applicable statutes, substitute a successor or
successors for the Trustee named herein or acting hereunder.
SECTION 2.18 Trust Irrevocable; No Offset. The Trust created hereby is
----------------------------
irrevocable by Grantor. No offset or claim that Grantor now has or may in the
future have against Beneficiary shall relieve Grantor from paying the amounts or
performing the obligations contained herein or secured hereby.
ARTICLE III
Miscellaneous
-------------
SECTION 3.01. Partial Invalidity. In the event any one or more of the
-------------------
provisions contained in this Deed of Trust shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such validity, illegality or
unenforceability shall, at the
32
<PAGE>
option of Beneficiary, not affect any other provision of this Deed of Trust, and
this Deed of Trust shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein or therein.
SECTION 3.02. Notices. All notices and communications hereunder shall be
--------
in writing and given to Grantor, Beneficiary and Trustee in accordance with the
terms of applicable law and the Credit Agreement at the address set forth on the
first page of this Deed of Trust or as otherwise set forth in this Credit
Agreement.
SECTION 3.03. Successors and Assigns. All of the grants, covenants,
-----------------------
terms, provisions and conditions herein shall run with the Premises and the
Improvements and shall apply to, bind and inure to, the benefit of the permitted
successors and assigns of Grantor and the successors and assigns of Beneficiary.
SECTION 3.04. Satisfaction and Cancelation. (a) The conveyance to Trustee
-----------------------------
of the Trust Property as security, created and consummated by this Deed of Trust
shall be null and void when all the Mortgaged Obligations have been indefeasibly
paid in full in accordance with the terms of the Loan Documents and Beneficiary
has no further commitment to make Loans under the Credit Agreement.
(b) In connection with any termination or release pursuant to paragraph
(a), this Deed of Trust shall be marked "satisfied" by the Beneficiary and/or
Trustee, and this Deed of Trust shall be canceled of record at the request and
at the expense of the Grantor. Beneficiary and Trustee shall execute any
documents reasonably requested by Grantor to accomplish the foregoing or to
accomplish any release contemplated by paragraph (b) and Grantor will pay all
costs and expenses, including reasonable attorneys' fees, disbursements and
other charges, incurred by Beneficiary and Trustee in connection with the
preparation and execution of such documents.
33
<PAGE>
SECTION 3.05. Definitions. As used in this Deed of Trust, the singular
------------
shall include the plural as the context requires and the following words and
phrases shall have the following meanings: (a) "including" shall mean "including
---------
but not limited to"; (b) "provisions" shall mean "provisions, terms, covenants
----------
and/or conditions"; (c) "lien" shall mean "lien, charge, encumbrance, security
----
interest, mortgage or deed of trust"; (d) "obligation" shall mean "obligation,
----------
duty, covenant and/or condition"; and (e) "any of the Trust Property" shall mean
"the Trust Property or any part thereof or interest therein". Any act that
Trustee or Beneficiary is permitted to perform hereunder may be performed at any
time and from time to time by Trustee or Beneficiary or any person or entity
designated by Trustee or Beneficiary. Any act that is prohibited to Grantor
hereunder is also prohibited to all lessees of any of the Trust Property. Each
appointment of Trustee or Beneficiary as attorney-in-fact for Grantor under the
Deed of Trust is irrevocable, with power of substitution and coupled with an
interest. Subject to the applicable provisions hereof, Beneficiary has the right
to refuse to grant its consent, approval or acceptance or to indicate its
satisfaction, in its sole discretion, whenever such consent, approval,
acceptance or satisfaction is required hereunder.
SECTION 3.06. Governing Law. This Deed of Trust shall be governed by and
--------------
construed in accordance with the internal law of the State of California.
SECTION 3.07. Full Reconveyance. Upon written request of Beneficiary
-----------------
stating that all sums secured hereby have been paid, upon surrender to Trustee
of the original or a certified copy of this Deed of Trust for cancelation and
retention, and upon payment of its fees, Trustee shall fully reconvey, without
warranty, the entire remaining Property then held hereunder. The recitals in
such reconveyance of any matters of facts shall be conclusive proof of the
truthfulness thereof. The grantee in such reconveyance may be described as "the
person or persons legally entitled thereto".
34
<PAGE>
SECTION 3.08. Sale of Loans. Subject to the terms of the Credit
-------------
Agreement, Beneficiary, at any time and without the consent of Borrower, may
grant participations in or sell, transfer, assign and convey all or any portion
of its right, title and interest in and to the Loans, this Deed of Trust and the
other Loan Documents, guaranties given in connection with the Loans and any
collateral given to secure the Loans.
SECTION 3.09. Trustee's Powers and Liabilities. (a) Trustee, by acceptance
---------------------------------
hereof, covenants faithfully to perform and fulfill the trusts herein created,
being liable, however, only for gross negligence, bad faith or wilful
misconduct, and hereby waives any statutory fee and agrees to accept reasonable
compensation, in lieu thereof, for any services rendered by it in accordance
with the terms hereof. All authorities, powers and discretions given in this
Deed of Trust to Trustee and/or Beneficiary may be exercised by either, without
the other, with the same effect as if exercised jointly.
(b) Trustee may resign at any time upon giving 30 days' notice in writing
to Grantor and to Beneficiary.
(c) Beneficiary may remove Trustee at any time or from time to time and
select a successor trustee. In the event of the death, removal, resignation,
refusal to act, inability to act or absence of Trustee from the state in which
the premises are located, or in its sole discretion for any reason whatsoever,
Beneficiary may, upon notice to the Grantor and without specifying the reason
therefor and without applying to any court, select and appoint a successor
trustee, and all powers, rights, duties and authority of the former Trustee, as
aforesaid, shall thereupon become vested in such successor. Such substitute
trustee shall not be required to give bond for the faithful performance of his
duties unless required by Beneficiary. Such substitute trustee shall be
appointed by written instrument duly recorded in the county where the Land is
located. Grantor hereby ratifies and confirms any and all acts that the herein
named Trustee, or his
35
<PAGE>
successor or successors in this trust, shall do lawfully by virtue hereof.
Grantor hereby agrees, on behalf of itself and its heirs, executors,
administrators and assigns, that the recitals contained in any deed or deeds
executed in due form by any Trustee or substitute trustee, acting under the
provisions of this instrument, shall be prima facie evidence of the facts
recited, and that it shall not be necessary to prove in any court, otherwise
than by such recitals, the existence of the facts essential to authorize the
execution and delivery of such deed or deeds and the passing of title thereby.
(d) Trustee shall not be required to see that this Deed of Trust is
recorded, nor liable for its validity or its priority as a first deed of trust,
or otherwise, nor shall Trustee be answerable or responsible for performance or
observance of the covenants and agreements imposed upon Grantor or Beneficiary
by this Deed of Trust or any other agreement. Trustee, as well as Beneficiary,
shall have authority in their respective discretion to employ agents and
attorneys in the execution of this trust and to protect the interest of the
Beneficiary hereunder, and to the extent permitted by law they shall be
compensated and all reasonable expenses relating to the employment of such
agents and/or attorneys, including expenses of litigations, shall be paid out of
the proceeds of the sale of the Trust Property conveyed hereby should a sale be
had, but if no such sale be had, all sums so paid out shall be recoverable to
the extent permitted by law by all remedies at law or in equity.
(e) At any time, or from time to time, without liability therefor and with
10 days' prior written notice to Grantor, upon written request of Beneficiary
and without affecting the effect of this Deed of Trust upon the remainder of the
Trust Property, Trustee may (i) reconvey any part of the Trust Property, (ii)
consent in writing to the making of any map or plat thereof, so long as Grantor
has consented thereto, (iii) join in granting any easement thereon, so long as
Grantor has consented thereto, or (iv) join in any
36
<PAGE>
extension agreement or any agreement subordinating the lien or charge hereof.
SECTION 3.10. Limitation on Beneficiary's or Trustee's Responsibility. No
--------------------------------------------------------
provision of this Deed of Trust shall operate to place any obligation or
liability for the control, care, management or repair of the Trust Property upon
Beneficiary or Trustee, nor shall it operate to make Beneficiary or Trustee
responsible or liable for any waste committed on the Trust Property by the
tenants or any other parties, or for any dangerous or defective condition of the
Trust Property, or for any negligence in the management, upkeep, repair or
control of the Trust Property resulting in loss or injury or death to any
tenant, licensee, employee or stranger. Nothing herein contained shall be
construed as constituting Beneficiary a "mortgagee in possession" absent the
actual taking of possession of the Trust Property by Beneficiary.
SECTION 3.11. Hold Harmless. Neither Beneficiary or Trustee shall be
--------------
obligated to perform or discharge, and do not undertake hereby to perform nor to
discharge, any obligation, duty or liability with respect to the Trust Property
or the Leases solely by reason of this Deed of Trust, and Trustor shall and does
hereby agree to defend, indemnify, hold harmless and protect Beneficiary or
Trustee from and against any and all claims, losses, expenses, damage and
liabilities (including, without limitation, reasonable attorneys' fees) which
may arise or be incurred or accrue in connection therewith, except, in each
case, to the extent incurred as a result of the negligence or misconduct of
Beneficiary or Trustee, as the case may be, or the failure of Beneficiary or
Trustee, as the case may be, to comply in all material respects with Applicable
Laws. Should Beneficiary or Trustee incur any such liability, loss or damage,
the amount thereof, including all reasonable attorneys' fees and reasonable
costs and expenses associated with actions taken by Beneficiary, as the case may
be, in defense thereof, or otherwise in protecting its interests hereunder,
shall be part of the Mortgaged Obligations and shall be secured hereby, and
Trustor covenants and agrees to reimburse Beneficiary therefor promptly
following demand. Should Trustee incur any such liability, loss or damage, the
amount thereof including all reasonable attorneys' fees and reasonable costs and
expenses
37
<PAGE>
associated with actions taken by Trustee in defense thereof, shall be reimbursed
by Trustor promptly after demand therefor.
SECTION 3.12. Marshalling; Payments Set Aside. Beneficiary and Trustee
--------------------------------
shall not be under any obligation to marshall any assets in favor of Trustor or
any other party or against or in payment of any or all of the Mortgaged
Obligations hereby secured. To the extent that Trustor makes a payment or
payments to Beneficiary or Trustee, or Beneficiary or Trustee enforces its lien
or exercises any rights or setoff, and such payment or payments or the proceeds
of such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or Federal law, common law or equitable cause, then to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all such liens and rights and remedies therefor, shall be revived and
continue in full force and effect as if such payment had not been made or such
enforcement or setoff has not occurred.
SECTION 3.13. Waiver of Jury Trial; Consent to Jurisdiction. (a) TO THE
----------------------------------------------
EXTENT PERMITTED UNDER APPLICABLE LEGAL REQUIREMENTS, GRANTOR AND BENEFICIARY
EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY AGREE TO WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS DEED OF TRUST, OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS DEED OF TRUST. THE SCOPE OF THIS WAIVER IS INTENDED TO
ENCOMPASS ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO
THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. GRANTOR AND BENEFICIARY EACH ACKNOWLEDGE THAT THIS WAIVER IS
A MATERIAL INDUCEMENT TO ENTER INTO THIS DEED OF TRUST, AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALING. GRANTOR AND
BENEFICIARY EACH FURTHER WARRANT AND REPRESENT THAT EACH OF THEM HAS REVIEWED
THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT EACH OF THEM KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY
38
<PAGE>
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
DEED OF TRUST OR ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION.
IN THE EVENT OF LITIGATION, THIS DEED OF TRUST MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.
(b) GRANTOR AND BENEFICIARY HERETO CONSENT FOR THEMSELVES AND IN
RESPECT OF THEIR PROPERTIES, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, TO THE
NONEXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS IN THE STATE OF
CALIFORNIA WITH RESPECT TO ANY PROCEEDING TO FORECLOSE THE LIEN OF THIS DEED OF
TRUST OR TO ENFORCE BENEFICIARY'S REMEDIES HEREUNDER. GRANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS, GENERALLY, UNCONDITIONALLY AND
IRREVOCABLY, AT THE ADDRESS SET FORTH IN THE CREDIT AGREEMENT IN CONNECTION WITH
ANY OF THE AFORESAID PROCEEDINGS IN ACCORDANCE WITH THE RULES APPLICABLE TO SUCH
PROCEEDINGS. GRANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW
HAVE OR HAVE IN THE FUTURE TO THE LAYING OF VENUE IN RESPECT OF ANY OF THE
AFORESAID PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO ABOVE AND AGREES NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF BENEFICIARY TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW
OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED AGAINST GRANTOR IN ANY
JURISDICTION.
SECTION 3.14. Lien Absolute, Multisite Real Estate and Multiple Collateral
------------------------------------------------------------
Transaction. Grantor acknowledges that this Deed of Trust and other Security
- ------------
Documents together secure the Mortgaged Obligations. Grantor agrees that the
lien of this Deed of Trust and all obligations of Grantor hereunder shall be
absolute and unconditional and shall not in any manner be affected or impaired
by:
(a) any lack of validity or enforceability of any other Security
Documents, any agreement with respect to any of the Mortgaged Obligations
or any other agreement or instrument relating to any of the foregoing;
(b) any acceptance by Beneficiary or Trustee of any security for or
guarantees of any of the Mortgaged Obligations hereby secured, including
but not limited to any of the Security Documents;
39
<PAGE>
(c) any failure, neglect or omission on the part of Beneficiary or
Trustee to realize or protect any of the Mortgaged Obligations hereby
secured or any collateral security therefor, or due to any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, Trustor in respect of the Mortgaged Obligations of this Deed
of Trust;
(d) any extension, renewal, compromise of, or change in the time,
manner or place of payment or, or in any other term of, all or any of the
Mortgaged Obligations;
(e) any release (except as to the property released), sale, pledge,
surrender, compromise, settlement, nonperfection, renewal, extension,
indulgence, alteration, exchange, modification or disposition of any of the
Mortgaged Obligations hereby secured or of any of the collateral security
therefor;
(f) any amendment or waiver of or any consent to any departure from
this Deed of Trust, or any other Security Document, and Trustee or
Beneficiary may in its discretion foreclose, exercise any power of sale, or
exercise any other remedy available to it under any of the other Loan
Documents without first exercising or enforcing any of its rights and
remedies hereunder; and
(g) any exercise of the rights or remedies of Beneficiary or Trustee
hereunder or under any or all of the other Loan Documents.
40
<PAGE>
IN WITNESS WHEREOF, this Deed of Trust has been duly executed and
delivered to Trustee and Beneficiary by Grantor on the date of the
acknowledgment attached hereto.
JAFRA COSMETICS
INTERNATIONAL, INC., a
Delaware corporation,
by:
Name:
Title:
41
<PAGE>
STATE OF _______________ )
) ss:
COUNTY OF ______________ )
On _________________, before me,
________________,
a Notary Public, personally appeared ______________________
____________________________________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
_____________________________________
Print Name ___________________
My Commission Expires
____________________.
[Seal]
42
<PAGE>
Exhibit A
to Deed of Trust
Legal Description
-----------------
<PAGE>
FILE NO. 65889-RD
THE LAND REFERRED TO IN THIS REPORT IS SITUATED IN THE STATE OF CALIFORNIA,
COUNTY OF VENTURA, AND IS DESCRIBED AS FOLLOWS:
PARCEL A:
- ---------
Parcels 1 and 2 of LD-613, in the City of Thousand Oaks, County of Ventura,
State of California, as shown on a parcel map filed in Book 52, Pages 43 and 44
of Parcel Maps, in the office of the County Recorder of said county.
EXCEPT all oil, gas, hydrocarbon substances lying within and under that portion
of said land lying below a depth of 500 feet, measured vertically from the
surface of said land, without, however, any right to enter upon the surface of
said land, nor into that portion of the subsurface thereof lying above a depth
of 500 feet, measured vertically from said surface.
PARCEL B:
- ---------
Lot 5 of Tract 1921-2, in the City of Thousand Oaks, as per map recorded in Book
51, Pages 85 to 88 inclusive of maps, in the office of the County Recorder of
said county.
EXCEPT all oil, gas, hydrocarbon substances lying within and under that portion
of said land lying below a depth of 500 feet measured vertically from the
surface of said land, without, however, any right to enter upon the surface of
said land nor into that portion of the subsurface thereof, lying above a depth
of 500 feet measured vertically from said surface.
RD/jd
<PAGE>
Schedule A
to Deed of Trust
Leases of Trust Property
------------------------
NONE
<PAGE>
EXHIBIT J
to CREDIT AGREEMENT
PARENT GUARANTEE AGREEMENT dated as of April 30, 1998,
between CDRJ INVESTMENTS (LUX) S.A., a Luxembourg societe anonyme
(the "Guarantor") and CREDIT SUISSE FIRST BOSTON, a bank
organized under the laws of Switzerland, acting through its New
York branch, as collateral agent (the "Collateral Agent") for the
Secured Parties (as defined in the Credit Agreement referred to
below).
Reference is made to the Credit Agreement dated as of April 30, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Guarantor, CDRJ Acquisition Corporation (to be renamed
Jafra Cosmetics International, Inc.), a Delaware corporation ("JCI"), Jafra
Cosmetics International, S.A. de C.V., a sociedad ano'nima de capital variable
organized under the laws of the United Mexican States (together with JCI, the
"Borrowers"), the lenders from time to time party thereto (the "Lenders"), the
Issuing Bank (as defined therein) and Credit Suisse First Boston, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), as swingline lender and as Collateral Agent. Capitalized terms used
herein and not defined herein shall have the meanings assigned to such terms in
the Credit Agreement.
The Lenders have agreed to make Loans to the Borrowers and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrowers pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. As the indirect owner of all of the issued and outstanding capital
stock of, or other equity interests in, the Borrowers, the Guarantor
acknowledges that it will derive substantial benefit from the making of the
Loans by the Lenders and the issuance of the Letters of Credit by the Issuing
Bank. The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit are conditioned on, among other things, the execution
and delivery by the Guarantor of a Guarantee Agreement in the form hereof. As
consideration therefor and in order to induce the Lenders to make Loans and the
Issuing Bank to issue Letters of Credit, the Guarantor is willing to execute
this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. The Guarantor unconditionally guarantees, as a
primary obligor and not merely as a surety, all obligations of the Borrowers:
(a) under the Credit Agreement, including the due and punctual
payment of (i) the principal of and premium, if any, and interest
(including interest accruing at the applicable rate provided in the Credit
Agreement during the pendency of any bankruptcy, insolvency, receivership
or other similar proceeding, regardless of whether allowed or allowable in
such proceeding) on the Loans, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise, (ii)
each payment required to be made by the Borrowers under the Credit
Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements and interest thereon
and (iii) all other monetary obligations, including fees, costs, expenses
and indemnities, whether direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), of the Borrowers to the Secured
Parties under the Credit Agreement and the other Loan Documents;
(b) for the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Borrowers under or pursuant
to the Credit Agreement and the other Loan Documents; and
(c) unless otherwise agreed upon in writing by the counterparty
thereto, the due and punctual payment and performance of all obligations of
the Borrowers, monetary or
<PAGE>
2
otherwise, under each Hedging Agreement entered into with a counterparty
(whether or not a Lender or an Affiliate thereof) (all the monetary and
other obligations referred to in the preceding clauses (a) through (c)
being collectively called the "Obligations").
The Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice to or further assent from it, and
that it will remain bound upon its guarantee notwithstanding any extension or
renewal of any Obligation.
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, the Guarantor waives presentment to, demand of payment from and
protest to the Borrowers of any of the Obligations, and also waives notice of
acceptance of its guarantee and notice of protest for nonpayment. To the
fullest extent permitted by applicable law, the obligations of the Guarantor
hereunder shall not be affected by (a) the failure of the Collateral Agent or
any other Secured Party to assert any claim or demand or to enforce or exercise
any right or remedy against either Borrower or any other guarantor of the
Obligations under the provisions of the Credit Agreement, any other Loan
Document or otherwise, (b) any rescission, waiver, amendment or modification of,
or any release from any of the terms or provisions of this Agreement, any other
Loan Document, any Guarantee or any other agreement, including with respect to
any other guarantor of the Obligations or (c) the failure to perfect any
security interest in, or the release of, any of the security held by or on
behalf of the Collateral Agent or any other Secured Party.
SECTION 3. Security. The Guarantor authorizes the Collateral Agent, for
the ratable benefit of the Secured Parties, to (a) take and hold security
pursuant to the terms of the Credit Agreement, the Pledge Agreement and the
other Security Documents for the payment of this guarantee and the Obligations
and exchange, enforce, waive and release any such security, (b) apply such
security and direct the order or manner of sale thereof pursuant to the terms of
the Credit Agreement, the Pledge Agreement and the other Security Documents and
(c) release or substitute any one or more endorsees, other guarantors or other
obligors.
SECTION 4. Guarantee of Payment. The Guarantor further agrees that its
guarantee constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Collateral Agent or
any other Secured Party to any of the security held for payment of the
Obligations or to any balance of any deposit account or credit on the books of
the Collateral Agent or any other Secured Party in favor of either Borrower or
any other Person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of
the Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the performance or payment
in full of the Obligations, as the case may be), including any claim of waiver,
release, surrender, alteration or compromise of any of the Obligations, and
shall not be subject to any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of the Guarantor hereunder shall
not be discharged or impaired or otherwise affected by the failure of the
Collateral Agent or any other Secured Party to assert any claim or demand or to
enforce any remedy under the Credit Agreement, any other Loan Document or any
other agreement, by any waiver or modification of any provision of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
Obligations, or by any other act or omission that may or might in any manner or
to any extent vary the risk of the Guarantor or that would otherwise operate as
a discharge of the Guarantor as a matter of law or equity (other than the
performance or payment in full of all the Obligations, as the case may be).
SECTION 6. Defenses of Borrowers Waived. To the fullest extent permitted
by applicable law, the Guarantor waives any defense based on or arising out of
any defense of either Borrower or the unenforceability of the Obligations or any
part thereof from any cause, or the cessation from any cause of the liability of
either Borrower, other than the performance or payment in full of the
Obligations then due and owing. The Collateral Agent, for the ratable benefit
of the Secured Parties, may, at its election, foreclose on any security held by
one or more of them by one or more judicial or nonjudicial sales, accept an
assignment of any such security in lieu of foreclosure, compromise or
<PAGE>
3
adjust any part of the Obligations, make any other accommodation with either
Borrower or any other guarantor or exercise any other right or remedy available
to them against either Borrower or any other guarantor, without affecting or
impairing in any way the liability of the Guarantor hereunder except to the
extent the Obligations then due and owing have been fully paid.
SECTION 7. Agreement to Pay; Subrogation. In furtherance of the foregoing
and not in limitation of any other right that the Collateral Agent or any other
Secured Party has at law or in equity against the Guarantor by virtue hereof,
upon the failure of either Borrower to pay any Obligation when and as the same
shall become due, whether at maturity, by acceleration, after notice of
prepayment or otherwise, the Guarantor hereby promises to and will forthwith
pay, or cause to be paid, to the Collateral Agent in cash the amount of such
unpaid Obligations. Upon payment by the Guarantor of any sums to the Collateral
Agent as provided above, all rights of the Guarantor against the Borrowers
arising as a result thereof by way of right of subrogation, contribution,
reimbursement, indemnity or otherwise shall in all respects be subordinate and
junior in right of payment to the prior payment in full of all the Obligations.
If any amount shall erroneously be paid to the Guarantor on account of such
subrogation, contribution, reimbursement, indemnity or similar right, such
amount shall be held in trust for the benefit of the Secured Parties and shall
forthwith be paid to the Collateral Agent to be credited against the payment of
the Obligations, whether matured or unmatured, in accordance with the terms of
the Loan Documents.
SECTION 8. Information. The Guarantor assumes all responsibility for
being and keeping itself informed of the financial condition and assets of the
Borrowers, and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks that the Guarantor
assumes and incurs hereunder, and agrees that none of the Collateral Agent or
the other Secured Parties will have any duty to advise the Guarantor of
information known to it or any of them regarding such circumstances or risks.
SECTION 9. Termination. The Guarantee made hereunder (a) shall terminate
when all the Obligations have been paid in full and the Lenders have no further
commitment to lend under the Credit Agreement, the L/C Exposure has been reduced
to zero and the Issuing Bank has no further obligation to issue Letters of
Credit under the Credit Agreement and (b) shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by any Secured Party
or the Guarantor upon the bankruptcy or reorganization of the Borrowers, the
Guarantor or otherwise.
SECTION 10. Binding Agreement; Assignments. Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the Guarantor that are contained in this
Agreement shall bind and inure to the benefit of each party hereto and their
respective successors and assigns. This Agreement shall become effective when a
counterpart hereof executed on behalf of the Guarantor shall have been delivered
to the Collateral Agent and a counterpart hereof shall have been executed on
behalf of the Collateral Agent, and thereafter shall be binding upon the
Guarantor and the Collateral Agent and their respective successors and assigns,
and shall inure to the benefit of the Guarantor, the Collateral Agent and the
other Secured Parties, and their respective successors and assigns, except that
the Guarantor shall not have the right to assign its rights or obligations
hereunder or any interest herein except with the written consent of the
Collateral Agent (and any such attempted assignment shall be void).
SECTION 11. Waivers; Amendment. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and
of the other Secured Parties under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of this Agreement or consent to any departure by the
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance
<PAGE>
4
and for the purpose for which given. No notice or demand on the Guarantor in any
case shall entitle the Guarantor to any other or further notice or demand in
similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Guarantor and the Collateral Agent, with the prior written consent of the
Required Lenders (except as otherwise provided in the Credit Agreement).
SECTION 12. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH
PRINCIPLES OR RULES WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
SECTION 13. Notices. All communications and notices hereunder shall be in
writing (including by facsimile transmission) and given as provided in Section
9.02 of the Credit Agreement.
SECTION 14. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Guarantors herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall survive the making by the Lenders of the Loans
and the issuance of the Letters of Credit by the Issuing Bank.
SECTION 15. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 10. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 16. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
Section 17. Integration. This Agreement represents the agreement between
the parties with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by any of the parties
hereto relative to the subject matter hereof not expressly set forth or referred
to herein or in the other Loan Documents.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
CDRJ INVESTMENTS (LUX) S.A., as Guarantor,
by____________________________________
Name:
Title:
<PAGE>
5
CREDIT SUISSE FIRST BOSTON, as Collateral
Agent,
by____________________________________
Name:
Title:
by____________________________________
Name:
Title:
<PAGE>
EXHIBIT K
to CREDIT AGREEMENT
PLEDGE AGREEMENT dated as of April 30, 1998, among CDRJ
INVESTMENTS (LUX) S.A., a Luxembourg socie'te' anonyme
("Parent"), CDRJ NORTH ATLANTIC (LUX) SARL, a Luxembourg societe
a re'sponsibilite' limite'e ("Lux SARL"), CDRJ LATIN AMERICA
HOLDING COMPANY B.V., LATIN COSMETICS HOLDINGS B.V., REGIONAL
COSMETICS HOLDING B.V., SOUTHERN COSMETICS HOLDINGS B.V. and CDRJ
MEXICO HOLDING COMPANY B.V., each a legal entity in the form of a
"besloten vennootschap met beperkte aansprakelijkheid" organized
under the laws of The Netherlands (collectively, the "Dutch
HoldCos"), CDRJ ACQUISITION CORPORATION (to be renamed JAFRA
COSMETICS INTERNATIONAL, INC.), a Delaware corporation ("JCI"),
JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V., a sociedad ano'nima
de capital variable organized under the laws of the United
Mexican States ("JCISA" and, together with JCI, the "Borrowers"),
upon consummation of the Transactions, each Subsidiary of the
Borrowers listed on Schedule I hereto (each such Subsidiary
individually a "Subsidiary Pledgor" and collectively, the
"Subsidiary Pledgors"; the Borrowers, Parent, Lux SARL, the Dutch
HoldCos and the Subsidiary Pledgors are referred to collectively
herein as the "Pledgors") and CREDIT SUISSE FIRST BOSTON, a bank
organized under the laws of Switzerland, acting through its New
York branch as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (as defined in the
Credit Agreement referred to below). Capitalized terms used
herein without definition shall have the respective meanings
ascribed thereto in the Credit Agreement referred to below.
Reference is made to (a) the Credit Agreement dated as of April 30, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Parent, the Borrowers, the lenders from time to time party
thereto (the "Lenders"), the Issuing Bank and Credit Suisse First Boston, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), as swingline lender and as Collateral Agent, (b) the Parent Guarantee
Agreement, (c) the JCI Guarantee Agreement, (d) the JCISA Guarantee Agreement
(together with the JCI Guarantee Agreement, the "Cross Guarantee Agreements"),
(e) the JCI Subsidiary Guarantee Agreement and (f) the JCISA Subsidiary
Guarantee Agreement (together with the JCI Subsidiary Guarantee Agreement, the
"Subsidiary Guarantee Agreements").
The Lenders have agreed to make Loans to the Borrowers and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrowers pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. As set forth in the respective Guarantee Agreements, the Guarantors
have agreed to guarantee, among other things, the obligations of the Borrowers
under the Credit Agreement. The obligations of the Lenders to make Loans and of
the Issuing Bank to issue Letters of Credit are conditioned upon, among other
things, the execution and delivery by the Pledgors of a Pledge Agreement in the
form hereof to secure:
(a) in the case of each Borrower, (i) the due and punctual payment by
it of (A) the principal of and premium, if any, and interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on its Loans, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (B) each payment required to be made by it under the Credit
Agreement in respect of any Letter of Credit issued for its benefit, when
and as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash collateral
and (C) all other monetary obligations, including fees, costs, expenses and
indemnities, whether direct, contingent, fixed or otherwise (including
monetary obligations incurred
<PAGE>
2
during the pendency of any bankruptcy, insolvency, receivership or other
similar proceeding, regardless of whether allowed or allowable in such
proceeding) if it to the Secured Parties under the Credit Agreement and the
other Loan Documents, (ii) the due and punctual performance of all
covenants, agreements, obligations and liabilities of it under or pursuant
to the Credit Agreement, its respective Cross Guarantee Agreement and the
other Loan Documents to which it is a party, (iii) unless otherwise agreed
to in writing by the counterparty thereto, the due and punctual payment and
performance of all its obligations under each Hedging Agreement entered
into with any counterparty, (whether or not a Lender or an Affiliate
thereof), and (iv) the due and punctual payment and performance of all
guarantee obligations of such Borrower referred to in Section 6.01(d)(ii)
of the Credit Agreement as to which any Lender or any Affiliate thereof is
originally a beneficiary (in the case of JCI, the "JCI Secured Obligations"
and in the case of JCISA, the "JCISA Secured Obligations"; the JCI Secured
Obligations and the JCISA Secured Obligations are referred to collectively
as the "Borrower Secured Obligations");
(b) in the case of Parent, the due and punctual payment and
performance of all the covenants, agreements, obligations and liabilities
of Parent under or pursuant to the Parent Guarantee Agreement and the other
Loan Documents (the "Parent Secured Obligations");
(c) in the case of each Subsidiary Pledgor, the due and punctual
payment and performance of all the covenants, agreements, obligations and
liabilities of such Subsidiary Pledgor under or pursuant to the applicable
Subsidiary Guarantee Agreement and the other Loan Documents to which it is
a party (in the case of each such Subsidiary Pledgor, the "Individual
Subsidiary Pledgor Secured Obligations"; all Individual Subsidiary Pledgor
Secured Obligations are referred to collectively as the "Subsidiary Pledgor
Secured Obligations");
(d) in the case of Lux SARL, the due and punctual payment and
performance by each Borrower of such Borrower's Borrower Secured
Obligations (the "SARL Secured Obligations"); and
(e) in the case of each Dutch HoldCo, the due and punctual payment and
performance by JCISA of all the JCISA Secured Obligations (in the case of
each such Dutch HoldCo, the "Individual Dutch HoldCo Secured Obligations";
all Individual Dutch HoldCo Secured Obligations are referred to
collectively as the "Dutch HoldCo Secured Obligations"; and the Borrower
Secured Obligations, the Parent Secured Obligations, the Subsidiary Pledgor
Secured Obligations, the SARL Secured Obligations and the Dutch HoldCo
Secured Obligations are referred to collectively hereinafter as the
"Obligations", such term when used with reference to a specific Pledgor
being understood to refer to such Pledgor's respective monetary and other
obligations referred to in the preceding clauses (a) through (e)).
Accordingly, the Pledgors and the Collateral Agent, on behalf of itself and
each Secured Party (and each of their respective successors or assigns), hereby
agree as follows:
SECTION 1. Pledge. As security for the payment and performance, as the
case may be, in full of its respective Obligations, each Pledgor hereby
transfers, grants, bargains, sells, conveys, hypothecates, pledges, sets over
and delivers unto the Collateral Agent, its successors and assigns, and hereby
grants to the Collateral Agent, its successors and assigns, for the ratable
benefit of the Secured Parties, a security interest in and lien on all of the
Pledgor's right, title and interest in, to and under (a) the shares of capital
stock or other equity interests owned by it (assuming consummation of the
Transactions) and listed on Schedule II hereto and any shares of capital stock
of, or other equity interests in, the respective issuers listed on Schedule II
and, upon acquisition thereof, any other shares required to be pledged by a
Pledgor pursuant to Section 5.11 of the Credit Agreement obtained in the future
by the Pledgor and the certificates representing all such shares (the "Pledged
Stock"), provided that the Pledged Stock shall not include (i) more than 65% of
the issued and outstanding shares of stock of any Foreign Subsidiary of JCI or
of any Foreign Subsidiary of a Domestic Subsidiary of
<PAGE>
3
Parent, (ii) directors' qualifying shares or shares held by nominees, or (iii)
the capital stock of any after acquired or organized Subsidiary of a Pledgor
until such time as such stock is required to be pledged pursuant to Section 5.11
of the Credit Agreement; (b)(i) the debt securities listed opposite the name of
the Pledgor on Schedule II hereto, (ii) any debt securities in the future issued
to a Pledgor (other than intercompany debt securities) and (iii) the promissory
notes and any other instruments evidencing such debt securities (the "Pledged
Debt Securities"); (c) all other property that may be delivered to and held by
the Collateral Agent pursuant to the terms hereof; (d) subject to Section 5, all
payments of principal or interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed, in
respect of, in exchange for or upon the conversion of the securities referred to
in clauses (a) and (b) above; (e) subject to Section 5, all rights and
privileges of the Pledgor with respect to the securities and other property
referred to in clauses (a), (b), (c) and (d) above; and (f) all proceeds of any
of the foregoing (the items referred to in clauses (a) through (f) above being
collectively referred to as the "Collateral"). Upon delivery to the Collateral
Agent, (a) any Pledged Stock or Pledged Debt Securities now or hereafter
included in the Collateral (the "Pledged Securities") shall be accompanied by
stock powers duly executed in blank (or in the case of shares of Mexican
companies, the endorsement in guaranty of each share certificate in favor of the
Collateral Agent in accordance with Mexican law) or other instruments of
transfer reasonably satisfactory to the Collateral Agent and by such other
instruments and documents as the Collateral Agent may reasonably request and (b)
all other property comprising part of the Collateral shall be accompanied by
proper instruments of assignment duly executed by the applicable Pledgor and
such other instruments or documents as the Collateral Agent may reasonably
request. Each delivery of Pledged Securities shall be accompanied by a schedule
describing the securities theretofore and then being pledged hereunder, which
schedule shall be attached hereto as Schedule II and made a part hereof. Each
schedule so delivered shall supersede any prior schedules so delivered.
TO HAVE AND TO HOLD the Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto,
unto the Collateral Agent, its successors and assigns, for the ratable benefit
of the Secured Parties, forever; subject, however, to the terms, covenants and
conditions hereinafter set forth.
SECTION 2. Delivery of the Pledged Securities. (a) Each Pledgor agrees
promptly to deliver or cause to be delivered to the Collateral Agent any and all
(i) Pledged Stock that is certificated and (x) issued by an entity organized
under the laws of the United States of America or a State thereof or (y) issued
by an entity organized under the laws of a jurisdiction other than the United
States or a State or territory thereof, to the extent required to perfect the
security interest in such Pledged Stock and (ii) all Pledged Debt Securities
which are evidenced by a promissory note.
(b) Each Pledgor will cause any Indebtedness for borrowed money owed to the
Pledgor by any Person [(other than intercompany debt)] that is evidenced by a
duly executed promissory note to be pledged and delivered to the Collateral
Agent pursuant to the terms thereof.
SECTION 3. Representations, Warranties and Covenants. Each Pledgor hereby
represents, warrants and covenants, as to itself and the Collateral pledged by
it hereunder, to and with the Collateral Agent that:
(a) assuming consummation of the Transactions, on the date hereof the
Pledged Stock represents that percentage as set forth on Schedule II of the
issued and outstanding shares of each class of the capital stock of the
issuer with respect thereto;
(b) except for the security interest granted hereunder and except as
permitted under Section 6.02, 6.04 or 6.05 of the Credit Agreement, the
Pledgor (i) is and will at all times continue to be the direct owner,
beneficially and of record, of the Pledged Securities indicated on Schedule
II, (ii) holds the same free and clear of all Liens, (iii) will make no
assignment, pledge, hypothecation or transfer of, or create or permit to
exist any security interest in or other Lien on, the Pledged Securities,
other than pursuant hereto;
<PAGE>
4
(c) the Pledgor (i) has the power and authority to pledge the Pledged
Securities in the manner hereby done or contemplated and (ii) will defend
its title or interest thereto or therein against any and all Liens (other
than the Lien created by this Agreement or as otherwise permitted by the
Credit Agreement), however arising, of all Persons whomsoever;
(d) on the date hereof when the Pledged Stock which is certificated
and governed by the law of a State of the United States of America,
together with stock powers, and the Pledged Debt Securities evidenced by
notes, together with bond powers, are delivered to the Collateral Agent
(assuming the continued possession of such Pledged Stock and Pledged Debt
Securities by the Collateral Agent), the Collateral Agent will obtain a
valid and perfected first lien upon and security interest in the Pledged
Stock and Pledged Debt Securities;
(e) all of the Pledged Stock has been duly authorized and validly
issued and is fully paid and nonassessable;
(f) all information set forth herein relating to the Pledged Stock is
accurate and complete in all material respects as of the date hereof;
(g) upon the acquisition of any stock of a Subsidiary acquired after
the Closing Date that is required to be pledged pursuant to Section 5.11 of
the Credit Agreement, the respective Pledgor shall deliver a schedule of
such additional stock to the Collateral Agent and such information shall be
made a part of Schedule II hereof and such stock shall be deemed Pledged
Stock; and
(h) on the date hereof, the Collateral Agent will have a perfected
pledge in the shares of any Mexican companies whose shares have been
pledged, as applicable, when the share certificates of such Mexican
companies are (i) in the possession of the Collateral Agent, (ii) duly
endorsed in guaranty in its favor and (iii) the pledge of shares of any
Mexican companies hereunder has been duly registered in the Shareholders
Registry Book of the relevant company or, in the case of Jafra Cosmetics,
S. de R.L., the security interests will be perfected by means of (i)
corporate approval of pledge, (ii) the delivery of certificates evidencing
ownership of interests therein to the Collateral Agent and (iii) notations
thereof in the corporate records.
SECTION 4. Registration in Nominee Name; Denominations. If an Event of
Default shall occur and be continuing and the Collateral Agent shall give notice
of its intent to exercise the rights specified herein to the relevant Pledgor or
Pledgors, the Collateral Agent, on behalf of the Secured Parties, shall have the
right (in its sole and absolute discretion) to hold the Pledged Securities in
its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or
the name of the Pledgors, endorsed or assigned in blank or in favor of the
Collateral Agent.
SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless and
until an Event of Default shall have occurred and be continuing and the
Collateral Agent has given notice as specified in clause (b) or (c) below:
(i) Each Pledgor shall be entitled to exercise any and all voting
and/or other consensual rights and powers inuring to an owner of Pledged
Securities or any part thereof for any purpose; provided, however, that
such Pledgor will not be entitled to exercise any such right (other than in
connection with a transaction permitted by the Credit Agreement) which
would result in any violation of any provision of the Credit Agreement,
this Agreement or any other Loan Document.
(ii) The Collateral Agent shall promptly execute and deliver to each
Pledgor, or cause to be promptly executed and delivered to each Pledgor,
all such proxies, powers of attorney and other instruments as such Pledgor
may reasonably request for the purpose of enabling
<PAGE>
5
such Pledgor to exercise the voting and/or consensual rights and powers it
is entitled to exercise pursuant to subparagraph (i) above and to receive
the cash dividends it is entitled to receive pursuant to subparagraph (iii)
below.
(iii) Each Pledgor shall be entitled to receive and retain any and all
cash dividends, interest and principal paid on the Pledged Securities to
the extent such cash dividends, interest and principal are permitted by the
Credit Agreement. All noncash dividends, interest and principal, and all
dividends, interest and principal paid or payable in cash or otherwise in
connection with a partial or total liquidation or dissolution, return of
capital, capital surplus or paid-in surplus, and all other distributions
(other than distributions referred to in the preceding sentence) made on or
in respect of the Pledged Securities, whether paid or payable in cash or
otherwise, whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of the issuer of any
Pledged Securities or received in exchange for Pledged Securities or any
part thereof, or in redemption thereof, or as a result of any merger,
consolidation, acquisition or other exchange of assets to which such issuer
may be a party or otherwise, shall be and become part of the Collateral,
and, if received by any Pledgor, shall not be commingled by such Pledgor
with any of its other funds or property but shall be held separate and
apart therefrom, shall be held in trust for the benefit of the Collateral
Agent and shall be forthwith delivered to the Collateral Agent in the same
form as so received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event of Default
and subsequent notice by the Collateral Agent to the relevant Pledgor or
Pledgors of its intent to exercise such rights, all rights of any Pledgor to
dividends, interest or principal that such Pledgor is authorized to receive
pursuant to paragraph (a)(iii) above shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, which shall have the sole and
exclusive right and authority to receive and retain such dividends, interest or
principal. All dividends, interest or principal received by any Pledgor
contrary to the provisions of this Section 5 shall be held in trust for the
benefit of the Collateral Agent, shall be segregated from other property or
funds of such Pledgor and shall be forthwith delivered to the Collateral Agent
upon demand in the same form as so received (with any necessary endorsement).
Any and all money and other property paid over to or received by the Collateral
Agent pursuant to the provisions of this paragraph (b) shall be retained by the
Collateral Agent in an account to be established by the Collateral Agent upon
receipt of such money or other property and shall be applied in accordance with
the provisions of Section 7. After all Events of Default have been cured or
waived, the Collateral Agent shall, within five Business Days after all such
Events of Default have been cured or waived, repay to each Pledgor all cash
dividends, interest or principal (without interest), that such Pledgor would
otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii)
above and which remain in such account.
(c) Upon the occurrence and during the continuance of an Event of Default
and subsequent notice by the Collateral Agent to the relevant Pledgor or
Pledgors of its intent to exercise such rights, all rights of any Pledgor to
exercise the voting and consensual rights and powers it is entitled to exercise
pursuant to paragraph (a)(i) of this Section 5, and the obligations of the
Collateral Agent under paragraph (a)(ii) of this Section 5, shall cease, and all
such rights shall thereupon become vested in the Collateral Agent, which shall
have the sole and exclusive right and authority to exercise such voting and
consensual rights and powers, provided that, unless otherwise directed by the
Required Lenders, the Collateral Agent shall have the right from time to time
following and during the continuance of an Event of Default to permit the
Pledgors to exercise such rights. After all Events of Default have been cured
or waived, such Pledgor will have the right to exercise the voting and
consensual rights and powers that it would otherwise be entitled to exercise
pursuant to the terms of paragraph (a)(i) above.
SECTION 6. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, subject to applicable regulatory and legal
requirements, the Collateral Agent may sell the Collateral, or any part thereof,
at public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery as the Collateral Agent
shall deem
<PAGE>
6
appropriate. The Collateral Agent shall be authorized at any such sale (if it
deems it advisable to do so) to restrict the prospective bidders or purchasers
to Persons who will represent and agree that they are purchasing the Collateral
for their own account for investment and not with a view to the distribution or
sale thereof, and upon consummation of any such sale the Collateral Agent shall
have the right to assign, transfer and deliver to the purchaser or purchasers
thereof the Collateral so sold. Each such purchaser at any such sale shall hold
the property sold absolutely free from any claim or right on the part of any
Pledgor, and, to the extent permitted by applicable law, the Pledgors hereby
waive all rights of redemption, stay, valuation and appraisal any Pledgor now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted.
The Collateral Agent shall give a Pledgor at least 10 days' prior written
notice (which each Pledgor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions) of the Collateral Agent's
intention to make any sale of such Pledgor's Collateral. Such notice, in the
case of a public sale, shall state the time and place for such sale and, in the
case of a sale at a broker's board or on a securities exchange, shall state the
board or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Collateral Agent may
fix and state in the notice of such sale. At any such sale, the Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the sale price is paid in
full by the purchaser or purchasers thereof, but the Collateral Agent shall not
incur any liability in case any such purchaser or purchasers shall fail to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. At any public (or, to the extent
permitted by applicable law, private) sale made pursuant to this Section 6, any
Secured Party may bid for or purchase, free from any right of redemption, stay
or appraisal on the part of any Pledgor (all said rights being also hereby
waived and released), the Collateral or any part thereof offered for sale and
may make payment on account thereof by using any claim then due and payable to
it from such Pledgor as a credit against the purchase price, and it may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to such Pledgor therefor. For purposes hereof,
(a) a written agreement to purchase the Collateral entered into with a Person
(other than a Lender or an affiliate thereof) or any portion thereof shall be
treated as a sale thereof, (b) the Collateral Agent shall be free to carry out
such sale pursuant to such agreement and (c) such Pledgor shall not be entitled
to the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Collateral Agent shall have entered into
such an agreement all Events of Default shall have been remedied and the
Obligations paid in full. As an alternative to exercising the power of sale
herein conferred upon it, the Collateral Agent may proceed by a suit or suits at
law or in equity to foreclose upon the Collateral and to sell the Collateral or
any portion thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver. Any sale pursuant to the provisions of this Section 6 shall be deemed
to conform to the commercially reasonable standards as provided in Section 9-
504(3) of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions.
Certain rights and remedies of the Collateral Agent hereunder, may with
respect to Collateral issued by a Person not organized under the laws of a
jurisdiction of the United States of America, be limited. The Collateral Agent,
with respect to such Collateral, acknowledges such limitations and agrees to
comply with applicable laws with respect thereto.
<PAGE>
7
SECTION 7. Application of Proceeds of Sale. The proceeds of any sale of
Collateral pursuant to Section 6, as well as any Collateral consisting of cash,
may, in the sole discretion of the Collateral Agent, be applied by the
Collateral Agent against the respective Obligations of the relevant Pledgor then
due and owing in the following order of priority:
FIRST, to the payment of all reasonable costs and expenses incurred by
the Collateral Agent in connection with such sale or otherwise in
connection with this Agreement, any other Loan Document or any of the
Obligations of the relevant Pledgor, including all court costs and the
reasonable fees and expenses of the Collateral Agent's agents and legal
counsel, the repayment of all advances made by the Collateral Agent
hereunder or under any other Loan Document on behalf of such Pledgor and
any other reasonable costs or expenses incurred in connection with the
exercise of any right or remedy hereunder or under any other Loan Document;
SECOND, to the payment in full of the Obligations of the relevant
Pledgor (the amounts so applied to be distributed among the Secured Parties
pro rata in accordance with the amounts of such Obligations owed to them on
the date of any such distribution); and
THIRD, to the relevant Pledgor, its successors or assigns or to
whomsoever may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the purchase money by the Collateral Agent or of the officer
making the sale shall be a sufficient discharge to the purchaser or purchasers
of the Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over
to the Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
SECTION 8. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor
hereby appoints the Collateral Agent the attorney-in-fact of such Pledgor for
the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument that the Collateral Agent may reasonably
deem necessary or advisable to accomplish the purposes hereof, which appointment
is irrevocable and coupled with an interest; provided that the Collateral Agent
agrees not exercise such power except upon the occurrence and during the
continuance of an Event of Default. Without limiting the generality of the
foregoing, the Collateral Agent shall have the right, upon the occurrence and
during the continuance of an Event of Default, with full power of substitution
either in the Collateral Agent's name or in the name of such Pledgor, to ask
for, demand, sue for, collect, receive and give acquittance for any and all
moneys due or to become due under and by virtue of any applicable Collateral, to
endorse checks, drafts, orders and other instruments for the payment of money
payable to the Pledgor representing any interest or dividend or other
distribution payable in respect of the Collateral or any part thereof or on
account thereof and to give full discharge for the same, to settle, compromise,
prosecute or defend any action, claim or proceeding with respect thereto, and to
sell, assign, endorse, pledge, transfer and to make any agreement respecting, or
otherwise deal with, the same; provided, however, that nothing herein contained
shall be construed as requiring or obligating the Collateral Agent to make any
commitment or to make any inquiry as to the nature or sufficiency of any payment
received by the Collateral Agent, or to present or file any claim or notice, or,
except as otherwise provided herein, to take any action with respect to the
Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby. The Collateral Agent and the other
Secured Parties shall be accountable only for amounts actually received as a
result of the exercise of the powers granted to them herein, and neither they
nor their officers, directors, employees or agents shall be responsible to any
Pledgor for any act or failure to act hereunder, except for their own gross
negligence or wilful misconduct.
<PAGE>
8
SECTION 9. Waivers; Amendment. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and
of the other Secured Parties under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provisions of this Agreement or consent to any departure by any
Pledgor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on any Pledgor in any case shall entitle such Pledgor to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Collateral Agent and the Pledgor or Pledgors with respect to which such waiver,
amendment or modification is to apply, subject to any consent required in
accordance with Section 9.01 of the Credit Agreement.
SECTION 10. Securities Act, etc. In view of the position of the Pledgors
in relation to the Pledged Securities, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time in
effect being called the "Federal Securities Laws") with respect to any
disposition of the Pledged Securities permitted hereunder. Each Pledgor
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Collateral Agent if the Collateral Agent were
to attempt to dispose of all or any part of the Pledged Securities, and might
also limit the extent to which or the manner in which any subsequent transferee
of any Pledged Securities could dispose of the same. Similarly, there may be
other legal restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Securities under applicable
Blue Sky or other state securities laws or similar laws analogous in purpose or
effect. Each Pledgor recognizes that in light of such restrictions and
limitations the Collateral Agent may, with respect to any sale of the Pledged
Securities, limit the purchasers to those who will agree, among other things, to
acquire such Pledged Securities for their own account, for investment, and not
with a view to the distribution or resale thereof. Each Pledgor acknowledges
and agrees that in light of such restrictions and limitations, the Collateral
Agent, in its sole and absolute reasonable discretion, (a) may proceed to make
such a sale whether or not a registration statement for the purpose of
registering such Pledged Securities or part thereof shall have been filed under
the Federal Securities Laws and (b) may approach and negotiate with a single
potential purchaser to effect such sale. Each Pledgor acknowledges and agrees
that any such sale might result in prices and other terms less favorable to the
seller than if such sale were a public sale without such restrictions. In the
event of any such sale, the Collateral Agent shall incur no responsibility or
liability for selling all or any part of the Pledged Securities at a price that
the Collateral Agent, in its reasonable discretion, may in good faith deem
reasonable under the circumstances, notwithstanding the possibility that a
substantially higher price might have been realized if the sale were deferred
until after registration as aforesaid or if more than a single purchaser were
approached. The provisions of this Section 10 will apply notwithstanding the
existence of a public or private market upon which the quotations or sales
prices may exceed substantially the price at which the Collateral Agent sells.
SECTION 11. Registration, etc. Each Pledgor agrees that, upon the
occurrence and during the continuance of an Event of Default hereunder, if for
any reason the Collateral Agent shall determine to sell any of the Pledged Stock
of the respective Pledgor at a public sale, it will, at any time and from time
to time, upon the written request of the Collateral Agent, use its reasonable
best efforts to take or to cause the issuer of such Pledged Stock to (a) execute
and deliver, and use its best efforts to cause the directors and officers of
such issuer to execute and deliver, all such instruments and documents, and do
or cause to be done all such other acts as may be, in the reasonable opinion of
the Collateral Agent, necessary or advisable to register such Pledged Stock, or
that portion thereof to be sold, under the provisions of the Federal Securities
Laws, (b) use its best efforts to cause the
<PAGE>
9
registration statement relating thereto to become effective and to remain
effective for a period of not more than one year from the date of the first
public offering of such Pledged Stock, or that portion thereof to be sold and
(c) make all amendments thereto and/or to the related prospectus which, in the
reasonable opinion of the Collateral Agent, are necessary or advisable, all in
conformity with the requirements of the Federal Securities Laws and the rules
and regulations of the Securities and Exchange Commission applicable thereto.
The respective Pledgor further agrees, upon such written request referred to
above, to use its reasonable best efforts to qualify, file or register, or cause
the issuer of such Pledged Stock to qualify, file or register, any of the
Pledged Stock under the Blue Sky or other securities laws of such states of the
United States as may be reasonably requested by the Collateral Agent and keep
effective, or cause to be kept effective, all such qualifications, filings or
registrations. Each Pledgor will bear all costs and expenses of carrying out its
obligations under this Section 11. Each Pledgor acknowledges that there is no
adequate remedy at law for failure by it to comply with the provisions of this
Section 11 and that such failure would not be adequately compensable in damages,
and therefore agrees that its agreements contained in this Section 11 may be
specifically enforced.
SECTION 12. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the grant of a security interest in the Collateral and all
obligations of each Pledgor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Credit Agreement, any other Loan
Document or any other agreement or instrument relating to any of the foregoing,
(c) any exchange, release or nonperfection of any other collateral, or any
release or amendment or waiver of or consent to or departure from any guaranty,
for all or any of the Obligations or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, any Pledgor in
respect of its Obligations or in respect of this Agreement (other than the
performance or payment in full of all the Obligations, as the case may be).
SECTION 13. Termination or Release. (a) This Agreement and the security
interests granted hereby shall terminate when all the Obligations have been paid
in full and the Lenders have no further commitment to lend under the Credit
Agreement, the L/C Exposure has been reduced to zero and the Issuing Bank has no
further obligation to issue Letters of Credit under the Credit Agreement.
(b) Upon any sale or other transfer by any Pledgor of any Collateral that
is permitted under the Credit Agreement to any Person (unless sold or
transferred to a Person that is required to pledge such Collateral to the
Collateral Agent pursuant to Section 5.11 of the Credit Agreement), or, upon the
effectiveness of any written consent to the release of the security interest
granted hereby in any Collateral pursuant to Section 9.01(d) of the Credit
Agreement, the security interest in such Collateral shall be automatically
released.
(c) If all of the capital stock of a Pledgor is sold, transferred or
otherwise disposed of to a Person that is not an Affiliate of the Borrowers
pursuant to a transaction permitted by Section 6.05 of the Credit Agreement,
such Pledgor shall be released from its obligations under this Agreement without
further action and the security interest in the Collateral of such Pledgor shall
be automatically released.
(d) In connection with any termination or release pursuant to paragraph
(a), (b) or (c), the Collateral Agent shall execute and deliver to any Pledgor,
at such Pledgor's expense, all documents that such Pledgor shall reasonably
request to evidence such termination or release and shall deliver to such
Pledgor all related Collateral of such Pledgor held by the Collateral Agent.
Any execution and delivery of documents pursuant to this Section 13 shall be
without recourse to or warranty by the Collateral Agent.
<PAGE>
10
SECTION 14. Notices. All communications and notices hereunder shall be in
writing and given as provided in Section 9.02 of the Credit Agreement. All
communications and notices hereunder to any Subsidiary Pledgor shall be given to
it in care of the applicable Borrower.
SECTION 15. Further Assurances. Each Pledgor agrees to do such further
reasonable acts and things, and to execute and deliver such additional
conveyances, assignments, agreements and instruments, as the Collateral Agent
may at any time reasonably request in connection with the administration and
enforcement of this Agreement or with respect to the Collateral or any part
thereof or in order better to assure and confirm unto the Collateral Agent its
rights and remedies hereunder.
SECTION 16. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of any Pledgor that are contained in
this Agreement shall bind and inure to the benefit of its successors and
assigns. This Agreement shall become effective as to any Pledgor when a
counterpart hereof executed on behalf of such Pledgor shall have been delivered
to the Collateral Agent and a counterpart hereof shall have been executed on
behalf of the Collateral Agent, and thereafter shall be binding upon such
Pledgor and the Collateral Agent and their respective successors and assigns,
and shall inure to the benefit of such Pledgor, the Collateral Agent and the
other Secured Parties, and their respective successors and assigns, except that
no Pledgor shall have the right to assign its rights hereunder or any interest
herein or in the Collateral (and any such attempted assignment shall be void),
except with the consent of the Collateral Agent or as expressly contemplated by
this Agreement or the other Loan Documents. This Agreement shall be construed
as a separate agreement with respect to each Pledgor and may be amended,
modified, supplemented, waived or released with respect to any Pledgor without
the approval of any other Pledgor and without affecting the obligations of any
other Pledgor hereunder
SECTION 17. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by each Pledgor herein shall
survive the making by the Lenders of the Loans and the issuance of the Letters
of Credit by the Issuing Bank.
(b) Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 18. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH
PRINCIPLES OR RULES WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
SECTION 19. Counterparts. This Agreement may be executed by one or more
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument, and shall become effective as
provided in Section 16. Delivery of an executed counterpart of a signature page
to this Agreement by facsimile transmission shall be as effective as delivery of
a manually executed counterpart of this Agreement.
SECTION 20. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement. Section headings used herein are for convenience of reference only,
are not part of this Agreement and are not to affect the construction of, or to
be taken into consideration in interpreting this Agreement.
<PAGE>
11
SECTION 21. Jurisdiction; Consent to Service of Process. Each party
hereto hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or proceeding
relating to this Agreement, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts of any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient forum and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to the applicable party at
its address set forth in Section 14 or at such other address of which the
parties hereto shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
Section 21 any punitive damages.
SECTION 22. Waiver Of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 23. Additional Pledgors. Pursuant to Section 5.11 of the Credit
Agreement, the stock (or a portion thereof) of certain Subsidiaries that were
not Subsidiaries on the Closing Date must be pledged to the Collateral Agent for
the benefit of the Secured Parties. Upon execution and delivery by the
Collateral Agent and such holder of stock of an instrument in the form of Annex
1, such holder shall become a Pledgor and, if applicable, a Subsidiary Pledgor
hereunder with the same force and effect as if originally named as a Pledgor
and, if applicable, a Subsidiary Pledgor herein. The execution and delivery of
such instrument shall not require the consent of any Pledgor hereunder. The
rights and obligations of each Pledgor hereunder shall remain in full force and
effect notwithstanding the addition of any new Pledgor and, if applicable, a
Subsidiary Pledgor as a party to this Agreement.
SECTION 24. Execution of Financing Statements. Pursuant to Section 9-402 of
the Uniform Commercial Code as in effect in the State of New York or its
equivalent in other jurisdictions, each Pledgor authorizes the Collateral Agent
to file financing statements with respect to the Collateral owned by it without
the signature of such Pledgor in such form and in such filing offices as the
Collateral Agent reasonably determines appropriate to perfect the security
interests of the Collateral Agent under this Agreement. A carbon, photographic
or other reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction. Promptly upon any such filing, the
Collateral Agent shall deliver a copy of such filing to the respective Pledgor.
SECTION 25. Integration. This Agreement represent the agreement among the
parties with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by any of the parties hereto
relative to the subject matter hereof not expressly set forth or referred to
herein.
<PAGE>
12
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
CDRJ INVESTMENTS (LUX) S.A.,
by________________________________________
Name:
Title:
CDRJ NORTH ATLANTIC (LUX) SARL,
by________________________________________
Name:
Title:
CDRJ LATIN AMERICA HOLDING COMPANY B.V.,
by________________________________________
Name:
Title:
LATIN COSMETICS HOLDINGS B.V.,
by________________________________________
Name:
Title:
REGIONAL COSMETICS HOLDING B.V.,
by________________________________________
Name:
Title:
SOUTHERN COSMETICS HOLDINGS B.V.,
by________________________________________
Name:
Title:
CDRJ MEXICO HOLDING COMPANY B.V.,
by________________________________________
Name:
Title:
CDRJ ACQUISITION CORPORATION (to be renamed
JAFRA COSMETICS INTERNATIONAL, INC.),
by________________________________________
Name:
Title:
<PAGE>
13
JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V.,
by__________________________________________
Name:
Title:
THE SUBSIDIARY PLEDGORS LISTED ON SCHEDULE I,
by__________________________________________
Authorized Officer:
CREDIT SUISSE FIRST BOSTON, as Collateral Agent,
by__________________________________________
Name:
Title:
by__________________________________________
Name:
Title:
<PAGE>
Schedule I to the
Pledge Agreement
SUBSIDIARY PLEDGORS
Name Address
- ---- -------
Reday, S.A. de C.V. [Debevoise to complete]
Distribuidora Venus, S.A. de C.V.
Dirsamex, S.A. de C.V.
Qualifax, S.A. de C.V.
Jafra Cosmetics, S. de R.L. de C.V.
Consultoria Jafra, S.A. de C.V.
<PAGE>
Schedule II to the
Pledge Agreement
CAPITAL STOCK
Number of Registered Number and Percentage of
Issuer Certificate Owner Class of Shares Shares
- ------ ----------- ---------- --------------- -------------
[Debevoise to complete]
DEBT SECURITIES
Principal
Issuer Amount Payee Date of Note Maturity Date
- ------ --------- ----- ------------ -------------
[Debevoise to complete]
<PAGE>
Annex 1 to the
Pledge Agreement
SUPPLEMENT NO. dated as of , to the PLEDGE AGREEMENT
dated as of April 30, 1998, among CDRJ INVESTMENTS (LUX) S.A., a
Luxembourg socie'te' anonyme ("Parent"), CDRJ NORTH ATLANTIC
(LUX) SARL, a Luxembourg socie'te' a' responsibilite' limite'e
("Lux SARL"), CDRJ LATIN AMERICA HOLDING COMPANY B.V., LATIN
COSMETICS HOLDINGS B.V., REGIONAL COSMETICS HOLDING B.V.,
SOUTHERN COSMETICS HOLDINGS B.V. and CDRJ MEXICO HOLDING COMPANY
B.V., each a legal entity in the form of a "besloten vennootschap
met beperkte aansprakelijkheid" organized under the laws of The
Netherlands (collectively, the "Dutch HoldCo's"), JAFRA COSMETICS
INTERNATIONAL, INC., a Delaware corporation ("JCI"), JAFRA
COSMETICS INTERNATIONAL, S.A. DE C.V., a sociedad ano'nima de
capital variable organized under the laws of the United Mexican
States ("JCISA" and, together with JCI, the "Borrowers"), each
subsidiary of the Borrowers listed on Schedule I hereto (each
such subsidiary individually a "Subsidiary Pledgor" and
collectively, the "Subsidiary Pledgors"; the Borrowers, Parent,
Lux SARL, the Dutch HoldCo's and the Subsidiary Pledgors are
referred to collectively herein as the "Pledgors") and CREDIT
SUISSE FIRST BOSTON, a bank organized under the laws of
Switzerland, acting through its New York branch, as collateral
agent (in such capacity, the "Collateral Agent") for the Secured
Parties (as defined in the Credit Agreement referred to below).
Capitalized terms used herein without definition shall have the
respective meanings ascribed thereto in the Credit Agreement
referred to below.
A. Reference is made to (a) the Credit Agreement dated as of April 30,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Parent, the Borrowers, the lenders from time to time
party thereto (the "Lenders"), the Issuing Bank and Credit Suisse First Boston,
as administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), as swingline lender and as Collateral Agent, (b) the Parent Guarantee
Agreement, (c) the JCI Guarantee Agreement, (d) the JCISA Guarantee Agreement
(together with the JCI Guarantee Agreement, the "Cross Guarantee Agreements"),
(e) the JCI Subsidiary Guarantee Agreement and (f) the JCISA Subsidiary
Guarantee Agreement (together with the JCI Subsidiary Guarantee Agreement, the
"Subsidiary Guarantee Agreements").
B. The Pledgors have entered into the Pledge Agreement in order to induce
the Lenders to make Loans and the Issuing Bank to issue Letters of Credit.
Pursuant to Section 5.11 of the Credit Agreement, the stock (or a portion
thereof) of certain Subsidiaries that were not Subsidiaries on the Closing Date
must be pledged to the Collateral Agent for the benefit of the Secured Parties,
and the Subsidiary which owns such stock (if not already a party) is required to
enter into the Pledge Agreement as a Pledgor, and if applicable, a Subsidiary
Pledgor. Section 23 of the Pledge Agreement provides that such Subsidiaries may
become Pledgors, and if applicable, Subsidiary Pledgors under the Pledge
Agreement by execution and delivery of an instrument in the form of this
Supplement. The undersigned Subsidiary (the "New Pledgor") is executing this
Supplement in accordance with the requirements of the Credit Agreement to become
a Subsidiary Pledgor under the Pledge Agreement in order to induce the Lenders
to make additional Loans and the Issuing Bank to issue additional Letters of
Credit and as consideration for Loans previously made and Letters of Credit
previously issued.
Accordingly, the Collateral Agent and the New Pledgor agree as follows:
SECTION 1. In accordance with Section 23 of the Pledge Agreement, the New
Pledgor by its signature below becomes a Pledgor under the Pledge Agreement with
the same force and effect as if originally named therein as a Pledgor and the
New Pledgor hereby agrees (a) to all the terms and provisions of the Pledge
Agreement applicable to it as a Pledgor thereunder and (b) represents and
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2
warrants that the representations and warranties made by it as a Pledgor
thereunder are true and correct on and as of the date hereof. In furtherance of
the foregoing, the New Pledgor, as security for the payment and performance in
full of its respective Obligations (as defined in the Pledge Agreement), does
hereby create and grant to the Collateral Agent, its successors and assigns, for
the benefit of the Secured Parties, their successors and assigns, a security
interest in and lien on all of the New Pledgor's right, title and interest in
and to the Collateral (as defined in the Pledge Agreement) of the New Pledgor.
Each reference to a "Subsidiary Pledgor" or a "Pledgor", as applicable, in the
Pledge Agreement shall be deemed to include the New Pledgor. The Pledge
Agreement is hereby incorporated herein by reference.
[If New Pledgor is not a Subsidiary Pledgor, add relevant information with
respect to its "Obligations" and incorporate such into the definition of
"Obligations" in the Pledge Agreement.]
SECTION 2. The New Pledgor represents and warrants to the Collateral Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as may
be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, or similar laws relating to or affecting creditors'
rights generally, general equitable principles (regardless of whether
enforcement is sought in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.
SECTION 3. This Supplement may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Pledgor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Pledgor hereby represents and warrants that, on the
date hereof, set forth on Schedule I attached hereto is a true and correct
schedule of all its Pledged Securities.
SECTION 5. Except as expressly supplemented hereby, the Pledge Agreement
shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES
WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforce able, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Pledge Agreement shall not in any way be affected or impaired.
The parties hereto shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
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3
SECTION 8. All communications and notices hereunder shall be in writing
(including by facsimile transmission) and given as provided in Section 14 of the
Pledge Agreement. All communications and notices hereunder to the New Pledgor
shall be given to it in care of JCI.
IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly
executed this Supplement to the Pledge Agreement as of the day and year first
above written.
[Name of New Pledgor],
by ________________________________________
Name:
Title:
Address:
CREDIT SUISSE FIRST BOSTON, as Collateral Agent,
by ________________________________________
Name:
Title:
by ________________________________________
Name:
Title:
<PAGE>
Schedule I to
Supplement No.
to the Pledge Agreement
Pledged Securities of the New Pledgor
-------------------------------------
CAPITAL STOCK
Number of Registered Number and Percentage of
Issuer Certificate Owner Class of Shares Shares
- ------ ----------- ----------- --------------- -------------
DEBT SECURITIES
Principal
Issuer Amount Payee Date of Note Maturity Date
- ------ --------- ----- ------------ -------------
<PAGE>
EXHIBIT L
to CREDIT AGREEMENT
SECURITY AGREEMENT dated as of April 30, 1998, among CDRJ
ACQUISITION CORPORATION (to be renamed JAFRA COSMETICS
INTERNATIONAL, INC.), a Delaware corporation ("JCI" or the
"Grantor"), each subsidiary of JCI listed on Schedule I hereto
(each such subsidiary individually a "Subsidiary Grantor" and
collectively, the "Subsidiary Grantors"; the Subsidiary Grantors
and JCI are referred to collectively herein as the "Grantors")
and CREDIT SUISSE FIRST BOSTON, a bank organized under the laws
of Switzerland, acting through its New York branch, as collateral
agent (in such capacity, the "Collateral Agent") for the Secured
Parties (as defined herein).
Reference is made to (a) the Credit Agreement dated as of April 30, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg socie'te' anonyme
("Parent"), JCI, Jafra Cosmetics International, S.A. de C.V., a sociedad
ano'nima de capital variable organized under the laws of Mexico ("JCISA" and,
together with JCI, the "Borrowers"), the lenders from time to time party thereto
(the "Lenders"), the Issuing Bank (as defined therein) and Credit Suisse First
Boston, as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"), as swingline lender and as Collateral Agent and (b) the
JCI Guarantee Agreement.
The Lenders have agreed to make Loans to the Borrowers and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrowers pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. JCI has agreed to guarantee, among other things, all the obligations
of JCISA under the Credit Agreement. The JCI Subsidiary Grantors will agree to
guarantee, among other things, all the obligations of JCI under the Credit
Agreement and the JCI Guarantee Agreement. The obligations of the Lenders to
make Loans and of the Issuing Bank to issue Letters of Credit are conditioned
upon, among other things, the execution and delivery by the Grantors of an
agreement in the form hereof to secure their respective obligations under the
Credit Agreement, the JCI Subsidiary Guarantee Agreement and the other Loan
Documents, including (a) in the case of JCI, (i) the due and punctual payment by
JCI of (A) the principal of and premium, if any, and interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Loans of JCI, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (B) each payment required to be made by JCI under the Credit
Agreement in respect of any Letter of Credit issued for its benefit, when and as
due, including payments in respect of reimbursement of disbursements, interest
thereon and obligations to provide cash collateral and (C) all other monetary
obligations, including fees, costs, expenses and indemnities, whether direct,
contingent, fixed or otherwise (including monetary obligations incurred during
the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), of
JCI to the Secured Parties under the Credit Agreement, the JCI Guarantee
Agreement and the other Loan Documents, (ii) the due and punctual performance of
all covenants, agreements, obligations and liabilities of JCI under or pursuant
to the Credit Agreement, the JCI Guarantee Agreement and the other Loan
Documents, (iii) unless otherwise agreed to in writing by the applicable
counterparty thereto, the due and punctual payment and performance of all
obligations of JCI under each Hedging Agreement entered into with any
counterparty (whether or not a Lender or an Affiliate thereof) and (iv) the due
and punctual payment and performance of all guarantee obligations of JCI
referred to in Section 6.01(d)(ii) of the Credit Agreement as to which any
Lender or any Affiliate thereof is originally a beneficiary (all the monetary
and other obligations described in the preceding clauses (i) through (iv) being
collectively called the "JCI Obligations") and (b) in the case of any Subsidiary
Grantor, its respective obligations under the JCI Subsidiary Guarantee Agreement
and the other Loan Documents to which such Subsidiary Grantor is a party (the
"Subsidiary Grantor Obligations" and, together with the JCI Obligations, the
"Obligations").
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2
Accordingly, each Grantor and the Collateral Agent, on behalf of itself and
each Secured Party (and each of their respective successors or assigns), hereby
agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. Unless the context
otherwise requires, all capitalized terms used but not defined herein shall have
the meanings set forth in the Credit Agreement and all references to the Uniform
Commercial Code shall mean the Uniform Commercial Code in effect in the State of
New York as of the date hereof.
SECTION 1.02. Definition of Certain Terms Used Herein. As used herein, the
following terms shall have the following meanings:
"Account Debtor" shall mean any Person who is or who may become obligated
to any Grantor under, with respect to or on account of an Account.
"Accounts" shall have the meaning set forth in the Uniform Commercial Code.
"Chattel Paper" shall have the meaning set forth in the Uniform Commercial
Code.
"Collateral" shall mean, with respect to each Grantor, all (a) Accounts,
(b) Contracts, (c) Documents, (d) Equipment, (e) General Intangibles, (f)
Inventory, (g) cash and cash accounts, (h) Intellectual Property, (i) Investment
Property, (j) Instruments, (k) Chattel Paper and (l) Proceeds of the foregoing,
excluding the Pledged Securities (as defined in the Pledge Agreement), and all
properties and assets excluded from the definition of Pledged Securities in the
Pledge Agreement (including, without limitation, any Capital Stock of any
Foreign Subsidiary in excess of 65% of any series of such stock and intercompany
indebtedness).
"Contracts" shall mean, with respect to any Grantor, all contracts,
agreements, instruments and indentures in any form, and portions thereof, to
which such Grantor is a party or under which such Grantor has any right, title
or interest or to which such Grantor or any property of such Grantor is subject,
as the same may from time to time be amended, supplemented or otherwise
modified, including, without limitation, (a) all rights of such Grantor to
receive moneys due and to become due to it thereunder or in connection
therewith, (b) all rights of such Grantor to damages arising thereunder and (c)
all rights of such Grantor to perform and to exercise all remedies thereunder.
"Copyright Licenses" shall mean, with respect to any Grantor, all United
States written license agreements of such Grantor with any Person who is not an
Affiliate or a Subsidiary providing for the grant by such Grantor of any right
to use any Copyright of such Grantor, subject, in each case, to the terms of
such license agreements, and the right to prepare for sale, sell and advertise
for sale, all Inventory now or hereafter covered by such licenses.
"Copyrights" shall mean, with respect to any Grantor, all of such Grantor's
right, title and interest in and to all United States copyrights, whether or not
the underlying works of authorship have been published or registered, United
States copyright registrations and copyright applications and (a) all renewals
thereof, (b) all income, royalties, damages and payments now and hereafter due
and/or payable with respect thereto, including payments under all licenses
entered into in connection therewith, and damages and payments for past, present
or future infringements thereof and (c) the right to sue or otherwise recover
for past, present and future infringements thereof.
"Credit Agreement" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
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3
"Documents" shall have the meaning set forth in the Uniform Commercial
Code.
"Equipment" shall have the meaning set forth in the Uniform Commercial Code
(other than all cars, trucks, trailers, construction and earth moving equipment
and other vehicles covered by a certificate of title law of any state and all
liens and other appurtenances to any of the foregoing).
"General Intangibles" shall have the meaning specified in the Uniform
Commercial Code, excluding the Pledged Securities (as defined in the Pledge
Agreement) all properties and assets excluded from the definition of Pledged
Securities in the Pledge Agreement.
"Instruments" shall have the meaning specified in the Uniform Commercial
Code, excluding the Pledged Securities (as defined in the Pledge Agreement) and
all properties and assets excluded from the definition of Pledged Securities in
the Pledge Agreement.
"Intellectual Property" shall mean, with respect to any Grantor, the
collective reference to such Grantor's Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trade Secrets, Trademarks and Trademark Licenses.
"Inventory" shall mean, with respect to any Grantor, all inventory (as
defined in the Uniform Commercial Code) of such Grantor.
"Investment Property" shall have the meaning specified in the Uniform
Commercial Code, excluding the Pledged Securities (as defined in the Pledge
Agreement) and all the properties and assets excluded from the definition of
Pledged Securities in the Pledge Agreement.
"IP Collateral" shall mean, with respect to any Grantor, the collective
reference to such Grantor's Patents, Patent Licenses, Trademarks, Trademark
Licenses, General Intangibles connected with the use of or symbolized by the
Trademarks and Patents and, to the extent not otherwise included, all Proceeds
and products of any and all of the foregoing and all collateral security and
guarantees given by any Person with respect to any of the foregoing.
"License" shall mean any Patent License, Trademark License or Copyright
License to which any Grantor is a party, including those listed on Schedule II.
"Obligations" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Patent Licenses" shall mean with respect to any Grantor, all United States
written license agreements of such Grantor with any Person who is not an
Affiliate or a Subsidiary in connection with any of the Patents of such Grantor
or such other Person's patents, whether such Grantor is a licensor or a licensee
under any such agreement, subject, in each case, to the terms of such license
agreements, and the right to prepare for sale, sell and advertise for sale, all
Inventory now or hereafter covered by such licenses.
"Patents" shall mean with respect to any Grantor, all of such Grantor's
right, title and interest in and to all United States patents, patent
applications and patentable inventions, including all patents and patent
applications identified in Schedule III and including (a) all inventions and
improvements described and claimed therein, (b) the right to sue or otherwise
recover for any and all past, present and future infringements thereof, (c) all
income, royalties, damages and other payments now and hereafter due and/or
payable with respect thereto (including payments under all licenses entered into
in connection therewith, and damages and payments for past, present or future
infringements thereof) and (d) all other rights corresponding thereto in the
United States and all reissues, divisions, continuations, continuations-in-part,
substitutes, renewals, and extensions thereof, all improvements thereon and all
other rights of any kind whatsoever of such Grantor accruing thereunder or
pertaining thereto.
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4
"Perfection Certificate" shall mean a certificate substantially in the form
of Annex 2 hereto, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by a Financial Officer and the chief
legal officer of JCI.
"Proceeds" shall have the meaning set forth in the Uniform Commercial Code.
"Secured Parties" shall mean (a) the Lenders, (b) the Administrative Agent,
(c) the Collateral Agent, (d) the Issuing Bank, (e) unless otherwise agreed to
in writing by the applicable counterparty thereto, each counterparty to a
Hedging Agreement entered into with JCI (whether or not a Lender or an Affiliate
of a Lender) at the time the Hedging Agreement was entered into, (f) the
beneficiaries of each indemnification obligation undertaken by any Grantor under
any Loan Document and (g) the successors and assigns of each of the foregoing.
"Security Interest" shall have the meaning assigned to such term in Section
2.01.
"Trade Secrets" shall mean, with respect to any Grantor, all of such
Grantor's right, title and interest in and to all United States trade secrets,
including know-how, processes, formulae, compositions, designs and confidential
business and technical information, and all rights of any kind whatsoever
accruing thereunder or pertaining thereto, including (a) all income, royalties,
damages and payments now and hereafter due and/or payable with respect thereto,
including payments under all licenses, non-disclosure agreements and memoranda
of understanding entered into in connection therewith and damages and payments
for past or future misappropriations thereof and (b) the right to sue or
otherwise recover for past, present or future misappropriations thereof.
"Trademark Licenses" shall mean, with respect to any Grantor, all United
States written license agreements of such Grantor with any Person who is not an
Affiliate or a Subsidiary in connection with any of the Trademarks of such
Grantor or such other Person's names or trademarks, whether such Grantor is a
licensor or a licensee under any such agreement, subject, in each case, to the
terms of such license agreements, and the right to prepare for sale, sell and
advertise for sale, all Inventory now or hereafter covered by such licenses.
"Trademarks" shall mean with respect to any Grantor, all of such Grantor's
right, title and interest in and to all United States trademarks, service marks,
trade names, trade dress or other indicia of trade origin or business
identifiers, trademark and service mark registrations, and applications for
trademark or service mark registrations (except for "intent to use" applications
for trademark or service mark registrations filed pursuant to Section 1(b) of
the Lanham Act, 15 U.S.C. (S) 1051, unless and until an Amendment to Allege Use
or a Statement of Use under Sections 1(c) and 1(d) of said Act has been filed),
and any renewals thereof, including each registration and application identified
in Schedule IV, and including (a) the right to sue or otherwise recover for any
and all past, present and future infringements or dilutions thereof, (b) all
income, royalties, damages and other payments now and hereafter due and/or
payable with respect thereto (including payments under all licenses entered into
in connection therewith, and damages and payments for past, present or future
infringements thereof) and (c) all other rights corresponding thereto in the
United States and all other rights of any kind whatsoever of such Grantor
accruing thereunder or pertaining thereto in the United States, together in each
case with the goodwill of the business connected with the use of, and symbolized
by, each such trademark, service mark, trade name, trade dress or other indicia
of trade origin or business identifiers.
SECTION 1.03. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
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ARTICLE II
Security Interest
SECTION 2.01. Security Interest. Subject to Section 2.03, each Grantor,
as security for the payment or performance, as the case may be, in full of the
Obligations, hereby grants to the Collateral Agent, its successors and assigns,
for the ratable benefit of the Secured Parties, a security interest in, all of
such Grantor's right, title and interest in, to and under its respective
Collateral (the "Security Interest"). Without limiting the foregoing, the
Collateral Agent is hereby authorized to file one or more financing statements,
continuation statements, filings with the United States Patent and Trademark
Office or United States Copyright Office (or any successor office) or other
documents for the purpose of perfecting, confirming, continuing, enforcing or
protecting the Security Interest granted by each Grantor, without the signature
of such Grantor, and naming such Grantor as debtor and the Collateral Agent as
secured party (in each case, to the extent permitted by applicable law). The
Collateral Agent shall provide copies of each such filing to the Grantors
promptly upon the filing or recordation of any such filing.
SECTION 2.02. No Assumption of Liability. The Security Interest is
granted as security only and shall not subject the Collateral Agent or any other
Secured Party to, or in any way alter or modify, any obligation or liability of
any Grantor with respect to or arising out of the Collateral.
SECTION 2.03. Certain Exceptions. No Security Interest is or will be
granted pursuant hereto in (and the term "Collateral" shall not include) - the
right, title and interest of any Grantor under or in:
(a) any Instruments, Contracts, Chattel Paper, Documents, General
Intangibles, Licenses or other contracts or agreements with or issued by Persons
other than Parent, the Subsidiaries or the Borrowers (collectively, "Excluded
Agreements") that would otherwise be included in the Collateral (and such
Excluded Agreements shall not be deemed to constitute a part of the Collateral)
for so long as, and to the extent that, the granting of such a Security Interest
pursuant hereto would result in a breach, default or termination of such
Excluded Agreements;
(b) any Equipment that would otherwise be included in the Collateral
(and such Equipment shall not be deemed to constitute a part of the Collateral)
if such Equipment is subject to a Lien permitted by Section 6.02(g) of the
Credit Agreement; or
(c) any Pledged Securities (as such term is defined in the Pledge
Agreements), and all properties and assets excluded from the definition of
Pledged Securities in the Pledge Agreement (including, without limitation, any
Capital Stock of any Foreign Subsidiary in excess of 65% of any series of such
stock and intercompany indebtedness).
ARTICLE III
Representations and Warranties
Each Grantor represents and warrants to the Collateral Agent and the
Secured Parties that:
SECTION 3.01. Title and Authority. Such Grantor has good and valid rights
in and title to its Collateral with respect to which it has purported to grant a
Security Interest hereunder and has full power and authority to grant to the
Collateral Agent the Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other Person other than
any consent or approval which has been obtained.
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SECTION 3.02. Perfected Liens. (a) This Agreement is effective to create,
as collateral security for the Obligations of such Grantor, valid and
enforceable Liens on such Grantor's Collateral in favor of the Collateral Agent,
for the benefit of the Secured Parties, except as enforceability may be affected
by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
(b) Except with regard to Liens (if any) on Specified Assets, upon
the completion of the Filings, and the delivery to and continuing possession by
the Collateral Agent of all Instruments, Chattel Paper and Documents, a security
interest in which is perfected by possession, the Liens created pursuant to this
Agreement will constitute valid Liens on and (to the extent provided herein) a
perfected Security Interest in such Grantor's Collateral in favor of the
Collateral Agent for the benefit of the Secured Parties, and will be prior to
all other Liens of all other Persons other than Permitted Liens, and which Liens
are enforceable as such as against all other Persons other than Ordinary Course
Buyers, except to the extent that the recording of an assignment or other
transfer of title to the Collateral Agent or the recording of other applicable
documents in the United States Patent and Trademark Office, the United States
Copyright Office or the Commonwealth of Puerto Rico may be necessary for
perfection or enforceability, and except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law) or by an implied covenant of good faith and fair dealing. As used in
this Section 3.02, the following terms shall have the following meanings:
(i) "Filings" shall mean the filing or recording of the Financing
Statements, the Mortgages, and this Agreement as set forth in Section 3.20
of the Credit Agreement, and any filings after the Closing Date in any
other jurisdiction as may be necessary under any Requirement of Law.
(ii) "Financing Statements" shall mean the financing statements
delivered to the Collateral Agent by each Grantor on the Closing Date for
filing in the jurisdictions listed on Schedule 3.20 to the Credit Agreement
(which Financing Statements are in proper form for filing in such
jurisdictions).
(iii) "Ordinary Course Buyers" shall mean, with respect to goods
only, buyers in the ordinary course of business to the extent provided in
Section 9-307(1) of the Uniform Commercial Code as in effect from time to
time in the applicable jurisdiction.
(iv) "Permitted Liens" shall mean Liens permitted pursuant to the
Loan Documents, including those permitted to exist pursuant to Section 6.02
of the Credit Agreement.
(v) "Specified Assets" shall mean the following property and assets
of each Grantor:
(A) Equipment constituting Fixtures;
(B) Patents, Patent Licenses, Trademarks and Trademark Licenses to
the extent that (1) Liens thereon cannot be perfected by the filing of
financing statements under the Uniform Commercial Code or by the filing and
acceptance thereof in the United States Patent and Trademark Office or (2)
such Patents, Patent Licenses, Trademarks and Trademarks Licenses as are
not, individually or in the aggregate, material to the business of the
Parent, the Borrowers and the Subsidiaries taken as a whole;
(C) Copyrights and Copyright Licenses and Accounts or receivables
arising therefrom only to the extent that the Uniform Commercial Code as in
effect from time to time in the relevant jurisdiction is not applicable to
the creation or perfection of Liens thereon;
(D) uncertificated securities;
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7
(E) Collateral for which the perfection of Liens thereon requires
filings in or other actions under the laws of jurisdictions outside the
United States of America, any State, territory or dependency thereof or the
District of Columbia;
(F) Contracts, Accounts or receivables on which the United States
of America or any department, agency or instrumentality thereof is the
obligor, and property or assets subject to any rights reserved in favor of
the United States government as required under law;
(G) goods included in Collateral received by any Person for "sale
or return" within the meaning of Section 2-326 of the Uniform Commercial
Code of the applicable jurisdiction, to the extent of claims of creditors
of such Person; and
(H) Proceeds of Accounts or Inventory until transferred to the
Collateral Agent.
SECTION 3.03. IP Collateral. Schedules II, III and IV together list all
material Trademarks and Patents in each case registered in the United States
Patent and Trademark Office and owned by such Grantor in its own name as of the
date hereof, and all material Trademark Licenses and Patent Licenses (including
material Trademark Licenses for registered Trademarks and Patent Licenses for
registered Patents) owned by such Grantor in its own name as of the date hereof.
SECTION 3.04. Farm Products. None of such Grantor's Collateral
constitutes, or is the Proceeds of, Farm Products.
SECTION 3.05. Accounts. The amount represented by such Grantor to the
Collateral Agent or the other Secured Parties from time to time as owing by each
account debtor or by all account debtors in respect of such Grantor's Accounts
will at such time be the correct amount, in all material respects, actually
owing by such account debtor or debtors thereunder, except to the extent that
appropriate reserves therefor have been established on the books of such Grantor
in accordance with GAAP. Unless otherwise indicated in writing to the
Collateral Agent, each Account of such Grantor arises out of a bona fide sale
and delivery of goods or rendition of services by such Grantor. Such Grantor
has not given any account debtor any deduction in respect of the amount due
under any such Account, except in the ordinary course of business or as such
Grantor may otherwise advise the Collateral Agent in writing.
ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records; Place of
Business. (a) Each Grantor agrees promptly to notify the Collateral Agent in
writing of any change (i) in its corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its properties
to the extent that any financing statement filed in connection with this
Agreement would become seriously misleading, (ii) in the location of its chief
executive office, its principal place of business, any office in which it
maintains books or records relating to Collateral owned by it or any office or
facility at which Collateral owned by it is located (including the establishment
of any such new office or facility), (iii) in its identity or corporate
structure to the extent that any financing statement filed in connection with
this Agreement would become seriously misleading or (iv) in its Federal Taxpayer
Identification Number. Each Grantor agrees to make all filings (other than in
the Commonwealth of Puerto Rico) under the Uniform Commercial Code or otherwise
that are required in order for the Collateral Agent to continue at all times
following such change to have a perfected security interest in all the
Collateral (other than Specified Assets).
(b) Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in
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8
accordance with such prudent and standard practices used in industries that are
the same as or similar to those in which such Grantor is engaged.
SECTION 4.02. Protection of Security. Each Grantor shall, at its own cost
and expense, take any and all reasonable actions necessary to defend title to
the Collateral against all Persons and to defend the Security Interest of the
Collateral Agent in the Collateral as a perfected security interest having at
least the priority described in Section 3.02 against any Lien not permitted
pursuant to Section 6.02 of the Credit Agreement.
SECTION 4.03. Further Assurances. Each Grantor agrees, at its own
expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the Collateral
Agent may from time to time reasonably request to better assure, preserve,
protect and perfect the Security Interest and the rights and remedies created
hereby, including the payment of any fees and taxes required in connection with
the execution and delivery of this Agreement, the granting of the Security
Interest and the filing of any financing statements (including fixture filings)
or other documents in connection herewith or therewith. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any promissory note or other instrument, such note or instrument shall be
immediately pledged and delivered to the Collateral Agent, duly endorsed in a
manner satisfactory to the Collateral Agent.
SECTION 4.04. Inspection and Verification. At any time during the
occurrence and continuance of an Event of Default, the Collateral Agent and such
Persons as the Collateral Agent may reasonably designate shall have the right,
at each Grantor's own cost and expense, to inspect such Grantor's Collateral,
all records related thereto (and to make extracts and copies from such records)
and the premises upon which any of such Grantor's Collateral is located, to
discuss - such Grantor's affairs with the officers of such Grantor and its
independent accountants and to verify under reasonable procedures the validity,
amount, quality, quantity, value, condition and status of, or any other matter
relating to, such Grantor's Collateral, excluding, however, in the case of
Accounts or Collateral in the possession of any third Person, by contacting
Account Debtors or the third Person possessing such Collateral for the purpose
of making such a verification. The Collateral Agent shall have the absolute
right to share any information it gains from such inspection or verification
with any Lender (it being understood that any such information shall be deemed
to be "Confidential Information" subject to the provisions of Section 9.17 of
the Credit Agreement).
SECTION 4.05. Taxes; Encumbrances. At its option, the Collateral Agent
may discharge past due taxes, assessments, charges, fees, Liens, security
interests or other encumbrances at any time levied or placed on the Collateral
that are not permitted pursuant to the Credit Agreement, and may pay for the
maintenance and preservation of any Grantor's Collateral to the extent such
Grantor fails to do so as required by the Credit Agreement or this Agreement,
and each Grantor severally agrees to reimburse the Collateral Agent on demand
for any reasonable payment made or any reasonable expense incurred by the
Collateral Agent pursuant to the foregoing authorization on such Grantor's
behalf; provided, however, that nothing in this Section 4.05 shall be
interpreted as excusing any Grantor from the performance of, or imposing any
obligation on the Collateral Agent or any Secured Party to cure or perform, any
covenants or other promises of any Grantor with respect to taxes, assessments,
charges, fees, liens, security interests or other encumbrances and maintenance
as set forth herein or in the other Loan Documents.
SECTION 4.06. Continuing Obligations of the Grantors. Each Grantor shall
remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each contract, agreement or instrument
relating to the Collateral.
SECTION 4.07. Use and Disposition of Collateral. None of the Grantors
shall grant any Lien in respect of the Collateral, except as permitted by the
Credit Agreement. Each Grantor agrees that if any Inventory is in the
possession or control of any warehouseman, bailee, agent or processor and the
Collateral Agent reasonably requests, such Grantor shall inform such
warehouseman, bailee, agent or processor of the Security Interest and shall use
good faith efforts to obtain from such
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9
warehouseman, bailee, agent or processor its agreement to hold the Inventory
subject to the Security Interest and to waive and release any Lien held by it
with respect to such Inventory (unless such Lien is permitted by the Credit
Agreement or other Loan Document), whether arising by operation of law or
otherwise.
SECTION 4.08. Limitation on Modification of Accounts. None of the
Grantors will, without the Collateral Agent's prior written consent, grant any
extension of the time of payment of any of the Accounts compromise, compound or
settle the same for less than the full amount thereof, release, wholly or
partly, any Person liable for the payment thereof or allow any credit or
discount whatsoever thereon, other than extensions, credits, releases,
discounts, compromises or settlements granted that would not reasonably be
expected to materially adversely affect the value of the Accounts constituting
Collateral taken as a whole.
SECTION 4.09. Insurance. The Grantors, at their own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage in
accordance with Section 5.06 of the Credit Agreement. Each Grantor irrevocably
makes, constitutes and appoints the Collateral Agent (and all officers,
employees or agents designated by the Collateral Agent) as such Grantor's true
and lawful agent (and attorney-in-fact) for the purpose, during the continuance
of an Event of Default specified in Section 7.01(a) or 7.02(a), of making,
settling and adjusting claims in respect of such Grantor's Collateral under
policies of insurance, endorsing the name of such Grantor on any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect thereto.
In the event that any Grantor at any time or times shall fail to obtain or
maintain any of the policies of insurance required hereby or to pay any premium
in whole or part relating thereto, the Collateral Agent may, without waiving or
releasing any obligation or liability of such Grantor hereunder, in its sole
discretion, obtain and maintain such policies of insurance and pay such premium
and take any other actions with respect thereto as the Collateral Agent
reasonably deems advisable. All sums disbursed by the Collateral Agent in
connection with this Section 4.09, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto, shall be payable, upon
demand, by the respective Grantor to the Collateral Agent and shall be
additional Obligations secured hereby.
SECTION 4.10. Covenants Regarding Copyrights, Patents, and Trademarks.
(a) Within 90 days after the end of each calendar year, such Grantor will notify
the Collateral Agent of any acquisition by such Grantor of any registration of
any material Copyright, Patent or Trademark or any exclusive right under a
material License, in each case constituting Collateral and shall take such
actions as may be reasonably requested by the Collateral Agent (but only to the
extent such actions are within such Grantor's control) to perfect the Security
Interest granted to the Collateral Agent and the other Secured Parties therein
to the extent provided in respect of Copyrights, Patents or Trademarks
constituting Collateral on the date hereof (including without limitation by (x)
the execution and delivery of a Security Agreement (or amendments to any such
agreement previously executed or delivered by such Grantor) and/or (y) the
making of appropriate filings in the United States Patent and Trademark Office
or the United States Copyright Office and/or appropriate Uniform Commercial Code
filings).
(b) Except as permitted in the Loan Documents, such Grantor agrees to take
all reasonably necessary steps, including in the United States Patent and
Trademark Office or in any court, to (i) maintain each trademark registration
and each Trademark License identified on Schedule II or IV hereto, as the case
may be, and (ii) pursue each trademark application now or hereafter identified
in Schedule V hereto, including, without limitation, the filing of responses to
office actions issued by the United States Patent and Trademark Office, the
filing of applications for renewal, the filing of affidavits under Sections 8
and 15 of the United States Trademark Act, and the participation in opposition,
cancelation, infringement and dilution proceedings, except, in each case in
which such Grantor has reasonably determined that any of the foregoing is not of
material economic value to it. Such Grantor agrees to take corresponding steps
with respect to each new or acquired trademark or service mark registration, or
application for trademark or service mark registration, or any rights obtained
under any Trademark License, in each case, to which it is now or later becomes
entitled,
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10
except in each case in which such Grantor has reasonably determined that any of
the foregoing is not of material economic value to it. Any expenses incurred in
connection with such activities shall be borne by such Grantor.
(c) Except as permitted in the Loan Documents, such Grantor agrees to take
all necessary steps, including in the United States Patent and Trademark Office
or in any court, to (i) maintain each patent and each Patent License identified
on Schedule II or III, as applicable, and (ii) pursue each patent application,
now or hereafter identified in Schedule III including the filing of divisional,
continuation, continuation-in-part and substitute applications, the filing of
applications for reissue, renewal or extensions, the payment of maintenance
fees, and the participation in interference, reexamination, opposition or
infringement and misappropriation proceedings, except, in each case in which
such Grantor has reasonably determined that any of the foregoing is not of
material economic value to it. Such Grantor agrees to take corresponding steps
with respect to each new or acquired patent, patent application, or any rights
obtained under any Patent License, in each case, which it is now or later
becomes entitled, except in each case in which such Grantor has reasonably
determined that any of the foregoing is not of material economic value to it.
Any expenses incurred in connection with such activities shall be borne by such
Grantor.
(d) Except as provided in subsection (f) hereof, such Grantor shall take
all additional steps not set forth in subsections (b) and (c) hereof which it or
the Collateral Agent deems reasonably appropriate under the circumstances to
preserve and protect its material Copyrights, Copyright Licenses, Trademarks,
Trademark Licenses, Patents and Patent Licenses.
(e) Such Grantor shall not abandon any trademark registration, patent or
any pending trademark or patent application, in each case listed on Schedule III
or IV, without the written consent of the Collateral Agent, unless such Grantor
shall have previously determined that such use or the pursuit or maintenance of
such trademark registration, patent or pending trademark or patent application
is not of material economic value to it, in which case, such Grantor will, at
least annually, give notice of any such abandonment to the Collateral Agent in
writing, in reasonable detail, at its address set forth in the Credit Agreement.
(f) In the event that any Grantor becomes aware that any of such Grantor's
IP Collateral which such Grantor has reasonably determined to be material to its
business is infringed or misappropriated by a third party, which infringement or
misappropriation would reasonably be expected to have a Material Adverse Effect,
such Grantor shall notify the Collateral Agent promptly and in writing, in
reasonable detail, at its address set forth in the Credit Agreement, and shall
take such actions as such Grantor or the Collateral Agent deems reasonably
appropriate under the circumstances to protect such IP Collateral including
suing for damages and/or for an injunction against such infringement or
misappropriation. Any expense incurred in connection with such activities shall
be borne by such Grantor. Such Grantor will advise the Collateral Agent
promptly and in writing, in reasonable detail, at its address set forth in the
Credit Agreement, of any adverse determination or the institution of any
proceeding (including, without limitation, the institution of any proceeding in
the United States Patent and Trademark Office or any court) regarding any item
of such Grantor's IP Collateral which could reasonably result in a Material
Adverse Effect.
(g) Such Grantor shall mark its products with the trademark registration
symbol (R), the numbers of all appropriate patents, the common law trademark
symbol (TM), or the designation "patent pending", as the case may be, to the
extent that it is reasonably and commercially practicable.
(h) Such Grantor will not create, incur or permit to exist, will defend
such Grantor's IP Collateral against, and will take such other action as is
reasonably necessary to remove, any material Lien or material adverse claim on
or to any of such Grantor's IP Collateral other than Liens created hereby and
other than as permitted pursuant to the Loan Documents (including any Liens
permitted to exist on such Grantor's IP Collateral pursuant to Section 6.02 of
the Credit Agreement), and will defend the right, title and interest of the
Collateral Agent and the other Secured Parties in and to any
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of the IP Collateral against the claims and demands of all Persons whomsoever,
except where failure to defend would not have a Material Adverse Effect.
(i) Without the prior written consent of the Collateral Agent, such
Grantor will not sell, assign, transfer, exchange or otherwise dispose of, or
grant any option with respect to, such Grantor's IP Collateral, or attempt,
offer or contract to do so, except with respect to licenses in the ordinary
course of business or as permitted by this Agreement or the Loan Documents.
(j) Such Grantor will advise the Collateral Agent promptly and in writing,
in reasonable detail, at its address set forth in the Credit Agreement, (i) of
any Lien (other than Liens created hereby or permitted under the Loan Documents,
including, without limitation, any Liens permitted to exist on such Grantor's
Patents or Trademarks pursuant to Section 6.02 of the Credit Agreement) on any
of such Grantor's IP Collateral and (ii) of the occurrence of any other event
which would reasonably be expected in the aggregate to have a material adverse
effect on the aggregate value of the IP Collateral as a whole or the Liens
created hereunder.
Section 4.13. Protection of Trade Secrets. Such Grantor shall take
all steps which it deems commercially reasonable to preserve and protect the
secrecy of all material Trade Secrets of such Grantor.
ARTICLE V
Collections
SECTION 5.01. Power of Attorney. Each Grantor irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers and employees of
the Collateral Agent designated by the Collateral Agent) as such Grantor's true
and lawful agent and attorney-in-fact, and in such capacity the Collateral Agent
shall have the right, with power of substitution for each Grantor and in each
Grantor's name or otherwise, for the use and benefit of the Collateral Agent and
the Secured Parties, but only upon the occurrence and during the continuance of
an Event of Default (a) to receive, endorse, assign and/or deliver any and all
notes, acceptances, checks, drafts, money orders or other evidences of payment
relating to such Grantor's Collateral or any part thereof; (b) to demand,
collect, receive payment of, give receipt for and give discharges and releases
of all or any of such Grantor's Collateral; (c) to sign the name of such Grantor
on any invoice or bill of lading relating to any of such Grantor's Collateral;
(d) to send verifications of such Grantor's Accounts to any Account Debtor; (e)
to commence and prosecute any and all suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect or otherwise realize on
all or any of such Grantor's Collateral or to enforce any rights in respect of
any such Collateral; (f) to settle, compromise, compound, adjust or defend any
actions, suits or proceedings relating to all or any of such Grantor's
Collateral; (g) to notify, or to require such Grantor to notify, Account Debtors
to make payment directly to the Collateral Agent; and (h) subject to any
existing reserved rights or licenses, to use, sell, assign, transfer, pledge,
make any agreement with respect to or otherwise deal with all or any of such
Grantor's Collateral, and to do all other acts and things necessary to carry out
the purposes of this Agreement, as fully and completely as though the Collateral
Agent were the absolute owner of such Grantor's Collateral for all purposes;
provided, however, that nothing herein contained shall be construed as requiring
or obligating the Collateral Agent to make any commitment or to make any inquiry
as to the nature or sufficiency of any payment received by the Collateral Agent,
or to present or file any claim or notice, or, except as otherwise provided
herein, to take any action with respect to the Collateral or any part thereof or
the moneys due or to become due in respect thereof or any property covered
thereby, and no action taken or omitted to be taken by the Collateral Agent with
respect to the Collateral or any part thereof shall give rise to any defense,
counterclaim or offset in favor of any Grantor or to any claim or action against
the Collateral Agent. It is understood and agreed that the appointment of the
Collateral Agent as the agent and attorney-in-fact of each Grantor for the
purposes set forth above is coupled with an interest and is irrevocable. The
provisions of this Section shall in no event relieve any Grantor of any of its
obligations hereunder or under any other Loan Document
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with respect to the such Grantor's Collateral or any part thereof or, such
Grantor's impose any obligation on the Collateral Agent or any Secured Party to
proceed in any particular manner with respect to the Collateral or any part
thereof, or, except as otherwise provided herein, in any way limit the exercise
by the Collateral Agent or any Secured Party of any other or further right which
it may have on the date of this Agreement or hereafter, whether hereunder, under
any other Loan Document, by law or otherwise. Anything in this Section 5.01 to
the contrary notwithstanding, the Collateral Agent agrees that it will not
exercise any rights under the power of attorney provided for in this Section
5.01 unless an Event of Default shall have occurred and be continuing.
ARTICLE VI
Remedies
SECTION 6.01. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees that the Collateral
Agent shall have the right to take any of or all the following actions at the
same or different times: (a) in the case of any Copyright, Patent or Trademark
constituting Collateral of such Grantor, execute and deliver any and all
agreements, instruments, documents and papers as the Collateral Agent may
reasonably request to evidence the Collateral Agent's and the other Secured
Parties' security interest in such Copyright, Patent or Trademark and the
goodwill and general intangibles of such Grantor relating thereto or represented
thereby and, subject to any existing reserved rights or licenses, assign any
Copyright, Patent or Trademark constituting Collateral of such Grantor (along
with the goodwill of the business to which any such Copyright, Patent or
Trademark pertains), for such term or terms, on such conditions, and in such
manner, as the Collateral Agent shall in its sole discretion determine, and (b)
with or without legal process and with or without prior notice or demand for
performance, to take possession of such Grantor's Collateral and without
liability for trespass to enter any premises where such Grantor's Collateral may
be located for the purpose of taking possession of or removing such Grantor's
Collateral and, generally, to exercise any and all rights afforded to a secured
party under the Uniform Commercial Code or other applicable law. Without
limiting the generality of the foregoing, each Grantor agrees that the
Collateral Agent shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of such
Grantor's Collateral, at public or private sale or at any broker's board or on
any securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall reasonably deem appropriate. The Collateral Agent shall
be authorized at any such sale of any Grantor's Collateral subject to
restrictions on sales under the Securities Act of 1933, as amended (if it
reasonably deems it advisable to do so), to restrict the prospective bidders
or purchasers to Persons who will represent and agree that they are purchasing
such Collateral for their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale the
Collateral Agent shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Collateral so sold. Each such purchaser at
any such sale shall hold the property sold absolutely, free from any claim or
right on the part of any Grantor, and each Grantor hereby waives (to the extent
permitted by law) all rights of redemption, stay and appraisal which such
Grantor now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantors at least 10 days' written
notice (which each Grantor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions) of the Collateral Agent's
intention to make any sale of such Grantor's Collateral. Such notice, in the
case of a public sale, shall state the time and place for such sale and, in the
case of a sale at a broker's board or on a securities exchange, shall state the
board or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Collateral Agent may
fix and state in the notice (if any) of such sale. At any such sale, the
Collateral, or portion thereof, to be sold may be sold in one lot as an entirety
or in separate parcels, as the Collateral Agent may in its sole and absolute
discretion determine. The
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13
Collateral Agent shall not be obligated to make any sale of any Collateral if it
shall reasonably determine not to do so, regardless of the fact that notice of
sale of such Collateral shall have been given. The Collateral Agent may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the sale price is paid by
the purchaser or purchasers thereof, but the Collateral Agent shall not incur
any liability in case any such purchaser or purchasers shall fail to take up and
pay for the Collateral so sold and, in case of any such failure, such Collateral
may be sold again upon like notice. At any public (or, to the extent permitted
by law, private) sale made pursuant to this Section, any Secured Party may bid
for or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of any Grantor (all said
rights being also hereby waived and released to the extent permitted by law),
such Grantor's Collateral or any part thereof offered for sale and may make
payment on account thereof by using any claim then due and payable to such
Secured Party from such Grantor as a credit against the purchase price, and such
Secured Party may, upon compliance with the terms of sale, hold, retain and
dispose of such property without further accountability to such Grantor
therefor. For purposes hereof, a written agreement with any Person (other than a
Secured Party or affiliate thereof) to purchase the Collateral or any portion
thereof shall be treated as a sale thereof; the Collateral Agent shall be free
to carry out such sale pursuant to such agreement and no Grantor shall be
entitled to the return of such Grantor's Collateral or any portion thereof
subject thereto, notwithstanding the fact that after the Collateral Agent shall
have entered into such an agreement all Events of Default shall have been
remedied and the Obligations paid in full. As an alternative to exercising the
power of sale herein conferred upon it, the Collateral Agent may proceed by a
suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a court-
appointed receiver.
SECTION 6.02. Application of Proceeds. The Collateral Agent may, in the
sole discretion of the Collateral Agent, apply the proceeds of any collection or
sale of the Collateral, as well as any Collateral consisting of cash against the
respective Obligations of the relevant Grantor then due and owing in the
following order of priority:
FIRST, to the payment of all reasonable costs and reasonable expenses
incurred by the Collateral Agent hereunder in connection with such
collection or sale or otherwise in connection with this Agreement or any of
the Obligations of the relevant Grantor then due and owing, including all
court costs and the reasonable fees and expenses of its agents and legal
counsel, the repayment of all reasonable advances made by the Collateral
Agent hereunder on behalf of such Grantor and any other reasonable costs or
expenses incurred in connection with the exercise of any right or remedy
hereunder;
SECOND, to the payment in full of the Obligations of the relevant
Grantor then due and owing (the amounts so applied to be distributed among
the Secured Parties pro rata in accordance with the amounts of such
Obligations then due and owing to them on the date of any such
distribution); and
THIRD, to the relevant Grantor, its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers
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14
shall not be obligated to see to the application of any part of the purchase
money paid over to the Collateral Agent or such officer or be answerable in any
way for the misapplication thereof.
ARTICLE VII
Miscellaneous
SECTION 7.01. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 9.02 of the Credit Agreement. All communications and
notices hereunder to any Subsidiary Grantor shall be given to it in care of JCI.
SECTION 7.02. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the Security Interest and all obligations of the Grantors
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Credit Agreement, any other Loan Document, any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Credit Agreement, any other Loan Document or any other agreement or instrument,
(c) any exchange, release or non-perfection of any Lien on other collateral, or
any release or amendment or waiver of or consent under or departure from any
guarantee, securing or guaranteeing all or any of the Obligations, or (d) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Obligations or this Agreement.
SECTION 7.03. Survival of Agreement. All covenants and agreements, made
by any Grantor herein shall survive the making by the Lenders of the Loans, and
the execution and delivery to the Lenders of any notes evidencing such Loans.
SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall
become effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Grantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Grantor, the Collateral Agent and the other Secured Parties and their respective
successors and assigns, except that no Grantor shall have the right to assign or
transfer its rights or obligations hereunder or any interest herein except with
the consent of the Collateral Agent or as contemplated by this Agreement or the
Credit Agreement. This Agreement shall be construed as a separate agreement
with respect to each Grantor and may be amended, modified, supplemented, waived
or released with respect to any Grantor without the approval of any other
Grantor and without affecting the obligations of any other Grantor hereunder.
SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
SECTION 7.06. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO
THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.
<PAGE>
15
SECTION 7.07. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provisions of this Agreement or consent to any
departure by any Grantor therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Grantor in any case shall entitle such
Grantor or any other Grantor to any other or further notice or demand in similar
or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Collateral Agent and the Grantor or Grantors with respect to which
such waiver, amendment or modification is to apply, subject to any consent
required in accordance with Section 9.01 of the Credit Agreement.
SECTION 7.08. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.
SECTION 7.09. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 7.10. Counterparts. This Agreement may be executed by one or more
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument and shall become effective as
provided in Section 7.04. Delivery of an executed signature page to this
Agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof.
SECTION 7.11. Headings. Article and Section headings used herein are for
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 7.12. Jurisdiction; Consent to Service of Process. Each party
hereto hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement, or for recognition and enforcement
of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the courts of the State of New York, the courts of the
United States of America for the Southern District of New York, and
appellate courts of any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient forum and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form
<PAGE>
16
of mail), postage prepaid, to applicable party at the address specified in
Section 7.01 or at such other address of which the parties hereto shall
have been notified pursuant thereto.
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section 7.12 any punitive damages.
SECTION 7.13. Termination. This Agreement shall terminate and the
Security Interest shall be automatically released, all without delivery of any
instrument or performance of any act by any party, (a) when all the Obligations
have been paid in full, the Lenders have no further commitment to lend, the L/C
Exposure has been reduced to zero and the Issuing Bank has no further commitment
to issue Letters of Credit under the Credit Agreement, at which time the
Collateral Agent shall execute and deliver to the Grantors, at the Grantors'
expense, all Uniform Commercial Code termination statements and similar
documents which the Grantors shall reasonably request to evidence such
termination. Any execution and delivery of termination statements or documents
pursuant to this Section 7.14 shall be without recourse to or warranty by the
Collateral Agent, (b) upon any sale or other transfer by any Grantor of any
Collateral that is permitted under the Credit Agreement to any Person (unless
such sold Collateral is to a Person that is required to pledge such Collateral
to the Collateral Agent pursuant to Section 5.11 of the Credit Agreement) or (c)
upon the effectiveness of any written consent to the release of the security
interest granted hereby in any Collateral pursuant to Section 9.01(d) of the
Credit Agreement. A Subsidiary Grantor shall automatically be released from its
obligations hereunder and the Security Interest in the Collateral of such
Subsidiary Grantor shall be automatically released in the event that all the
capital stock of such Subsidiary Grantor shall be sold, transferred or otherwise
disposed of to a Person that is not an Affiliate of JCI in accordance with the
terms of the Credit Agreement.
SECTION 7.14. Additional Grantors. Pursuant to Section 5.11 of the Credit
Agreement, certain Domestic Subsidiaries of JCI are required to become
Subsidiary Grantors hereunder. Upon execution and delivery by the Collateral
Agent and such Domestic Subsidiary of an instrument in the form of Annex 2
hereto, such Domestic Subsidiary shall become a Subsidiary Grantor hereunder
with the same force and effect as if originally named as a Subsidiary Grantor
herein. The execution and delivery of any such instrument shall not require the
consent of any Grantor hereunder. The rights and obligations of each Grantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Subsidiary Grantor as a party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
JAFRA COSMETICS INTERNATIONAL, INC.,
by ______________________________
Name:
Title:
<PAGE>
17
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by ______________________________
Name:
Title:
by ______________________________
Name:
Title:
<PAGE>
SCHEDULE I
to the Security Agreement
SUBSIDIARY GRANTORS
<PAGE>
SCHEDULE II
to the Security Agreement
LICENSES
<PAGE>
SCHEDULE III
to the Security Agreement
PATENTS
<PAGE>
SCHEDULE IV
to the Security Agreement
TRADEMARKS
<PAGE>
Annex 1
to the Security Agreement
[Form Of]
PERFECTION CERTIFICATE
Reference is made to (a) the Credit Agreement dated as of April 30, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme
("Parent"), CDRJ Acquisition Corporation (to be renamed Jafra Cosmetics
International, Inc.), a Delaware corporation ("JCI"), Jafra Cosmetics
International, S.A. de C.V., a sociedad anonima de capital variable organized
under the laws of the United Mexican States ("JCISA" and together with JCI, the
"Borrowers"), the lenders from time to time party thereto (the "Lenders"), the
Issuing Bank (as defined therein), Credit Suisse First Boston, as administrative
agent for the Lenders (in such capacity, the "Administrative Agent"), as
swingline lender and as Collateral Agent, and (b) the JCI Guarantee Agreement
dated as of April 30, 1998 (as amended, supplemented or otherwise modified from
time to time, the "JCI Guarantee Agreement") between JCI and the Collateral
Agent.
Capitalized terms used herein without definition shall have the respective
meanings ascribed thereto in the Security Agreement, dated as of April 30, 1998,
as amended, modified or supplemented from time to time, among JCI, the
Subsidiary Grantors and the Collateral Agent.
The undersigned, an Officer of JCI, hereby certifies (as of the
consummation of the Transactions and thereafter) to the Collateral Agent as
follows:
1. Names. (a) The exact corporate name of JCI, as such name appears in
its certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name JCI has had in the past
five years, together with the date of the relevant change:
(c) Except as set forth in Schedule 1 hereto, JCI has not changed its
identity or corporate structure in any material way within the past year.
Changes in identity or corporate structure would include mergers, consolidations
and acquisitions, as well as any change in the form, nature or jurisdiction of
corporate organization. If any such change has occurred, include in Schedule 1
the information required by Sections 1 and 2 of this certificate as to each
acquiree or constituent party to a merger or consolidation.
(d) The following is a list of all other names (including trade names or
similar appellations) used by JCI or any of its divisions or other business
units in connection with the conduct of its business or the ownership of its
properties at any time during the past year:
<PAGE>
2
(e) Set forth below is the Federal Taxpayer Identification Number of JCI:
2. Current Locations. (a) The chief executive office of JCI is located at
the address set forth opposite its name below:
Grantor Mailing Address County State
- ------- --------------- ------ -----
(b) Set forth below opposite the name of JCI are all locations where JCI
maintains any books or records relating to any Accounts:
Grantor Mailing Address County State
- ------- --------------- ------ -----
(c) Set forth below opposite the name of JCI are all the places of
business of JCI not identified in paragraph (a) or (b) above:
Grantor Mailing Address County State
- ------- --------------- ------ -----
(d) Set forth below opposite the name of JCI are all the locations where
JCI maintains any Collateral not identified above:
Grantor Mailing Address County State
- ------- --------------- ------ -----
(e) Set forth below opposite the name of JCI are the names and addresses
of all Persons other than JCI that have possession of any of the Collateral of
JCI:
Grantor Mailing Address County State
- ------- --------------- ------ -----
3. Unusual Transactions. All Accounts have been originated by the Grantor
and all Inventory has been acquired by the Grantor in the ordinary course of
business.
4. UCC Filings. Duly signed financing statements on Form UCC-1 in
substantially the form of Schedule 5 hereto have been prepared for filing in the
Uniform Commercial Code filing office in each jurisdiction where the Grantor has
Collateral as identified in Section 2 hereof.
5. Schedule of Filings. Attached hereto as Schedule 6 is a schedule
setting forth, with respect to the filings pursuant to the Uniform Commercial
Code, each filing and the filing office in which such filing is to be made.
6. Stock Ownership. Attached hereto as Schedule 6 is a true and correct
list of all the duly authorized issued and outstanding stock of each Subsidiary
and the record and beneficial owners of such stock. Also set forth on Schedule
6 is each equity Investment of Parent and each Subsidiary that represents 50% or
less of the equity of the entity in which such investment was made.
<PAGE>
3
IN WITNESS WHEREOF, the undersigned have duly executed this certificate on
this 30th day of April, 1998.
JAFRA COSMETICS INTERNATIONAL, INC.,
by ______________________________
Name:
Title:
<PAGE>
Annex 2
to the Security Agreement
SUPPLEMENT NO. __ dated as of , to the Security Agreement
dated as of April 30, 1998, among JAFRA COSMETICS INTERNATIONAL,
INC. (formerly named CDRJ Acquisition Corporation), a Delaware
corporation ("JCI"), each subsidiary of JCI listed on Schedule I
thereto (each such subsidiary individually a "Subsidiary Grantor"
and collectively, the "Subsidiary Grantors"; the Subsidiary
Grantors and JCI are referred to collectively herein as the
"Grantors"), and CREDIT SUISSE FIRST BOSTON, a bank organized
under the laws of Switzerland, acting through its New York
branch, as collateral agent (in such capacity, the "Collateral
Agent") for the Secured Parties (as defined herein).
A. Reference is made to (a) the Credit Agreement dated as of April 30,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe
anonyme ("Parent"), JCI, Jafra Cosmetics International, S.A. de C.V., a sociedad
anonima de capital variable organized under the laws of the United Mexican
States ("JCISA" and, together with JCI, the "Borrowers"), the lenders from time
to time party thereto (the "Lenders"), the Issuing Bank (as defined therein) and
Credit Suisse First Boston, as administrative agent for the Lenders (in such
capacity, the "Administrative Agent"), as swingline lender and as Collateral
Agent and (b) the JCI Guarantee Agreement dated as of April 30, 1998 (as
amended, supplemented or otherwise modified from time to time, the "JCI
Guarantee Agreement"), between JCI and the Collateral Agent.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Security Agreement and the
Credit Agreement.
C. The Grantors have entered into the Security Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Section 7.15 of the Security Agreement provides that additional Domestic
Subsidiaries of JCI may become Grantors under the Security Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned Domestic Subsidiary (the "New Grantor") is executing this Supplement
in accordance with the requirements of the Credit Agreement to become a Grantor
under the Security Agreement in order to induce the Lenders to make additional
Loans and the Issuing Bank to issue additional Letters of Credit and as
consideration for Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Grantor agree as follows:
SECTION 1. In accordance with Section 7.15 of the Security Agreement, the
New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of
the Security Agreement applicable to it as a Grantor thereunder and (b)
represents and warrants that the representations and warranties made by it as a
Grantor thereunder are true and correct on and as of the date hereof. In
furtherance of the foregoing, the New Grantor, as security for the payment and
performance in full of its respective Obligations (as defined in the Security
Agreement), does hereby grant to the Collateral Agent, its successors and
assigns, for the benefit of the Secured Parties, their successors and assigns, a
security interest in all of the New Grantor's right, title and interest in and
to the Collateral (as defined in the Security Agreement) of the New Grantor.
Each reference to a "Grantor" in the Security Agreement shall be deemed to
include the New Grantor. The Security Agreement is hereby incorporated herein by
reference.
SECTION 2. The New Grantor represents and warrants to the Collateral Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally,
<PAGE>
2
general equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Grantor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Grantor hereby represents and warrants that (a) set
forth on Schedule I attached hereto is a true and correct schedule of the
location of any and all Collateral of the New Grantor and (b) set forth under
its signature hereto, is the true and correct location of the chief executive
office of the New Grantor. Such information, to the extent applicable, shall be
added to the Schedules to the Security Agreement.
SECTION 5. Except as expressly supplemented hereby, the Security Agreement
shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES
WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
SECTION 7. Any provision of this Supplement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 8. All communications and notices hereunder shall be in writing and
given as provided in Section 7.01 of the Security Agreement. All communications
and notices hereunder to the New Grantor shall be given to it care of JCI.
<PAGE>
3
IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly
executed this Supplement to the Security Agreement as of the day and year first
above written.
[Name Of New Grantor],
by _____________________________
Name:
Title:
Address:
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by _____________________________
Name:
Title:
by _____________________________
Name:
Title:
<PAGE>
SCHEDULE I
to Supplement No.___
to the Security Agreement
LOCATION OF COLLATERAL
----------------------
Description Location
- ----------- --------
<PAGE>
EXHIBIT M-1
to CREDIT AGREEMENT
FORM OF TERM NOTE
$[ ] New York, New York
[ ]
FOR VALUE RECEIVED, the undersigned, [CDRJ ACQUISITION CORPORATION (to
be renamed JAFRA COSMETICS INTERNATIONAL, INC.), a Delaware corporation] [JAFRA
COSMETICS INTERNATIONAL, S.A. DE C.V., a sociedad anonima de capital variable
organized under the laws of the United Mexican States] (the "Borrower"), hereby
unconditionally promises to pay to the order of [ ] (the "Lender") and
its successors and assigns at the office of Credit Suisse First Boston located
at Eleven Madison Avenue, New York, New York 10011, in lawful money of the
United States of America and in immediately available funds, the principal
amount of [ ] ($[ ]) or, if less, the aggregate unpaid principal amount
of all Term Loans made by the Lender to the Borrower pursuant to Section 2.02 of
the Credit Agreement.
The Borrower further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time outstanding at
the rates and on the dates specified in Sections 2.06 and 2.10 of such Credit
Agreement.
The holder of this Term Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of the Term
Loans and the date and amount of each payment or prepayment of principal with
respect thereto, each conversion of all or a portion thereof to another Type,
each continuation of all or a portion thereof as the same Type and, in the case
of Eurodollar Loans, the length of each Interest Period with respect thereto.
Each such endorsement shall constitute prima facie evidence of the accuracy of
the information endorsed. The failure to make any such endorsement or any error
in any such endorsement shall not affect the obligations of the Borrowers in
respect of such Term Loan.
This Term Note (a) is given in connection with the Credit Agreement
dated as of April 30, 1998 (the "Credit Agreement"), among CDRJ Investments
(Lux) S.A., CDRJ Acquisition Corporation (to be renamed Jafra Cosmetics
International, Inc.), Jafra Cosmetics International, S.A. de C.V., the lenders
from time to time party thereto (the "Lenders") and Credit Suisse First Boston,
as administrative agent for the Lenders, swingline lender and collateral agent,
(b) is subject to the provisions of the Credit Agreement and (c) is subject to
optional and mandatory prepayment in whole or in part as provided in the Credit
Agreement. This Term Note is secured and guaranteed as provided in the Loan
Documents. Reference is hereby made to the Loan Documents for a description of
the properties and assets in which a security interest has been granted, the
nature and extent of the security and the guarantees, the terms and conditions
upon which the security interests and each guarantee were granted and the rights
of the holder of this Term Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Term Note shall become, or may be declared to be, immediately due and payable,
all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Term Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind with respect to
matters relating to this Term Note.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
<PAGE>
2
THIS TERM NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER
THIS TERM NOTE SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, AND
GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES
WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
[CDRJ ACQUISITION CORPORATION (to be renamed
JAFRA COSMETICS INTERNATIONAL, INC.)] [JAFRA
COSMETICS INTERNATIONAL, S.A. DE C.V.],
by __________________________________
Name:
Title:
<PAGE>
Schedule A
to Term Note
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Amount of ABR Amount Converted to Amount of Principal of Amount of ABR Loans
Date Loans ABR Loans ABR Loans Repaid Converted to Eurodollar Loans
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------
Unpaid Principal Balance Notation Made
Date of ABR Loans By
- -------------------------------------------------------------
<S> <C> <C>
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
</TABLE>
<PAGE>
Schedule B
to Term Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount of
Eurodollar
Amount of Amount Converted Interest Period and Amount of Principal Loans Unpaid Principal
Eurodollar to Eurodollar Eurodollar Rate with of Eurodollar Loans Converted to Balance of Eurodollar
Date Loans Loans Respect Thereto Repaid ABR Loans Loans
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------
Notation Made
Date By
- ----------------------------------
<S> <C>
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
</TABLE>
<PAGE>
EXHIBIT M-2
to CREDIT AGREEMENT
FORM OF
REVOLVING NOTE
$[ ] New York, New York
[ ]
FOR VALUE RECEIVED, the undersigned, [CDRJ ACQUISITION CORPORATION (to
be renamed JAFRA COSMETICS INTERNATIONAL, INC.), a Delaware corporation] [JAFRA
COSMETICS INTERNATIONAL, S.A. DE C.V., a sociedad anonima de capital variable
organized under the laws of the United Mexican States] (the "Borrower"), hereby
unconditionally promises to pay to the order of [ ] (the "Lender") and
its successors and assigns, at the office of Credit Suisse First Boston located
at Eleven Madison Avenue, New York, New York 10011, or as otherwise provided in
the Credit Agreement, as hereinafter defined, in lawful money of the United
States and in immediately available funds, the principal amount of [ ]
($[ ]) or, if less, the aggregate unpaid principal amount of the Revolving Loans
made by the Lender to the Borrower pursuant to Section 2.02 of the Credit
Agreement; provided, however, that with respect to any such Revolving Loan
denominated in an Alternative Currency, the Borrower shall make all payments of
principal and interest on the dates specified above therefor in such Alternative
Currency.
The Borrower further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time outstanding at
the rates and on the dates specified in Sections 2.06 and 2.10 of such Credit
Agreement.
The holder of this Revolving Note is authorized to endorse on the
schedules annexed hereto and made a part hereof or on a continuation thereof
which shall be attached hereto and made a part hereof the date, Type, currency
and amount of the Revolving Loans and the date and amount of each payment or
prepayment of principal with respect thereto, each conversion of all or a
portion thereof to another Type, each continuation of all or a portion thereof
as the same Type and, in the case of Eurocurrency Revolving Loans, the length of
each Interest Period with respect thereto. Each such endorsement shall
constitute prima facie evidence of the accuracy of the information endorsed.
The failure to make any such endorsement or any error in any such endorsement
shall not affect the obligations of the Borrowers in respect of such Revolving
Loan.
This Revolving Note (a) is given in connection with the Credit
Agreement dated as of April 30,1998 (the "Credit Agreement"), among CDRJ
Investments (Lux) S.A., CDRJ Acquisition Corporation (to be renamed Jafra
Cosmetics International, Inc.), Jafra Cosmetics International, S.A. de C.V., the
lenders from time to time party thereto (the "Lenders") and Credit Suisse First
Boston, as administrative agent for the Lenders, swingline lender and collateral
agent, (b) is subject to the provisions of the Credit Agreement and (c) is
subject to optional and mandatory prepayment in whole or in part as provided in
the Credit Agreement. This Revolving Note is guaranteed as provided in the Loan
Documents. Reference is hereby made to the Loan Documents for a description of
the properties and assets in which a security interest has been granted, the
nature and extent of the security and guarantees, the terms and conditions upon
which the security interests and each guarantee were granted and the rights of
the holder of this Revolving Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Revolving Note shall become, or may be declared to be, immediately due and
payable, all as provided in the Credit Agreement.
<PAGE>
2
All parties now and hereafter liable with respect to this Revolving
Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind with
respect to matters relating to this Revolving Note.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS REVOLVING NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS REVOLVING NOTE SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES
WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
[CDRJ ACQUISITION CORPORATION
(to be renamed JAFRA COSMETICS INTERNATIONAL,
INC.)] [JAFRA COSMETICS INTERNATIONAL, S.A. DE
C.V.],
by
_____________________________
Name:
Title:
<PAGE>
Schedule A
to Revolving Note
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS (DOLLAR-DENOMINATED ONLY)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Amount of ABR Amount Converted to Amount of Principal of Amount of ABR Loans
Date Loans ABR Loans ABR Loans Repaid Converted to Eurocurrency Loans
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------
Unpaid Principal Balance Notation Made
Date of ABR Loans By
- -------------------------------------------------------------
<S> <C> <C>
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
- -------------------------------------------------------------
</TABLE>
<PAGE>
Schedule B
to Revolving Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EUROCURRENCY LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount of
Amount of and Eurocurrency
Currency of Amount Converted Interest Period and Amount of Principal Loans Unpaid Principal
Eurocurrency to Eurocurrency Eurocurrency Rate with of Eurocurrency Loans Converted to Balance of Eurocurrency
Date Loans Loans Respect Thereto Repaid ABR Loans Loans
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------
Notation Made
Date By
- ----------------------------------
<S> <C>
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
- ----------------------------------
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- ----------------------------------
</TABLE>
<PAGE>
EXHIBIT N-1 TO
CREDIT AGREEMENT
[DEBEVOISE & PLIMPTON LETTERHEAD]
April 30, 1998
Credit Suisse First Boston,
Administrative Agent and Collateral Agent
under the Credit Agreement referred to below
Eleven Madison Avenue
New York, New York 10010-3629
Each of the Lenders named in Annex A
attached hereto that are parties
to the Credit Agreement referred
to below
We have acted as special counsel to CDRJ Investments (Lux) S.A., a
Luxembourg societe anonyme (the "Parent"), CDRJ Acquisition Corporation, a
Delaware corporation to be renamed Jafra Cosmetics International, Inc. ("JCI"),
and Jafra Cosmetics International, S.A. de C.V., a sociedad anonima de capital
variable organized under the laws of the United Mexican States ("JCISA" and,
with JCI, the "Borrowers"), in connection with (a) the preparation, and the
-
execution and delivery today, of (i) the Credit Agreement, dated as of April 30,
-
1998 (the "Credit Agreement"), among the Parent, JCI, JCISA, the several banks
and other financial institutions parties thereto named on the signature pages
thereof (collectively, the "Lenders"), Credit Suisse First Boston, as
administrative agent for the Lenders (in such capacity, the "Administrative
<PAGE>
Credit Suisse First Boston,
Administrative Agent
and Collateral Agent
Each of the Lenders
named in Annex A -2- April 30, 1998
Agent") and as Collateral Agent (the "Collateral Agent", and together with the
Lenders, the "Secured Parties") and (ii) the other Loan Documents (as
--
hereinafter defined), and (b) the consummation today of the Merger (as
-
hereinafter defined) and the other transactions contemplated by the Loan
Documents.
The opinions expressed below are furnished to you pursuant to
subsection 4.02(a)(i), of the Credit Agreement. Unless otherwise defined herein
or in any Schedule hereto, capitalized terms defined in the Credit Agreement are
used herein as defined therein. As used herein, the following terms shall have
the following meanings: The term "DGCL" means the General Corporation Law of
the State of Delaware. The term "Subsidiary Parties" means those Subsidiaries
of the Parent listed in Schedule 1 hereto. The term "Loan Parties" means the
----------
Parent, JCI, JCISA and the Subsidiary Parties. The term "Material Adverse
Effect" means a material adverse effect on the business, operations, property or
condition (financial or otherwise) of Parent and its Subsidiaries taken as a
whole. The term "UCC" means the Uniform Commercial Code as in effect in the
State of New York on the date hereof.
In arriving at the opinions expressed below,
(1) we have examined and relied on the following (including, but not
limited to, the representations and warranties contained therein):
(a) originals, or copies certified or otherwise identified to our
satisfaction, of (i) the Credit Agreement, (ii) the forms of Notes to be
- --
issued pursuant to the Credit Agreement, (iii) the Parent Guarantee
---
Agreement, dated as of April 30, 1998 (the "Parent Guarantee Agreement")
between the Parent and the Collateral Agent, the JCI Guarantee Agreement,
dated as of April 30, 1998 (the "JCI Guarantee Agreement"), between JCI and
the Collateral Agent, the JCISA Guarantee Agreement, dated as of April 30,
1998 (the "JCISA Guarantee Agreement"), between JCISA and the
Collateral Agent, and the JCISA Subsidiary Guarantee Agreement, dated as
of April 30, 1998 (the "JCISA Subsidiary Guarantee Agreement" and
collectively with the others, the "Guarantee Agreements"), among each
Subsidiary of JCISA named on Schedule I thereto, (iv) the Security
--
Agreement, dated as of April 30, 1998 (the "Security Agreement"), between
JCI and the Collateral Agent, (v) the Pledge Agreement,
-
<PAGE>
Credit Suisse First Boston,
Administrative Agent
and collateral Agent
Each of the Lenders
named in Annex A -3- April 30, 1998
dated as of April 30, 1998 (the "Pledge Agreement"), among the Parent, CDRJ
North Atlantic (Lux) S. a R.L., CDRJ Latin America Holding Company B.V.,
Latin Cosmetics Holdings B.V., Southern Cosmetics Holdings B.V., CDRJ
Mexico Holding Company B.V., JCI, JCISA, the Subsidiary Pledgors named on
Schedule I thereto, and the Collateral Agent and (vi) the Indemnity,
--
Subrogation and Contribution Agreement, dated as of April 30, 1998 (the
"Contribution Agreement"), among JCISA, each Subsidiary of JCISA listed on
Schedule I thereto and the Collateral Agent (the Contribution Agreement,
together with the Credit Agreement, the Guarantee Agreements, the Security
Agreement and the Pledge Agreement, the "Loan Documents"),
(b) originals or copies certified or otherwise identified to our
satisfaction of the contracts and agreements to which the Parent, JCI or
JCISA is today a party that are listed in Schedule 2 hereto (collectively,
----------
the "Contracts"),
(c) such corporate documents and records of the Parent and its
Subsidiaries and such other instruments and certificates of public
officials, officers and representatives of the Parent and its Subsidiaries
and other Persons as we have deemed necessary or appropriate for the
purposes of this opinion; and
(2) we have made such investigations of law as we have deemed appropriate
as a basis for this opinion.
In rendering the opinions expressed below, we have assumed, with your
permission, without independent investigation or inquiry, (a) the authenticity
-
of all documents submitted to us as originals, (b) the genuineness of all
-
signatures, (c) the conformity to authentic originals of documents submitted to
-
us as certified, conformed or photostatic copies, (d) the effectiveness of the
-
Merger, and (e) the due authorization, execution and delivery of each of the
-
Loan Documents by each party thereto (other than JCI).
Based upon and subject to the foregoing and the qualifications
hereinafter set forth, we are of the opinion that:
<PAGE>
Credit Suisse First Boston,
Administrative Agent
and collateral Agent
Each of the Lenders
named in Annex A -4- April 30, 1998
1. JCI (i) is duly incorporated, validly existing and in good
-
standing under the laws of the State of Delaware, and (ii) has the corporate
--
power and authority to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged.
2. JCI has the corporate power and authority to make, deliver and
perform its obligations under each of the Loan Documents to which it is a party
and to borrow under the Credit Agreement. JCI has taken all necessary corporate
action to authorize the execution, delivery and performance of the Loan
Documents to which it is a party, and to authorize its borrowings on the terms
and conditions of the Credit Agreement. Except for (a) any consents,
-
authorizations, approvals, notices and filings that have been obtained or made,
(b) filings in the United States Patent and Trademark Office, the United States
-
Copyright Office, and appropriate offices under any applicable state trademark
laws, (c) filings and other actions to perfect the security interests created by
-
the Security Agreement or the Pledge Agreement, and (d) those consents,
-
authorizations, approvals, notices and filings that if not made, obtained or
done, would not, to our knowledge, have a Material Adverse Effect, to our
knowledge no consent or authorization of, approval by, notice to, or filing
with, any Federal, New York State or Delaware (insofar as the DGCL is concerned)
court or governmental authority is required to be obtained or made on or prior
to the date hereof by the Parent, JCI, JCISA or any Subsidiary Party in
connection with its execution, delivery or performance of the Loan Documents to
which it is a party or with the borrowings under the Credit Agreement on the
Closing Date, or in connection with the validity or enforceability against it of
the Loan Documents to which it is a party.
3. The Credit Agreement and the other Loan Documents to which JCI is
a party have been duly executed and delivered on behalf of JCI. The Credit
Agreement constitutes the legal, valid and binding obligation of the Parent, JCI
and JCISA, enforceable against each such Person in accordance with its terms.
Each of the Loan Documents (other than the Credit Agreement) constitutes the
legal, valid and binding obligation of each Loan Party party thereto, as the
case may be, enforceable against each such Person in accordance with its
respective terms.
In giving the opinion set forth in this paragraph 3, we have assumed,
with your permission, that (a) each Subsidiary Party is duly incorporated or
-
organized and
<PAGE>
Credit Suisse First Boston,
Administrative Agent
and collateral Agent
Each of the Lenders
named in Annex A -5- April 30, 1998
validly existing under the laws of its state or other jurisdiction of
incorporation or organization, has the requisite corporate or other power and
authority to execute, deliver and perform the Loan Documents, has duly
authorized the Loan Documents to which it is a party and has duly executed and
delivered such Loan Documents; (b) the Parent is duly incorporated or organized
-
and validly existing under the laws of Luxembourg, has the requisite corporate
or other power and authority to execute, deliver and perform the Loan Documents
to which it is a party, has duly authorized the Loan Documents to which it is a
party and has duly executed and delivered the Loan Documents to which it is a
party; and (c) JCISA is duly incorporated or organized and validly existing
-
under the laws of the United Mexican States, has the requisite corporate or
other power and authority to execute, deliver and perform the Loan Documents to
which it is a party, has duly authorized the Loan Documents to which it is a
party and has duly executed and delivered the Loan Documents to which it is a
party.
4. The execution and delivery by each Loan Party of the Loan
Documents to which it is a party, the performance by such Loan Party of its
obligations thereunder, the borrowings by JCI and JCISA under the Credit
Agreement on the Closing Date and the creation and perfection of any security
interest upon or with respect to any of the properties of JCI, all as provided
therein, (x) will not violate (i) the certificate of incorporation and bylaws of
- -
JCI, (ii) any existing Federal, New York State or DGCL law, rule or regulation
--
applicable to any Loan Party, (iii) any existing judgment, order or decree known
---
to us of any arbitrator, court or other governmental authority binding upon any
Loan Party or to which any Loan Party is subject or (iv) any Contract to which
--
any Loan Party is a party, except, in the case of clauses (ii), (iii) and (iv),
for such violations that to our knowledge would not have a Material Adverse
Effect, and (y) will not result in, or require, the creation or imposition of
-
any Lien (other than under the Loan Documents) on any of the properties or
revenues of any Loan Party, by operation of any law, rule, regulation, judgment,
order or decree referred to in the preceding clause (x) or pursuant to any such
Contract.
5. (a) The provisions of the Security Agreement are effective to
create valid security interests in favor of the Collateral Agent, for the
benefit of the Secured Parties, in all of the collateral described therein that
is of the type in which a security interest can be created under Article 9 of
the UCC (the "Article 9 Collateral"), to the extent the UCC is applicable to the
creation of such security interests.
<PAGE>
Credit Suisse First Boston,
Administrative Agent
and collateral Agent
Each of the Lenders
named in Annex A -6- April 30, 1998
(b) Upon the delivery of the Article 9 Collateral in which a security
interest may be perfected by possession pursuant to the UCC to (and provided
that the same remains in the possession of) the Collateral Agent in the State of
New York, the Collateral Agent will have a perfected security interest, for the
benefit of the Secured Parties, in such Article 9 Collateral.
(c) The Collateral Agent will have a valid and perfected security
interest, for the benefit of the Secured Parties, in the Pledged Stock (as
defined in the Pledge Agreement) upon the execution and delivery of the Pledge
Agreement, and the delivery of certificates representing such Pledged Stock
either in bearer form or registered form (issued or endorsed in each case in the
name of the Administrative Agent or in blank) to (and retention of control (as
defined in Section 8-106 of the UCC) thereof by) the Collateral Agent. Assuming
the Collateral Agent (i) acquires its security interest in such Pledged Stock
-
without notice of any adverse claim (as defined in Sections 8-102(a)(1) and 8-
105 of the UCC) and (ii) takes control (as so defined) of each certificate
--
representing such Pledged Stock, the Collateral Agent will acquire its security
interest in such Pledged Stock free of adverse claims (as so defined) governed
by the UCC.
6. None of the Parent or any of its Subsidiaries is (a) an
"investment company" required to register as such under the Investment Company
Act of 1940, as amended, within the meaning of such Act or (b) a "holding
company" as defined in, or otherwise subject to regulation under, the Public
Utility Holding Company Act of 1935.
7. Neither JCI nor JCISA is subject to regulation under any Federal
or New York State statute or regulation (other than Regulation X of the Board of
Governors of the Federal Reserve System) that limits its ability to borrow under
the Credit Agreement.
8. The making of Loans to the Borrowers and the application of the
proceeds thereof by the Borrowers pursuant to the terms of the Credit Agreement
will not violate Regulation U of the Board of Governors of the Federal Reserve
System.
Our opinion set forth in paragraphs 2, 3, and 5 above is subject to
the effects of (a) bankruptcy, insolvency, fraudulent conveyance, fraudulent
-
transfer, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights
<PAGE>
Credit Suisse First Boston,
Administrative Agent
and collateral Agent
Each of the Lenders
named in Annex A -7- April 30, 1998
or remedies generally, and (b) general equitable principles (whether considered
-
in a proceeding in equity or at law). Our opinion set forth in paragraphs 2, 3,
and 5 above is also subject to the effects of (i) an implied covenant of good
-
faith, reasonableness and fair dealing, (ii) applicable state laws and
--
interpretations which may affect the validity or enforceability of certain
remedies provided for in the Loan Documents, which limitations, however, do not,
in our opinion, make the remedies provided for therein inadequate for the
practical realization of the rights and benefits intended to be provided thereby
(subject to the other qualifications expressed herein), and (iii) limitations on
---
enforceability of rights to indemnification under Federal or state securities
laws or regulations or to the extent any indemnification would violate public
policy. We express no opinion as to (1) the enforceability of any waiver of any
-
statutory right, (2) Section 9.14 of the Credit Agreement, Section 19 of the
-
JCISA Subsidiary Guarantee Agreement, Section 7.12 of the Security Agreement or
Section 21 of the Pledge Agreement, and any similar provision in any other Loan
Document, insofar as such provisions relate to the subject matter jurisdiction
of the United States District Court for the Southern District of New York to
adjudicate any controversy, (3) the waiver of inconvenient forum set forth in
-
Section 9.14 of the Credit Agreement, Section 19 of the JCISA Subsidiary
Guarantee Agreement, Section 7.12 of the Security Agreement or Section 21 of the
Pledge Agreement, and any similar provision in any Loan Document, or (4) the
-
enforceability of Section 9.18 or 9.21 of the Credit Agreement.
We express no opinion as to the validity or perfection of any security
interest, or the validity, binding effect or enforceability of any Loan Document
to the extent that such Loan Document grants or purports to grant a security
interest, (i) that is not governed by the UCC (including but not limited to any
-
such security interest with respect to (x) shares of stock or other rights or
-
interests in any Foreign Subsidiary, (y) Copyrights, Copyright Licenses,
--
Patents, Patent Licenses, Trademarks and Trademark Licenses, as such terms are
defined in the Security Agreement, and (z) any deposit accounts and insurance
-
policies), (ii) in any Pledged Stock that is not a "certificated security" (as
--
such term is defined in Section 8-102(a)(4) of the UCC), (iii) in any collat-
---
eral of a type described in Section 9-401(1)(a) or (b) of the UCC, or (iv) in
--
any collateral that contains or is governed by provisions that purport to void
or prohibit the assignment thereof, or that are otherwise violated, if it is
assigned pursuant to the Security Agreement or the Pledge Agreement, including,
without limitation, any Accounts (as defined in the Security Agreement) the
obligor for which is the United States of
<PAGE>
Credit Suisse First Boston,
Administrative Agent
and collateral Agent
Each of the Lenders
named in Annex A -8- April 30, 1998
America or any department, agency or instrumentality thereof. No security
interest will exist with respect to after-acquired property of the Parent or any
Subsidiary until such party has rights therein within the meaning of Section 9-
203 of the UCC. We express no opinion herein as to the title or any other
interest of the Parent, JCI, JCISA or any Subsidiary in or to any of the
collateral described in the Loan Documents.
Except as set forth in paragraph 5 above, we express no opinion as to
the validity or perfection of the security interests purported to be created by
the Loan Documents. We express no opinion as to the validity or perfection of
such security interests:
(i) with respect to collateral sold, exchanged or otherwise
disposed of by a Loan Party;
(ii) to the extent such security interests may be affected by (A)
-
Section 552 of the United States Bankruptcy Code, under which a bankruptcy
court has discretion as to the extent to which post-petition proceeds may
be subject to a lien arising from a security agreement entered into by the
debtor before the commencement of the case, or (B) Section 547(b) of the
-
United States Bankruptcy Code, relating to the power to avoid a preference;
(iii) with respect to proceeds, to the extent of limitations under
Section 9-306 of the UCC on the perfection of a security interest in
proceeds;
(iv) as to any collateral acquired by the party granting such
security interest more than four months after such party changes its name,
identity or corporate structure so as to make the relevant financing
statements seriously misleading, unless new appropriate financing
statements indicating the new name, identity or corporate structure of such
party are properly filed before the expiration of such four months; and
(v) as to any securities, to the extent of limitations under
Section 9-115 of the UCC on the creation, perfection and continuation of a
security interest therein.
<PAGE>
Credit Suisse First Boston,
Administrative Agent
and collateral Agent
Each of the Lenders
named in Annex A -9- April 30, 1998
We call to your attention that Sections 8-105 and 8-107 of the UCC may in
certain circumstances limit the rights of a secured party in respect of any
unauthorized endorsement with respect to certificated securities constituting
collateral under the Loan Documents not registered in the name of or issued to
the Collateral Agent and not originally issued in bearer form.
We express no opinion as to the priority of the security interests
purported to be created by the Loan Documents. Our opinion in paragraph 5 above
with respect to the Pledged Stock is subject to the effects of the attachment
provisions of Section 324 of the DGCL (to the extent applicable) and comparable
provisions of the law of any jurisdiction (other than the State of Delaware)
where an issuer of Pledged Stock may be organized. In rendering the opinion set
forth in paragraph 5(b) above, we have assumed, with your consent, that all
Article 9 Collateral in which a security interest may be perfected only by
possession will be held at all times by the Collateral Agent in the State of New
York. In rendering the opinion set forth in paragraph 5(c) above, we have
assumed, with your consent, that all of the Pledged Stock will be held at all
times by the Collateral Agent in the State of New York.
We express no opinion as to the validity, binding effect or
enforceability of any provision of the Loan Documents that purports (i) to
-
waive, release or vary any right of, or any duties owing to, any Loan Party, to
the extent limited by Section 1-102(3) or 9-501(3) of the UCC or other
provisions of applicable law, (ii) to prohibit any Loan Party from transferring
--
its respective rights in the collateral described in the Loan Documents or any
proceeds thereof, as a result of the operation of Section 9-311 of the UCC, or
(iii) to permit the Collateral Agent to vote or otherwise exercise any rights
---
with respect to any of the collateral under the Loan Documents absent compliance
with the requirements of applicable laws and regulations as to the voting of or
other exercise of rights with respect to such collateral.
We express no opinion as to the effect of, or compliance with, any
Federal or State laws regarding fraudulent transfers or conveyances, or
provisions of Delaware or New York law restricting dividends, loans or other
distributions by a corporation to or for the benefit of its stockholders, or any
Federal or State securities laws, rules or regulations, including without
limitation as to the effect thereof on the validity, binding effect or
enforceability of any of the Loan Documents.
<PAGE>
Credit Suisse First Boston,
Administrative Agent
and collateral Agent
Each of the Lenders
named in Annex A -10- April 30, 1998
We express no opinion as to the laws of any jurisdiction other than
the laws of the State of New York, the General Corporation Law of the State of
Delaware and those Federal laws of the United States of America which, in our
experience, are generally applicable to transactions of this type. In
particular (and without limiting the generality of the foregoing) we express no
opinion as to the laws of any country (other than the Federal laws of the United
States of America) or as to the effect of such laws (whether limiting,
prohibitive or otherwise) on any of the rights or obligations of any Loan Party
or of any other party to or beneficiary of any of the Loan Documents. In giving
the foregoing opinion, we express no opinion as to the effect (if any) of any
law of any jurisdiction (except the State of New York) in which any Lender is
located which limits the rate of interest that such Lender may charge or
collect.
The opinions expressed herein are solely for your benefit and, without
our prior consent, neither our opinion nor this opinion letter may be disclosed
publicly to or relied upon by any other person.
Very truly yours,
<PAGE>
Annex A
-------
LENDERS
-------
Credit Suisse First Boston
The Chase Manhattan Bank
Bank of America National Trust & Savings Association
The Bank of Nova Scotia
Marine Midland Bank
Union Bank of California, N.A.
The Bank of New York
<PAGE>
Schedule 1
----------
SUBSIDIARY PARTIES
------------------
1. Pledgors
--------
CDRJ North Atlantic (Lux) S. a R.L.
CDRJ Latin America Holding Company B.V.
Latin Cosmetics Holdings B.V.
Regional Cosmetics Holdings B.V.
Southern Cosmetics Holdings B.V.
CDRJ Mexico Holding Company B.V.
2. Mexican Subsidiary Guarantors
-----------------------------
Reday, S.A. de C.V.
Distribuidora Venus, S.A. de C.V.
Dirsamex, S.A. de C.V.
Qualifax, S.A. de C.V.
Jafra Cosmetics, S. de R.L. de C.V.
Consultoria Jafra, SA. de C.V.
<PAGE>
Schedule 2
----------
CONTRACTS
---------
1. Acquisition Agreement, dated as of January 26, 1998, by and between The
Gillette Company ("Gillette"), Parent and CDRJ Holding Company
("CaymanCo"), as amended by the Letter Agreement, dated March 23, 1998,
from Gillette to Parent and CaymanCo, and Amendment No. 2, dated as of
April 30, 1998, among Gillette, Parent, CaymanCo, Jafra Cosmetics
International, Inc., a California corporation ("Jafra, Inc."), and JCI.
2. Certificate of Merger, dated April 30, 1998, of Jafra, Inc., and JCI.
3. Indenture, dated as of April 30, 1998, among JCI and JCISA, as Issuers
(the "Issuers"), Parent and State Street Bank and Trust Company, as
Trustee, relating to the Issuers' 11 3/4 Senior Subordinated Notes due
2008.
<PAGE>
EXHIBIT N.2
to CREDIT AGREEMENT
[LETTERHEAD OF RITCH, HEATHER Y MUELLER, S.C. APPEARS HERE]
April 30, 1998
Credit Suisse First Boston,
as Administrative Agent,
Issuing Bank and Collateral Agent
Eleven Madison Avenue
New York, N.Y. 10010;
The Chase Manhattan Bank,
as Lender under the Fee and
Guarantee Agreement
referred to below; and
The Lenders party to the Credit Agreement
referred to below (all of the addressees
hereof, collectively, the "Creditors")
---------
Ladies and Gentlemen:
We have acted as special Mexican counsel to Jafra Cosmetics International,
S.A. de C.V., a sociedad anonima de capital variable organized under the laws of
the United Mexican States (the "Borrower"), in connection with the execution and
--------
delivery of, and the consummation of the transactions contemplated by, the
Credit Agreement dated as of April 30, 1998 (the "Credit Agreement"), among CDRJ
----------------
Investments (Lux) S.A., a Luxembourg societe anonyme ("Parent"), Jafra Cosmetics
------
International, Inc., a Delaware corporation ("JCI"), the Borrower, the financial
---
institutions party thereto as lenders (the "Lenders"), the Issuing Bank (as
-------
defined therein) and Credit Suisse First Boston, as administrative agent (in
such capacity, the "Administrative Agent"), as swingline lender and as
--------------------
collateral agent (in such capacity, the "Collateral Agent"). This opinion is
----------------
delivered pursuant to Section 4.02(a)(ii) of the Credit Agreement. Capitalized
terms used but not defined herein shall have the meanings assigned to such terms
in the Credit Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the following
documents:
<PAGE>
2
1. a copy of the estatutos sociales of the Borrower and each
------------------
JCISA Subsidiary Guarantor;
2. resolutions of the Extraordinary Shareholders' Meeting of
the Borrower and of the Ordinary Shareholders' Meeting of
each JCISA Subsidiary Guarantor authorizing the Loan
Documents and certain persons to execute and deliver the
Loan Documents to which it is a party;
3. the Credit Agreement;
4. the JCISA Guarantee Agreement dated as of April 30, 1998 by
and between each of the entities specified to be signatory
thereto and the Collateral Agent;
5. the JCISA Subsidiary Guarantee Agreement dated as of April
30, 1998 by and between each of the entities specified to be
signatory thereto and the Collateral Agent;
6. the Pledge Agreement dated as of April 30, 1998 by and
between each of the entities specified to be signatory
thereto and the Collateral Agent;
7. the Indemnity, Subrogation and Contribution Agreement dated
as of April 30, 1998 by and between each of the entities
specified to be signatory thereto and the Collateral Agent;
8. the mortgages dated April 30, 1998 granted by Reday, S.A. de
C.V. in respect of certain real estate owned thereby in
favor of the Collateral Agent (the "Mexican Mortgages"); and
-----------------
9. the Fee and Guarantee Agreement dated the date hereof
entered into by and between The Chase Manhattan Bank
("Chase"), JCI, the Borrower and the Parent (the "Fee
----- ---
and Guarantee Agreement")
-----------------------
In addition, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such records, agreements,
instruments and other documents, and have
<PAGE>
3
made such other investigations, as we have deemed necessary for the purpose of
this opinion. We have assumed, without any independent investigation or
verification of any kind, (i) the due authorization, execution and delivery by
the Administrative Agent, the Collateral Agent, the Arrangers, the Syndication
Agent, the Lenders, JCI, the Parent, Chase and any other non-Mexican party, of
the Loan Documents (which term shall include for purposes of this opinion, the
Fee and Guarantee Agreement) as well as the power and authority and legal right
of the Administrative Agent, the Collateral Agent, the Arrangers, the
Syndication Agent, the Lenders, JCI, the Parent, Chase and any other non-Mexican
party under all applicable laws and regulations to enter into, execute, deliver
and perform its obligations under the Loan Documents (including, without
limitation, the Credit Agreement); (ii) the validity, binding effect and
enforceability of the Loan Documents under the laws of the State of New York of
the United States of America or any laws other than the laws of the United
Mexican States ("Mexico"); (iii) the genuineness of all signatures and the
------
authenticity of all opinions, documents and papers submitted to us and (iv) that
copies of all opinions, documents and papers submitted to us are complete and
conform to the originals thereof.
As to questions of fact material to the opinions hereafter expressed, we
have, when relevant facts were not independently established by us, relied upon
certificates of the Borrower and/or the JCISA Subsidiary Guarantors or their
respective officers.
Based upon the foregoing, and subject to the qualifications set forth
below, we are of the opinion that:
1. The Borrower and each JCISA Subsidiary Guarantor (a) is a corporation
duly organized and validly existing under the laws of Mexico, (b) has all
requisite corporate power and authority to own its property and assets and to
carry on its business as presently conducted and as proposed to be conducted,
and (c) has the corporate power and authority to execute, deliver and perform
its obligations under each of the Loan Documents to which it is a party and, in
the case of the Borrower, to borrow under the Credit Agreement.
2. As evidenced by the stock registry book of each such company, all of
the shares representing the capital stock of the Borrower and of each JCISA
Subsidiary Guarantor have been duly and validly authorized and issued, are fully
paid and non-assessable and, except as set forth on Schedule 3.08 to the Credit
Agreement, and with respect to each JCISA Subsidiary Guarantor, are owned by the
Borrower, directly or
<PAGE>
4
indirectly, free and clear of all Liens (other than Liens created under the Loan
Documents). To the best of our knowledge, after due inquiry, no authorized but
unissued or treasury shares of capital stock of any Subsidiary are subject to
any option, warrant, right to call or commitment of any kind. To the best of our
knowledge, after due inquiry, none of the Borrower or any Subsidiary is subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of its capital stock or any securities convertible into or
for shares of its capital stock. To the best of our knowledge, after due
inquiry, none of the Borrower or any JCISA Subsidiary Guarantor is a party to
any agreement restricting the transfer or voting of any shares of any capital
stock of the Borrower or any JCISA Subsidiary Guarantor (except as contemplated
in the Loan Documents).
3. The execution, delivery and performance of each of the Mortgages and
the Loan Documents by the borrower and each JCISA Subsidiary Guarantor party
thereto, the borrowing thereunder, the issuances of the Letters of Credit and
the creation of the security interests contemplated thereby (a) have been duly
authorized by all requisite corporate and, if necessary, stockholder action of
the Borrower and each JCISA Subsidiary Guarantor and (b) will not (i) violate
(A) any provision of the estatutos sociales of the Borrower or any JCISA
------------------
Subsidiary Guarantor, (B) any law, statute, rule or regulation applicable to the
Borrower or any JCISA Subsidiary Guarantor or their properties or (C) any
provision of any indenture or other material agreement or other material
instrument known to us to which the Borrower or any JCISA Subsidiary Guarantor
is a party or by which any of them or any of their property is bound, (ii) be in
conflict with, result in a breach of or constitute (alone or with notice or
lapse of time or both) a default under, or give rise to any right to accelerate
or to require the prepayment, repurchase or redemption of any obligation under
any such indenture, agreement or other instrument known to us or (iii) result in
the creation or imposition of any Lien upon or with respect to any property or
assets now owned or hereafter acquired by the Borrower or any JCISA Subsidiary
Guarantor (other than any Lien created under the Mortgages and the Loan
Documents).
4. Each Loan document to which it is a party has been duly executed and
delivered by each of the Borrower and the JCISA Subsidiary Guarantors, as
applicable, and constitutes the legal, valid and binding obligation of each of
such company, in each case enforceable against each such company in accordance
with its respective terms (subject to the qualifications set forth below).
<PAGE>
5
5. Each of the Loan Documents to which it is a party is in proper legal
form for the enforcement thereof against each of the Borrower and the JCISA
Subsidiary Guarantors under the laws of Mexico, and to ensure the legality,
validity, enforceability, priority or admissibility in evidence of each of the
Loan Documents is not necessary that it or any other document be filed,
registered or recorded with, or executed or notarized before, any court or other
authority in Mexico or that any registration charge or stamp or similar tax be
paid on or in respect of the Loan Documents, except in respect of the
notarization and recordation of the Mortgages with the Public Registry of
Property and Commerce corresponding to the location of the property.
6. (a) None of the Borrower or the JCISA Subsidiary Guarantors are in
default, nor any event has occurred which with notice or lapse of time or both
would constitute such a default, in the due performance or observance of any
term, covenant, or condition contained in (i) any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known to us, if any, to
which it is a party or by which it is bound or to which any of its property,
revenues or assets is subject or (ii) the Mortgages and the Loan Documents and
(b) none of the Borrower or the JCISA Subsidiary Guarantors are in violation of
any law, ordinance, government rule or regulation or judgment or order known to
us which it or its property, revenues or assets may be subject.
7. There are not any actions, suits or proceedings by or before any
Governmental Authority now pending or, to our knowledge, threatened against or
affecting the Borrower or any JCISA Subsidiary Guarantor or any business,
property or rights of any such person (a) that involve any of the Loan Documents
or the transactions contemplated thereby or (b) as to which there is a
reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect.
8. No action, consent or approval of, registration or filing with or any
other action by any Governmental Authority is or will be required in connection
with the execution, delivery and performance of the Mortgages and the Loan
Documents by the Borrower and the JCISA Subsidiary Guarantors or the
consummation of the transactions contemplated thereby, other than (i) the
recordation of the Mortgages and (ii) such authorizations and approvals as have
already been obtained and are in full force and effect.
<PAGE>
6
9. It is not necessary under the laws of Mexico (i) to enable any of the
Creditors (INCLUDING CHASE) to enforce its respective rights under the Loan
---------------
Documents or (ii) by reason of their enforcement, that any of them should be
licensed, qualified or entitled to carry on business in Mexico. None of the
Creditors will be deemed resident, domiciled, carrying on business or subject to
taxation in Mexico solely by reason of its respective execution, delivery,
performance or enforcement of the Loan Documents to which it is a party.
10. The Mortgages are in proper form under applicable laws of Mexico (a)
(i) to be accepted for recording by the Public Registry of Commerce of Mexico
City, Federal District, and Naucalpan, Estado de Mexico, as the case may be, and
(ii) to be enforceable against the mortgagor named therein in accordance with
their respective terms, and (b) (i) to create and constitute valid first place,
legal, binding and enforceable mortgage liens on the real property described
therein (the "Real Property") and on the personal property, identified therein
-------------
(the "Personal Property").
-----------------
11. The recordation of Mortgages with the public registries described
above are the only actions, recordings or filings necessary to perfect the
Mortgages under Mexican law.
12. The transfer of all or any portion of the Mortgaged Property in
connection with the exercise of any remedy under the Mortgages, including,
without limitation, by way of judicial foreclosure, will not restrict, affect or
impair the liability of the Borrower and each Material Subsidiary with respect
to the indebtedness secured thereby or mortgagee's rights or remedies relating
thereto, including the foreclosure or enforcement of any other security interest
or liens securing such indebtedness and the laws of Mexico do not require a
lienholder to elect to pursue its remedies either against mortgaged real
property or personal property where such lienholder holds security interests and
liens on both real and personal property of a debtor.
13. The Pledge Agreement, together (i) with possession by the Collateral
agent of the stock certificates evidencing the Mexican Pledged Securities (as
defined in the Pledge Agreement), (ii) the endorsement in guaranty (endoso en
---------
garantia) thereof in favor of the Collateral Agent and (iii) the notation
- --------
thereof in the stockholders, registry book of each of the issuers of the Mexican
Pledged Securities, creates in favor of the Collateral Agent for the benefit of
the Secured parties a valid and perfected security pledge of the Pledged
Securities under Mexican law, subject to no equal or prior security interest of
any other creditor.
<PAGE>
7
14. The Collateral Agent has the power, without naming all the Creditors
in any applicable legal proceeding, to exercise remedies under the Mortgages and
Security Agreements for the realization of any of the Mortgaged Property or the
Collateral in its own name, as collateral agent.
15. No taxes or other charges, including, without limitation, documentary
stamp taxes, mortgage or recording taxes, transfer taxes or similar charges, are
payable to Mexico to any jurisdiction therein on account of the execution or
delivery or recording or filing of the Mortgages or any of the Loan Documents or
the creation of the indebtedness evidenced or secured by any of the Loan
Documents, as applicable, except for filing or recording fees and any taxes
payable as a result of the transfer of the Mortgaged Property in the event of
foreclosure or other enforcement thereof.
16. Under the laws of Mexico, none of the Borrower or JCISA Subsidiary
Guarantors would be entitled to invoke immunity from jurisdiction, suit,
execution, attachment or other legal process in respect of any action arising
out of its obligations under the Mortgages or the Loan Documents.
17. The choice of New York law as the governing law of the Loan Documents
(except for the Mortgages which are governed by Mexican law) is a valid choice
of law.
18. Any judgment obtained in a state or Federal court sitting in the
Borough of Manhattan, City of New York, State of New York, arising out of or in
relation to the obligations of the Borrower and its Subsidiaries under the Loan
Documents (except for the Mortgages in respect of which the parties have
submitted to the jurisdiction of the courts of Mexico City, Federal District)
would be enforceable in Mexico against the Borrower pursuant to Articles 569 and
571 of the Federal Code of Civil Procedure of Mexico and Article 1347A of the
Commerce Code, which provide, inter alia, that any judgment rendered outside
Mexico may be enforced by Mexican courts, provided that:
--------
(i) such judgment is obtained in compliance with legal requirements
of the jurisdiction of the court rendering such judgment and in compliance
with all legal requirements of the Loan Documents;
(ii) such judgment is strictly for the payment of a certain sum of
money, based on an in personam (as opposed to an in rem) action;
<PAGE>
8
(iii) service of process has been made personally on the Borrower
and/or its JCISA Subsidiary Guarantors, as the case may be, or on the
appropriate process agent;
(iv) such judgment does not violate Mexican law, public policy of
Mexico (orden publico), international treaties or agreements binding upon
Mexico or generally accepted principles of international law;
(v) the applicable procedure under the laws of Mexico with respect
to the enforcement of foreign judgments (including issuance of letters
rogatory by the competent authority of such jurisdiction requesting
enforcement of such judgment and the certification of such judgment as
authentic by the corresponding authorities of such jurisdiction in
accordance with the laws thereof) is complied with;
(vi) such judgment is final in the jurisdiction where obtained;
(vii) the action in respect of which such judgment is rendered is not
the subject matter of a lawsuit among the same parties, pending before a
Mexican court; and
(viii) the courts of such jurisdiction recognize the principles of
reciprocity in connection with enforcement of Mexican judgments in such
jurisdiction.
20. The appointment by the Borrower and the JCISA Subsidiary Guarantors of
JCI as their agent for service of process under the Credit Agreement is legal,
valid and binding.
The foregoing opinion is subject to the following qualifications:
(a) enforcement of the Loan Documents against the Borrower and/or the
JCISA Subsidiary Guarantors may be limited by bankruptcy, suspension of
payments, insolvency, liquidation, reorganization, moratorium, labor, tax and
other similar laws of general application relating to or affecting the rights of
creditors generally;
(b) in any proceedings brought in the courts of Mexico for the enforcement
of any of the Loan Documents against the Borrower and/or the JCISA Subsidiary
Guarantors, a Mexican court would apply Mexican procedural law;
<PAGE>
9
(c) in the event that proceedings are brought in Mexico seeking
performance of the obligations of the Borrower and/or the JCISA Subsidiary
Guarantors in Mexico, pursuant to the Mexican Monetary Law, the Borrower and/or
the JCISA Subsidiary Guarantors, as the case may be, may discharge their
obligations by paying any sum due in a currency other than Mexican currency, in
Mexican currency at the rate of exchange prevailing in Mexico on the date when
payment is made, and, consequently, any currency indemnity provision of the Loan
Documents may not be enforceable in Mexico;
(d) provisions of the Agreement granting discretionary authority to any of
the Administrative Agent, the Collateral Agent, the Arrangers, the Syndication
Agent or the Lenders cannot be exercised in a manner inconsistent with relevant
facts nor defeat any requirement from a competent authority to produce
satisfactory evidence as to the basis of any determination; in addition, under
Mexican law, the Borrower and/or the JCISA Subsidiary Guarantors will have the
right to contest in court any notice or certificate of any such person or any
Lender purporting to be conclusive and binding;
(e) in the event that any legal proceedings are brought to the courts of
Mexico, a Spanish translation of the documents required in such proceedings
prepared by a court-approved translator would have to be approved by the court
after the defendant had been given an opportunity to be heard with respect to
the accuracy of the translation, and proceedings would thereafter be based upon
the translated documents;
(f) in any bankruptcy proceeding initiated in Mexico pursuant to the laws
of Mexico, labor claims, claims of tax authorities for unpaid taxes, Social
Security quotas, Workers' Housing Fund quotas and Retirement Fund quotas will
have priority over claims of the Administrative Agent, the Collateral Agent, the
Arrangers, the Syndication Agent or the Lenders;
(g) with respect to provisions contained in the Loan Documents in
connection with service of process, it should be noted that service of process
by mail does not constitute personal service of process under Mexican law and,
since such service is considered to be a basic procedural requirement, if for
purposes of proceedings outside Mexico service of process is made by mail, a
final judgment based on such process would not be enforced by the courts of
Mexico;
(h) Mexican law does not permit the collection of interest-on-interest
and, consequently, relevant provisions of
<PAGE>
10
the Loan Documents relating to the payment of interest-on-interest may not be
enforceable in Mexico;
(i) covenants of the Borrower and/or the JCISA Subsidiary Guarantors which
purport to bind it on matters reserved by law to shareholders, or which purport
to bind shareholders to vote or refrain from voting their shares issued by the
Borrowers and/or the JCISA Subsidiary Guarantors or their subsidiaries, are not
enforceable, under Mexican law, through specific performance;
(j) we express no opinion in respect of the enforceability under Mexican
law of the extra-judicial foreclosure or enforcement by the Collateral Agent of
the security interest on the Mexican Pledged Securities in the terms of the
Pledge Agreement; and
(k) we note that a Mexican court could hold that the consent to
jurisdiction provisions contained in the Loan Documents do not comply with
Mexican legal requirements to be considered valid and, therefore, a Mexican
court could deny the enforcement in Mexico of a foreign judgment issued against
the Borrower and/or the JCISA Subsidiary Guarantors under the Loan Documents.
We express no opinion as to any other than the laws of Mexico.
This opinion is addressed to you solely for your benefit and it is not to
be transmitted to anyone else or is it to be relied upon by anyone else or for
any other purpose or quoted or referred to in any public document or filed with
anyone without our express consent.
Very truly yours,
RITCH, HEATHER Y MUELLER, S.C.
By /s/ James E. Ritch
-------------------------------------
James E. Ritch Grande Ampudia,
a partner
<PAGE>
11
Schedule A
----------
SUBSIDIARIES
Jafra Cosmetics, S. de R.L. de C.V.
Dirsamex, S.A. de C.V.
Distribuidora Venus, S.A. de C.V.
Consultoria Jafra, S.A. de C.V.
Qualifax, S.A. de C.V.
Reday, S.A. de C.V.
<PAGE>
EXHIBIT N-3
to CREDIT AGREEMENT
[LETTERHEAD OF BONN & SCHMITT APPEARS HERE]
CREDIT SUISSE FIRST BOSTON
as Administrative Agent, Issuing Bank
and Collateral Agent
Eleven Madison Avenue
USA-New York, NY 10010
-----------------------
The Lenders party to the Credit
Agreement referred to below
THE CHASE MANHATTAN BANK, as
Lender under the Fee and Guarantee
Agreement dated the date hereof
April 30, 1998
Ladies and Gentlemen,
We have acted as counsel to CDRJ Investments (Lux) S.A., a Luxembourg
societe anonyme (the "COMPANY") and CDRJ North Atlantic (Lux) S.A.R.L., a
Luxembourg societe a responsabilite limitee ("LUX SARL"), in connection with the
execution and delivery today of, and the consummation of the transactions
contemplated by, the Credit Agreement dated as of April 30, 1998 (the "CREDIT
AGREEMENT"), among the Company, Jafra Cosmetics International, Inc., a Delaware
corporation ("JCI"), Jafra Cosmetics International, S.A. de C.V., a sociedad
anonima de capital variable organized under the laws of the United Mexican
States ("JCISA" and together with JCI, the "BORROWERS"), the financial
institutions party thereto as lenders (the "LENDERS"), the Issuing Bank (as
defined therein) and Credit Suisse First Boston, as administrative agent (in
such capacity, the "ADMINISTRATIVE AGENT"), as swingline lender (in such
capacity, the "SWINGLINE LENDER"), and as collateral agent (in such capacity,
the "COLLATERAL AGENT") and the other Credit Documents. This opinion is
delivered pursuant to Section 4.02(a) of the Credit Agreement. Capitalized terms
used but not defined herein shall have the meanings assigned to such terms in
the Credit Agreement.
<PAGE>
2
In connection with the opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the following
documents:
1. the articles of incorporation of the Company and Lux SARL;
2. resolutions of the board of directors and of the shareholders of
the Company and Lux SARL authorizing the Transactions and certain
persons to execute and deliver the Credit Documents;
3. the Credit Agreement;
4. the Parent Guarantee Agreement dated as of April 30, 1998 by and
between each of the entities specified to be signatory thereto
and the Collateral Agent (the "PARENT GUARANTEE");
5. the PLEDGE AGREEMENT dated as of April 30, 1998 by and between
each of the entities specified to be signatory thereto and the
Collateral Agent; and
6. the fee and guarantee agreement dated April 30, 1998 by and
between CDRJ Acquisition Corporation (to be renamed Jafra
Cosmetics International, Inc.), Jafra Cosmetics International,
S.A., de C.V. and CDRJ Investments (Lux) S.A. (the "FEE AND
GUARANTEE AGREEMENT")
In addition, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such records, agreements,
instruments and other documents, and have made such other investigations, as we
have deemed necessary for the purpose of this opinion.
The Credit Agreement, the Parent Guarantee, the Pledge Agreement and
the Fee and Guarantee Agreement are together referred to as the "CREDIT
DOCUMENTS".
For the purposes of this opinion, we have assumed:
a) that the execution and delivery of the Credit Documents are within the
capacity, power and authority of the parties thereto, other than the
Company, and that these Credit Documents have been duly authorized,
executed and delivered by, and are binding upon, all such parties,
other than the Company;
<PAGE>
3
b) the genuineness of all signatures on all documents and the
completeness, and the conformity to original documents, of all copies
submitted to us;
c) that all authorizations and consents of any public authority of any
country other than the Grand-Duchy of Luxembourg which may be required
in connection with the execution and delivery of the Credit Documents
have been or will be obtained;
d) that the documents are substantially in the form of the drafts or
copies we have examined; and
e) the legality, validity and enforceability of the Credit Documents and
all other documents related to this transaction under their governing
laws (other than the laws of Luxembourg).
On the basis of the foregoing and subject to the qualifications listed
below, we are, as of the date hereof, of the opinion that:
1. Each of the Company and Lux SARL (a) is a corporation duly
organized and validly existing under the laws of Luxembourg, (b) has all
requisite power and authority to own its property and assets and to carry on its
business as now conducted and as proposed to be conducted and (c) has the power
and authority to execute, deliver and perform its obligations under each of the
Credit Documents to which it is a party.
2. All shares of capital stock of, or other equity interests in Lux
SARL have been duly and validly authorized and issued, are fully paid and non-
assessable, are owned by the Company and are not pledged (otherwise than
pursuant to the Credit Documents). Our opinion as to the absence of pledge is
based solely on a review of Lux SARL's register.
3. All shares of capital stock of, or other equity interests in the
Company have been duly and validly authorized and issued, and will be fully paid
and non-assessable if and when restructuring of the share capital of the Company
as contemplated in the Company's board resolutions of same date will be
completed.
4. The execution, delivery and performance of each of the Credit
Documents to which it is a party by the Company and Lux SARL and the creation of
the security interests contemplated thereby (a) have been duly authorized by all
requisite corporate and stockholder action of the Company and Lux SARL and (b)
will not (i) violate (A)
<PAGE>
4
any provision of the articles of incorporation of the Company or Lux SARL, (B)
any law, statute, rule or regulation of any Governmental Authority applicable to
the Company or Lux SARL or their properties or (ii) result in the creation or
imposition of any Lien upon or with respect to any property or assets now owned
or hereafter acquired by the Company or Lux SARL (other than any Lien Created
under the Loan Documents).
5. Each Credit Document to which it is a party has been duly
executed and delivered by the Company and Lux SARL, as the case may be, and
constitutes the legal, valid and binding obligation of the Company and Lux SARL,
as the case may be, in each case enforceable against the Company and Lux SARL,
as the case may be, in accordance with its terms;
6. The Pledge Agreement creates a valid first priority right of
pledge in the shares of Lux SARL for the benefit of the Lenders, as security for
the payment and performance of the Company's obligations under the Credit
Documents, and are the legal, valid and binding obligations of the Company,
provided that the Pledge Agreement has been registered in the register of Lux
SARL and that either the Pledge Agreement has been notified to Lux SARL or that
Lux SARL has accepted the Pledge Agreement.
7. Each of the Credit Documents to which it is a party is in proper
legal form for the enforcement thereof against the Company and Lux SARL, as the
case may be, under the laws of Luxembourg, and to ensure the legality, validity,
enforceability, priority or admissibility in evidence of each of the Credit
Documents it is not necessary that it or any other document be filed, registered
or recorded with, or executed or notarized before, any court or other authority
in Luxembourg or that any registration charge or stamp or similar tax be paid on
or in respect of the Credit Documents save that registration may be ordered and
a registration fee of 0.24 per cent on the total amount involved might become
payable if the Credit Documents were to be exhibited before a Luxembourg Court
or a Luxembourg official authority (autorite constituee); in practice, the
registration is very rarely ordered. The only effect of such registration would
be the obligation to pay the fee.
8. No action, consent or approval of, registration of filing with or
any other action by any Governmental Authority is or will be required in
connection with the execution, delivery and performance of the Credit Documents
by the Loan Parties party thereto or the consummation of the transactions
contemplated thereby.
<PAGE>
5
9. There is no income, stamp or other tax, fee or charge of the
Government of Luxembourg, or any taxing authority thereof or therein, imposed by
or in the nature of withholding or otherwise, which is imposed on any payment to
be made pursuant to the Credit Documents, or imposed on or by virtue of the
execution, delivery or enforcement of the Credit Documents (such payments may
however constitute taxable income in the hands of recipients resident in
Luxembourg and/or recipients not resident in Luxembourg but having a permanent
establishment or a permanent representative in Luxembourg).
10. Each of the Company and Lux SARL is subject to civil and
commercial law with respect to its obligations under the Credit Documents, and
the execution, delivery and performance by each of the Company and Lux SARL
constitute and will constitute private and commercial acts rather than public or
Governmental acts. Each of the Company and Lux SARL has validly given its
consent to be sued in respect of its obligations under the Credit Documents to
which it is a party.
11. (a) The governing law clause set forth in the Credit Documents,
subjecting the Credit Documents to New York law, is legal, valid and binding
under the laws of Luxembourg and any political subdivision thereof and would be
recognized and given effect by the courts of Luxembourg and any political
subdivision thereof and (b) the courts of Luxembourg would award a judgment in
dollars to the extent provided in the Credit Documents.
12. Assuming that the Credit Documents were governed by the laws of
Luxembourg for the purpose of rendering the opinion set forth in this paragraph
12, the use of counterpart copies of any of the Credit Documents does not affect
the enforceability of any of the Credit Documents.
13. It is not necessary under the laws of Luxembourg in order to
enable the Administrative Agent, the Collateral Agent or any Lender to enforce
its rights under the Credit Documents that it should be licensed, qualified or
entitled to do business in Luxembourg.
The opinions expressed herein are subject to the following
qualifications:
(a) the obligations of the Company and of Lux SARL under the Credit
Documents and the enforceability of the Credit Documents will be
subject to and may be limited by any applicable bankruptcy,
liquidation, insolvency or other laws of
<PAGE>
6
similar effect relating to or affecting the enforcement of creditors'
rights generally;
(b) the enforcement of the Credit Documents and the rights and obligations
of the parties thereto will be subject to the general statutory
principles of Luxembourg law and no opinion is given herein as to the
availability of any specific performance remedy, other than monetary
damages, for the enforcement of any obligation of the Company and of
Lux SARL and this opinion should not be taken to imply that a
Luxembourg Court will necessarily grant any remedy, in particular,
orders for specific performance and injunctions will not be available;
(c) where any obligations are to be performed or observed or are based
upon a matter arising in a jurisdiction outside Luxembourg, they may
not be enforceable under Luxembourg law if and to the extent such
performance or observance would be unlawful, unenforceable, or
contrary to public policy under the laws of such jurisdiction;
(d) a Luxembourg Court may refuse to give effect to a purported
contractual obligation to pay costs imposed upon another party in
respect of the costs of any unsuccessful litigation brought against
that party before a Luxembourg Court and a Luxembourg Court may not
award by way of costs all of the expenditure incurred by a successful
litigant in proceedings brought before the Court;
(e) whilst, in the event of any proceedings being brought in a Luxembourg
Court in respect of a monetary obligation expressed to be payable in a
currency other than Luxembourg francs, a Luxembourg Court would have
power to give judgment expressed as an order to pay a currency other
than Luxembourg francs, enforcement of the judgment against the
Company in Luxembourg would be available only in Luxembourg francs and
for such purposes all claims or debts are converted into Luxembourg
francs normally at the prevailing exchange rate on the date of
payment;
(f) claims may become barred under the statutory limitation period rules
or may be or become subject to defenses of set-off or counterclaims;
(g) any determination or certificates made or given pursuant to the
provisions of the Credit Documents which provide for such
determination or certificate to be final, conclusive or binding might
not necessarily be held under Luxembourg law to be final, conclusive
or binding;
<PAGE>
7
(h) we express no opinion as to whether any provision in the Credit
Documents conferring a right of set-off or similar right would be
effective against a bankruptcy receiver, liquidator or a creditor;
(i) a contractual provision conferring or imposing a remedy, an obligation
or penalty consequent upon default may not be fully enforceable if it
were construed by a Luxembourg Court as constituting an excessive
pecuniary remedy.
This opinion is strictly limited to the matters of Luxembourg law
stated herein and is not to be read as extending by implication to any other
matters. It may be relied upon by each of you, by any successors and assigns of
the Administrative Agent, the Collateral Agent and the Issuing Bank, and any
participant, assignee or successor to the interests of the Lenders under the
Loan Documents.
This opinion is governed by Luxembourg law and the Luxembourg Courts
have exclusive jurisdiction in respect thereto.
Yours faithfully,
/s/ Bonn & Schmidt
BONN & SCHMIDT
<PAGE>
EXHIBIT N-4
to CREDIT AGREEMENT
[LETTERHEAD OF NAUTA DUTILH]
Credit Suisse First Boston
As Administrative Agent,
Issuing Bank and
Collateral Agent
Eleven Madison Avenue
New York, NY 10010
The Lenders party to the Credit
Agreement referred to below
Amsterdam, April 30, 1998
Ladies and Gentlemen,
This opinion is rendered pursuant to Section 4.02(a) of a credit agreement
dated as of April 30, 1998 among CDRJ Investments (Lux) S.A., Jafra Cosmetics
International, Inc., Jafra Cosmetics International, S.A. de C.V., the financial
institutions party thereto as lenders (the "Lenders"), the Issuing Bank (as
defined therein) and Credit Suisse First Boston as Administrative Agent, as
Issuing Bank and as Collateral Agent (the "Collateral Agent"), providing for a
US$90 million credit facility (the "Credit Agreement").
Capitalized terms used herein will have the meanings ascribed to them in the
Credit Agreement, unless otherwise defined herein.
<PAGE>
-2-
For the purposes of this opinion I have solely examined and relied on the
following documents:
(a) a copy of the deed of incorporation, including the articles of association
(in Dutch: "statuten"), of CDRJ Europe Holding Company B.V. ("Europe
Holding"), dated March 24, 1998 (the "Europe Holding Deed of
Incorporation"), stating that the statement of no objection from the
Minister of Justice in the Netherlands was obtained on March 20, 1998 with
number B.V. 626.298;
(b) a copy of an extract dated April 9, 1998 from the Commercial Register of
the Chamber of Commerce and Industry in Amsterdam, relating to Europe
Holding (the "Europe Holding Extract") confirmed to me by telephone to be
correct on April 29, 1998;
(c) a copy of the deed of incorporation, including the articles of association,
of CDRJ Latin America Holding Company B.V. ("Latin America Holding"), dated
March 24, 1998 (the "Latin America Holding Deed of Incorporation"), stating
that the statement of no objection from the Minister of Justice in the
Netherlands was obtained on March 20, 1998 with number B.V. 626-299;
(d) a copy of an extract dated April 9, 1998 from the Commercial Register of
the Chamber of Commerce and industry in Amsterdam, relating to Latin
America Holding (the "Latin America Holding Extract"), confirmed to me by
telephone to be correct on April 29, 1998;
(e) a copy of the deed of incorporation, including the articles of association,
of Latin Cosmetics Holdings B.V. ("Latin Cosmetics"), dated April 6, 1998
(the "Latin Cosmetics Deed of Incorporation"), stating that the statement
of no objection from the Minister of Justice in
<PAGE>
-3-
the Netherlands was obtained an March 25, 1998 with number B.V.
627.996;
(f) a copy of an extract dated April 9, 1998 from the Commercial Register of
the Chamber of Commerce and Industry in Amsterdam, relating to Latin
Cosmetics (the "Latin Cosmetics Extract"), confirmed to me by telephone to
be correct on April 29, 1998;
(g) a copy of the deed of incorporation, including the articles of association,
of Regional Cosmetics Holding B.V. ("Regional Cosmetics"), dated April 6,
1998 (the "Regional Cosmetics Deed of Incorporation"), stating that the
statement of no objection from the Minister of Justice in the Netherlands
was obtained on March 25, 1998 with number B.V. 627.999;
(h) a copy of an extract dated April 9, 1998 from the Commercial Register of
the Chamber of Commerce and Industry in Amsterdam, relating to Regional
Cosmetics (the "Regional Cosmetics Extract"), confirmed to me by telephone
to be correct on April 29, 1998;
(i) a copy of the deed of incorporation, including the articles of association,
of Southern Cosmetics Holdings B.V. ("Southern Cosmetics"), dated April 6,
1998 (the "Southern Cosmetics Deed of Incorporation"), stating that the
statement of no objection from the Minister of Justice in the Netherlands
was obtained on March 25, 1998 with number B.V. 627.998;
(j) a copy of an extract dated April 9, 1998 from the Commercial Register of
the Chamber of Commerce and Industry in Amsterdam, relating to Southern
Cosmetics (the "Southern Cosmetics Extract"), confirmed to me by telephone
to be correct on April 29, 1998;
<PAGE>
-4-
(k) a copy of the deed of incorporation, including the articles of association,
of CDRJ Mexico Holding company B.V. ("Mexico Holding"), dated April 6, 1998
(the "Mexico Holding Deed of incorporation"), stating that the statement of
no objection from the Minister of Justice in the Netherlands was obtained
on March 25, 1998 with number B.V. 627.997;
(l) a copy of an extract dated April 9, 1998 from the Commercial Register of
the Chamber of Commerce and Industry in Amsterdam, relating to Mexico
Holding (the "Mexico Holding Extract"), confirmed to me by telephone to be
correct on April 29, 1998;
(m) a copy of a draft of the Credit Agreement dated April 29, 1998;
(n) a draft copy of a pledge agreement dated as of April 30, 1998 among CDRJ
Investments (Lux) S.A., CDRJ North Atlantic (Lux) S.a.r.l., Latin America
Holding, Latin Cosmetics, Regional Cosmetics, Southern Cosmetics and Mexico
Holding, Jafra cosmetics International, Inc., Jafra Cosmetics
International, S.A. de C.V., the Subsidiary Pledgors as defined therein,
and Credit Suisse First Boston (the "Pledge Agreement");
(o) a copy of the notarial Share Pledge Deed dated April 30, 1998 between Jafra
Cosmetics International, Inc. as Pledgor I, CDRJ North Atlantic (Lux)
S.a.r.l. as Pledgor II, Europe Holding, Latin America Holding, and the
Collateral Agent as Pledgee (for itself and on behalf of the Lenders) with
respect to 65% of the shares of Europe Holding and 100% of the shares of
Latin America Holding (the "Share Pledge Deed");
(p) copies of the powers of attorney dated April 29, 1998
<PAGE>
-5-
from Jafra Cosmetics International, Inc., CDRJ North Atlantic (Lux)
S.a.r.l., the Collateral Agent, Europe Holding and Latin America Holding
respectively, to all lawyers of Nauta Dutilh to sign the Share Pledge Deed
on their behalves (the "Powers of Attorney");
(q) copies of the board resolutions dated April 29, 1998 of Latin America
Holding, Latin Cosmetics, Regional Cosmetics, Southern Cosmetics and Mexico
Holding with respect to the execution of the Pledge Agreement (the "Board
Resolutions"); and
(r) the shareholders registers of Europe Holding and Latin America Holding (the
"Shareholders Registers").
Europe Holding, Latin America Holding, Latin Cosmetics, Regional Cosmetics,
Southern Cosmetics and Mexico Holding are hereinafter also referred to as the
"Dutch Companies". Europe Holding and Latin America Holding are hereinafter also
referred to as the "Share Pledge Deed Companies". Latin America Holding, Latin
Cosmetics, Regional Cosmetics, Southern Cosmetics and Mexico Holding are
hereinafter also referred to as the "Pledge Agreement Companies". The Europe
Holding Deed of Incorporation, the Latin America Holding Deed of Incorporation,
the Latin Cosmetics Deed of Incorporation, the Regional Cosmetics Deed of
incorporation, the Southern Cosmetics Deed of Incorporation and the Mexico
Holding Deed of Incorporation are hereinafter also referred to as the "Deeds of
Incorporation". The Europe Holding Extract, the Latin America Holding Extract,
the Latin Cosmetics Extract, the Regional Cosmetics Extract, the Southern
Cosmetics Extract and the Mexico Holding Extract are hereinafter also referred
to as the "Extracts".
The following opinion is limited in ail respects to the laws, statutes and
governmental regulations of the Netherlands with general applicability as they
stand at the present time and as
<PAGE>
-6-
they are interpreted under published case law of the courts of the Netherlands
at the date hereof. I do not express any opinion on tax laws of the Netherlands
or on public international law or on the rules of or promulgated under or by any
treaty or organization.
This opinion shall be governed by and shall be construed and have effect in
accordance with the laws of the Netherlands.
In rendering this opinion I have assumed that:
(a) all documents submitted to me and the signatures and initials thereon are
genuine and that all documents submitted to me as photocopies or faxed
copies are in conformity with the originals and that all documents have
been or, as the case may be, will be executed in the form of the drafts
submitted to me;
(b) the Credit Agreement and the Pledge Agreement constitute, under the laws of
the State of New York, the legal, valid and binding obligations of all the
parties thereto, enforceable in accordance with their terms;
(c) the Share Pledge Deed has been duly executed on behalf of all parties
thereto other than the Share Pledge Deed Companies; such other parties than
the Share Pledge Deed Companies have the corporate power and authority to
enter into the Share Pledge Deed and to perform their obligations
thereunder;
(d) the Pledge Agreement will be executed on behalf of the Pledge Agreement
Companies by their managing director, CDRJ Holding Company;
(e) the Powers of Attorney and the Board Resolutions have not been revoked,
amended or terminated;
<PAGE>
-7-
(f) the warranties set forth in Section 5 of the Share Pledge Deed are
true and correct;
(g) the contents of the Shareholders Registers, other than the entries
therein relating to the Share Pledge Deed, are complete and correct; and
(h) the Pledge Agreement Companies are the sole owners of the entire
issued share capital in Jafra Cosmetics International, S.A. de C.V.
Based upon and subject to the foregoing and subject to the qualifications listed
below and to any matters not disclosed to me, I am of the following opinion:
1. Each of the Dutch Companies has been duly incorporated and is validly
existing under the laws of the Netherlands as a legal entity in the form of
a "besloten vennootschap met beperkte aansprakelijkheid". The Extracts and
our inquiries made yesterday by telephone with the Commercial Register of
the Chamber of Commerce and Industry in Amsterdam and the bankruptcy
registrar (in Dutch: faillissementsgriffie) of the District Court in
Amsterdam have revealed no information that any of the Dutch Companies has
been dissolved (in Dutch: ontbonden), granted a suspension of payments (in
Dutch: surseance van betaling) are declared bankrupt (in Dutch: failliet
verklaard).
2. All shares of each of the Share Pledge Deed Companies have been validly
issued, are fully paid up and are free and clear of any Liens (other than
the rights of pledge created under the Share Pledge Deed).
3. Each of the Pledge Agreement Companies has the corporate power and has
taken all corporate action as required by its Articles of Association or by
Netherlands law to sign
<PAGE>
-8-
the Pledge Agreement, to create the security interests contemplated thereby
and to perform its obligations thereunder. The Pledge Agreement, if and
when executed, has been duly executed on behalf of each of the Pledge
Agreement Companies. The execution of the Pledge Agreement does not violate
(i) any provision of the Articles of Association of any of the Pledge
Agreement Companies or (ii) any law, statute or governmental regulation of
the Netherlands with general applicability to which such company is
subject.
4. Each of the Share Pledge Deed Companies has the corporate power and has
taken all corporate action as required by its Articles of Association or by
Netherlands law to enter into the Share Pledge Deed, to create the security
interests contemplated thereby and to perform its obligations thereunder.
The Share Pledge Deed has been duly executed on behalf of each of the Share
Pledge Deed Companies. The execution of the Share Pledge Deed does not
violate (i) any provision of the Articles of Association of any of the
Share Pledge Deed Companies or (ii) any law, statute or governmental
regulation of the Netherlands with general applicability to which such
company is subject.
5. The Share Pledge Deed creates a valid first priority right of pledge
("eerste pandrecht") in the Shares (as defined therein) for the benefit of
the Collateral Agent, as security for the payment of the Obligations (as
defined therein), enforceable in the Netherlands in accordance with its
terms; to the extent the Share Pledge Deed provides for any obligations of
the Pledgor defined therein in addition and subsequent to the granting of
the pledge pursuant thereto, such obligations are the legal, valid and
binding obligations of such Pledgor, enforceable in the Netherlands in
accordance with their terms.
<PAGE>
-9-
6. No consents or approvals and no licences or orders from or notices to any
Netherlands court, government department or other regulatory body are
required for the entering into by the parties thereto of the Share Pledge
Deed or for the performance by the parties of their obligations under the
Share Pledge Deed, which, if not obtained or made, would affect the
validity thereof.
7. It is not necessary to ensure the validity or enforceability in the
Netherlands of the Share Pledge Deed that it be filed with or registered in
any public office or register kept by any governmental authority or
regulatory body in the Netherlands.
8. It is not necessary under the laws of the Netherlands in order to enable
the Collateral Agent to enforce its rights under the Share Pledge Deed that
it should be licensed, qualified or entitled to do business in the
Netherlands.
9. The choice of the law of the State of New York to govern the Pledge
Agreement is valid and shall be recognized and given effect by the courts
of the Netherlands. The courts of the Netherlands would award a judgment in
U.S. Dollars to the extent provided in the Pledge Agreement.
10. The use of counterpart copies does not affect the enforceability in
the Netherlands of the Pledge Agreement.
The opinions expressed above are subject to the following qualifications:
(i) The term "enforceable", used in this opinion means that the relevant
obligations are generally enforced by the courts In the Netherlands;
it does not mean that the relevant obligations will be specifically
<PAGE>
-10-
enforceable or that injunctive relief will be available as a remedy
for the enforcement of such obligations under all circumstances.
(ii) This opinion is limited by any applicable bankruptcy, insolvency and
other similar laws affecting the rights of creditors in general.
(iii) The enforcement of the obligations under the Share Pledge Deed are
limited by rules of "force majeure", reasonableness and fairness,
unforeseen circumstances, set-off and other defences afforded by
Netherlands law to obligors generally.
(iv) With respect to the opinion expressed in paragraph 2 above it should
be noted that I have relied on the contents of the Europe Holding
Extract, the Latin America Extract and the Shareholders Registers,
which do not, however, provide conclusive evidence of the correctness
of such opinion.
(v) With respect to the opinion expressed in paragraph 3 above the
following should be noted:
Under article 2.7 of the Netherlands Civil Code a transaction entered
into by a legal entity can be annulled if the objects of the entity
are thereby exceeded and the other party was or should, without making
its own enquiries, have been aware thereof. Only the legal entity can
invoke this ground for annulment.
There is uncertainty as to when the objects of a legal entity are
exceeded (i.e. when a transaction is ultra vires). The Netherlands
Supreme Court has ruled that in determining whether a certain transac-
<PAGE>
-11-
tion is ultra vires all circumstances must be taken into account and
that the manner in which the objects have been defined in the
company's articles of association is not the only decisive factor. The
fact that the company forms part of a group of companies may be
another relevant factor. Other relevant factors have so far not been
identified by the Supreme Court.
Several legal writers take the view that the acts of a company should
be in the actual interest of that company in the sense that they are
conducive to the realisation of the objects of the company as laid
down in its articles of association. A number of those writers are of
the opinion that granting security for the debt of a third party is in
principle - in the absence of circumstances which indicate the
contrary - ultra vires. Such contrary circumstances may exist in the
situation where a company forming part of a group of companies
directly or indirectly benefits from the fact that another company
forming part of the same group incurs a debt for which the former
company gives a guarantee or grants security. Case law and literature
do not provide much guidance as to the nature or the extent of the
required benefit.
In my opinion the fact that the objects clause in the Articles of
Association of the Pledge Agreement Companies expressly includes the
granting of security for the obligations of group companies diminishes
the risk that the security provided by the Pledge Agreement Companies
pursuant to the Pledge Agreement would be considered ultra vires. The
fact that the security provided by the Pledge Agreement Companies
pursuant to the Pledge Agreement is
<PAGE>
-12-
granted for the obligations of inter alia Jafra Cosmetics
----------
International, S.A. de C.V. of which the Pledge Agreement Companies
are the shareholders, and that Jafra Cosmetics International, S.A. de
C.V. is one of the Borrowers under the Credit Agreement, are relevant
circumstances to support the position that the Pledge Agreement is not
ultra vires.
(vi) With respect to the opinion expressed in paragraph 3 above the
following should be noted:
Article 3:45 of the Netherlands Civil Code provides that when a debtor
who enters into a transaction without being legally obliged to do so,
and knew or should have known that the possibilities for one or more
at its creditors to seek recourse against its assets would be
negatively affected thereby, any creditor whose possibilities to
recover his claim have been prejudiced has the right to nullify such
transaction if certain conditions are met ("Actio Pauliana"). Pursuant
to certain provisions of the Netherlands Bankruptcy Act a trustee in
bankruptcy can exercise the right of nullification on behalf of the
bankrupt's estate in similar situations.
In this connection it must be noted that no legal obligation exists
prior to the execution of the Pledge Agreement for the giving of the
pledges referred to herein. Whether this will cause the pledges
created pursuant to the Pledge Agreement to be subject to possible
nullification on the basis of the Actio Pauliana will therefore inter
-----
alia depend on whether there is reason to believe that the
----
possibilities of other creditors to recover their claims will be
negatively affected by the giving of the pledges. In this connection
the elements men-
<PAGE>
-13-
tioned in the last paragraph under (v) above will be relevant
circumstances to support the position that no knowledge exists that
the giving of the pledges would negatively affect the possibilities of
creditors to recover their claims.
(vii) With respect to the opinion expressed in paragraph 5 above the
following should be noted:
(a) I have assumed, with your consent, that the obligations of the
Borrowers under the Covenant to Pay (as defined in the Credit
Agreement) constitute under the law of the State of New York the
legal, valid and binding obligations of the Borrowers to the
Collateral Agent as creditor, enforceable by the Collateral
Agent;
(b) It is untested under Netherlands law whether a Netherlands court
will accept the Covenant to Pay as valid reason for creating the
rights of pledge on the basis of the Share Pledge Deed. In theory
it would be possible that the relevant pledgor may challenge the
relevant pledges on the grounds that the Collateral Agent, under
Netherlands law, may not be seen as a creditor in its own right
under the Covenant to Pay. However, I have no reason to believe
that a Netherlands court will for this reason invalidate the
rights of pledge created pursuant to the Share Pledge Deed, as
the Covenant to Pay would be deemed under New York law to be an
obligation of the Borrowers to the Collateral Agent as creditor,
enforceable by the
<PAGE>
-14-
Collateral Agent.
(viii) The enforcement of the Share Pledge Deed and the pledges created
thereunder in the Netherlands will be subject to the rules of civil
procedure as applied by the Netherlands courts.
(ix) It is uncertain under Netherlands law whether upon the enforcement of
a judgment for a sum of money expressed in foreign currency against
assets of the debtor situated in the Netherlands proceeds can be
obtained in such foreign currency or whether proceeds can only be
obtained in Netherlands currency which subsequently has to be
converted into such foreign currency.
(x) Our inquiries with the Commercial Register of the Chamber of Commerce
and Industry in Amsterdam and with the bankruptcy registrar of the
District Court in Amsterdam, which had to be made yesterday since the
date hereof is a public holiday in the Netherlands, do not provide
conclusive evidence that Europe Holding and Latin America Holding have
not been dissolved, granted a suspension of payments or declared
bankrupt;
(xi) In accordance with Netherlands law any power of attorney or mandate
will terminate upon the bankruptcy or become ineffective upon the
suspension of payments of the issuer thereof.
(xii) When applying the law of the State of New York as the chosen law to
govern the Pledge Agreement, the courts of the Netherlands may give
effect to mandatory rules of the Netherlands law or any other country
with which the situation has a close connection,
<PAGE>
-15-
if and in so far as, under the law of such country, those rules must
be applied whatever the law applicable to the contract. In addition,
the courts of the Netherlands may refuse the application of a rule of
the laws of the State of New York if such application is manifestly
incompatible with the public policy ("ordre public") of the
Netherlands. On the face of the Pledge Agreement I have no reason to
believe that (a) any provisions thereof are likely to be inconsistent
with the public policy of the Netherlands or (b) any such mandatory
rules would be applicable thereto.
(xiii) It should be noted that any replacement of the Collateral Agent by a
successor agent pursuant to Section 8.09 of the Credit Agreement will
require the execution of new versions of the Share Pledge Deed in
order to maintain the security provided to the Lenders thereunder.
(xiv) As it is uncertain and has not been determined in published case law
whether such right of pledge of shares can be created in advance, no
opinion is rendered in respect of Section 3.2 of the Share Pledge
Deed, insofar as it refers to the pledge in advance of any additional
shares, shares receivable or received by virtue of a stock split, or
any other shares receivable or received in exchange for any and all of
the Shares I and Shares II respectively.
<PAGE>
-16-
Without my prior written consent this opinion may not be disclosed to or relied
upon by any person other than each of you, any successors and assigns of the
Administrative Agent, the Collateral Agent and the Issuing Bank, and any
participant, assignee and successor to the interests of the Lenders under the
Loan Documents. I have no obligation to modify, amend or update the opinions set
forth herein for any reason.
Yours faithfully,
/s/ H.M. de Mol van Otterloo
H.M. de Mol van Otterloo
<PAGE>
EXHIBIT N-5
to CREDIT AGREEMENT
[LETTERHEAD OF LOEB & LOEB]
Writer's Direct Dial Number
213-688-3602
e-mail: [email protected]
April 30, 1998
Credit Suisse First Boston,
as Administrative Agent, Issuing Bank and Collateral Agent
Eleven Madison Avenue
New York, NY 10010
The Lenders party to the Credit
Agreement referred to below (all of
the Addressees,
collectively, the
"Creditors")
Ladies and Gentlemen:
We have acted as special counsel in the State of California (the "State")
to Jafra Cosmetics International, Inc., a Delaware corporation ("JCI") and Jafra
Cosmetics International, S.A. de C.V., a company organized under the laws of the
United Mexican States ("JCISA" and, together with JCI, the "Borrowers"), in
connection with the execution and delivery today of, and the consummation of the
transactions contemplated by, the Credit Agreement dated as of April 30, 1998
(the "Credit Agreement"), among the Borrowers, CDRJ Investments (Lux) S.A., a
Luxembourg societe anonyme, the financial institutions party thereto as lenders
(the "Lenders") and Credit Suisse First Boston, as administrative agent (in such
capacity, the "Administrative Agent"), as issuing bank (in such capacity, the
"Issuing Bank") and as collateral agent (in such capacity, the "Collateral
Agent"). This opinion is delivered pursuant to Section 4.02(a) of the Credit
Agreement. Capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Credit Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the following
documents (collectively, the "Documents"):
(i) the Credit Agreement;
(ii) the Parent Guarantee Agreement;
<PAGE>
LOEB&LOEB LLP
Credit Suisse First Boston,
April 30, 1998
Page 2
(iii) the JCI Guarantee Agreement;
(iv) the JCISA Guarantee Agreement;
(v) the JCI Subsidiary Guarantee Agreement;
(vi) the JCISA Subsidiary Guarantee Agreement;
(vii) the Security Agreement and the Perfection Certificates
identified therein;
(viii) the Pledge Agreement;
(ix) the Indemnity, Subrogation and Contribution Agreement;
(x) the Mortgages; and
(xi) UCC-1 financing statements, copies of which are attached
as Exhibit A (the "Financing Statements").
In addition, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of such records, agreements, instruments and
other documents, and have made such other investigations, as we have deemed
necessary for the purpose of this opinion.
References in this opinion to the "UCC" shall mean the Uniform Commercial
Code as in effect on the date hereof in the State.
In rendering this opinion to you, we have assumed that:
(a) there has occurred due execution and delivery of the Documents;
(b) except as otherwise set forth in the applicable Security
Documents, the Borrowers and each Guarantor, as applicable, owns such of
the Mortgaged Property (as defined in [the] [each] Mortgage) and each
Grantor and each Pledgor, as applicable, owns the Collateral (as defined in
the Security Agreement and the Pledge Agreement);
(c) each party to execute the Documents that is not an individual has
been or will be organized, validly existing and, where applicable, in good
standing under the laws of the state of its organization and, if required
to do so under State law with respect to activities other than its
participation in the Financing Transactions, has been
<PAGE>
LOEB&LOEB LLP
Credit Suisse First Boston,
April 30, 1998
Page 3
duly qualified or licensed to conduct intrastate business in the State, is
in good standing in the State and has filed all required franchise tax
returns and has paid all required franchise taxes due and payable by it to
date;
(d) the performance by each party signatory to the Documents will be
within the power granted to it by its organizational documents;
(e) the Documents to which the Administrative Agent and the other
Creditors are parties constitute their legal, valid and binding obligations
enforceable against them in accordance with their respective terms;
(f) the execution, delivery and performance of the Documents to which
the Collateral Agent or the other Creditors are parties will not violate
any law, rule, regulation, writ or order to which they are subject;
(g) the Documents have been negotiated in New York;
(h) the closing of the Loans will occur in New York;
(i) the funds disbursed to the Borrowers pursuant to the Documents
will be disbursed at the direction of the Administrative Agent in New York;
(j) repayments to the Administrative Agent for itself or on behalf of
the other Creditors of any amounts contemplated by the Documents will be
made in New York;
(k) all actions or proceedings arising in connection with the
Documents, other than procedural remedies or a Judicial foreclosure of the
Mortgages, shall be tried and litigated only in the state and federal
courts located in New York;
(l) the New York choice of law rules allow the parties to the
Documents to designate the law of the State of New York to govern the
Transactions;
(m) New York will have personal jurisdiction over the Borrowers,
Administrative Agent and the other Creditors at the time of any action;
(n) the Documents do not contain provisions which violate fundamental
State policies, such as policies against unconscionability or restraint of
trade;
(o) the Administrative Agent is licensed to maintain an office in New
York;
<PAGE>
LOEB&LOEB LLP
Credit Suisse First Boston,
April 30, 1998
Page 4
(p) there are no agreements or understandings among the Administrative
Agent or the other Creditors that would expand, modify or otherwise
materially affect the terms of the Documents, to the extent we are opining
on such terms, or the respective rights or obligations of the parties
thereunder; and
(q) the description of the Collateral is legally sufficient to enable
a subsequent purchaser or encumbrancer to identify said property.
Subject to the foregoing assumptions, we are of the opinion that:
1. None of the Collateral Agent or the other Creditors is required (a) to
be qualified to do business, file any designation for service of process or file
any reports or pay any taxes in the State, or (b) to comply with any statutory
or regulatory requirement applicable only to financial institutions chartered or
qualified or required to be chartered or qualified to do business in the State,
in each case solely by reason of the execution and delivery or filing or
recording, as applicable, of any of the Documents, or solely by reason of the
participation in any of the transactions under or contemplated by the Documents,
including, without limitation, the extension of any credit contemplated thereby,
the making and receipt of payments pursuant thereto and the exercise of any
remedy thereunder. If it were determined that such qualification and filing
were required, the validity of the Documents would not be affected thereby, but
(a) if the Collateral Agent were not qualified it would be precluded from
enforcing its rights as collateral agent on behalf of the Creditors in the
courts of the State until such time as it is admitted to transact business in
the State or (b) assuming the Creditors would institute remedies without the
Collateral Agent, they would be precluded from enforcing their rights in the
courts of the State until such time as they were admitted to transact business
in the State. However, the lack of qualification would not result in any waiver
of rights or remedies pending such qualification.
2. The execution, delivery, filing or recording, as applicable, and
performance by the Borrowers and each Guarantor of each of the Documents to
which each of them is a party (i) will not violate any existing law,
governmental rule or regulation of the State and (ii) do not require any
license, permit, authorization, consent or other approval of, any exemption by,
or any registration, recording or filing with any court, administrative agency
or other Governmental Authority of the State.
3. Assuming that the Security Agreement and the Pledge Agreement were
governed by the law of the State for the purpose of rendering the opinion set
forth in this paragraph, each of the Security Agreement and the Pledge Agreement
is in proper form under the applicable laws of the State to (i) be enforceable
against the grantors or pledgors named
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therein in accordance with its terms and (ii) create and constitute a valid
security interest in, lien on or pledge of the Collateral.
4. The Mortgage is in proper form under applicable laws of the State (a)
(i) to be accepted for recording by the Recorder of Ventura County and (ii) to
be enforceable against the Borrowers and each Guarantor, as applicable, in
accordance with its terms, and (b) (i) to create and constitute a valid, legal,
binding and enforceable mortgage lien on the real property described therein
(the "Real Property"), and (ii) to create and constitute valid, legal, binding
and enforceable perfected security interests in such of the Mortgaged Property
(the "UCC Property") as is subject to the provisions of Article 9 of the UCC.
5. The Financing Statements relating to the Mortgage and the Security
Agreement (a) are in proper form under the applicable laws of the State for
filing and (b) are required to be filed with the Office of the Secretary of
State of the State. Upon the filing of the Financing Statements, the Collateral
Agent for the benefit of the Creditors will have a valid and duly perfected
security interest in and lien on the UCC Property and Collateral (including
after-acquired property) described in the Mortgage and the Security Agreement,
respectively.
6. The recording of the Mortgage and the filing of the Financing
Statements with the recorders and in the offices described above are the only
actions, recordings or filings necessary to publish notice and protect the
validity of and to establish of record the rights of the parties under the
Mortgage and Security Agreement, except (i) that continuation statements under
the UCC are required to be filed within six months prior to the expiration of
five years from the date of filing of the Financing Statements, and (ii) that a
security interest in or pledge of money or instruments, other than money or
instruments constituting chattel paper, cannot be perfected by filing Financing
Statements or recording a Mortgage, but must be perfected by taking physical
possession thereof.
7. Subject to appropriate continuation or perfection under the UCC as set
forth the preceding paragraph, the priority of the security interest in, lien on
or pledge of the Collateral created by the Security Agreement and the Pledge
Agreement with respect to any extension of credit (each, a "Further Advance")
made or deemed to have been made by the Creditors after the date (the
"Perfection Date") on which the security interest in, lien on or pledge of the
Collateral shall have been perfected will be the same as the priority of the
security interest, lien on or pledge of the Collateral with respect to all
extensions of credit made or deemed to have been made by the Creditors on or
before the Perfection Date, and such priority will not, solely by virtue of the
fact that it relates to a Further Advance, be affected by the rights in and to
the Collateral of any third party whose Interest in the Collateral attached
thereto after the Perfection Date but prior to the date of such Further Advance,
provided that the Further
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Advance is made by the Creditors pursuant to a "commitment", within the meaning
of Section 9312(7) of the UCC.
8. The Collateral Agent has the power without naming all the Creditors in
any applicable legal proceeding to exercise remedies under the Security
Documents for the realization of any of the Mortgaged Property or the Collateral
in its own name, as collateral agent.
9. No taxes or other charges, including, without limitation, intangible
or documentary stamp taxes, mortgage or recording taxes, transfer taxes or
similar charges, are payable to the State or to any jurisdiction therein on
account of the execution or delivery or recording or filing of the Mortgage or
any of the other Documents or the creation of the indebtedness evidenced or
secured by any of the Documents, as applicable, except for nominal filing or
recording fees.
10. With respect to the enforcement of remedies under the applicable
Security Documents, the Collateral Agent may do any of the following: (a)
proceed, in any sequence (i) in accordance with the Lender's rights and remedies
in respect of the Real Property and (ii) in accordance with the UCC as to the
UCC Property and fixtures; (b) proceed in any sequence, as to both some or all
of the Real Property and some or all of the UCC Property or fixtures in
accordance with the Lender's rights and remedies in respect of the Real
Property, by including the portion of the UCC Property or fixtures selected by
the Collateral Agent in the judicial or nonjudicial foreclosure of the Real
Property in accordance with the procedures applicable to real property. A power
of sale under the Mortgage is exercisable with respect to both the Real Property
and the UCC Property or fixtures being sold and the sale may be conducted by the
trustee under the Mortgage. The Collateral Agent and the Lenders shall not be
deemed to have elected irrevocably to proceed as to both real property and
personal property or fixtures as provided in the UCC with respect to any
particular property, unless and until that particular property actually has been
disposed of pursuant to a unified sale (judicial or nonjudicial) conducted in
accordance with the procedures applicable to real property, and then only as to
the property so sold.
11. A state court or a federal court applying the choice of law principals
prevailing under the laws of the State to which the question is presented should
give effect to the provisions in the Documents selecting the laws of the State
of New York as the governing law thereof except that the courts may apply the
internal law of the State to determine the perfection and effect of perfection
of the liens created under the Documents and the application of remedies in
enforcing such liens with respect to the Mortgaged Property and the Collateral.
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12. Assuming that the Documents were governed by the law of the State for
the purpose of rendering the opinion set forth in this paragraph, the use of
counterpart copies of any of the Documents does not affect the enforceability of
any of the Documents.
The foregoing opinions are qualified as follows:
The opinion expressed at Paragraph 1 above as to the nonwaiver of rights or
remedies pending qualification and filing is subject to the qualification that,
in accordance with California Corporations Code Section 2203, a foreign
corporation which transacts intrastate business in the State without qualifying
to do business in the State (a "nonqualifying foreign corporation") is subject
to certain monetary penalties and may not maintain an action in the State with
respect to such business until such nonqualification is cured. Further,
pursuant to California Revenue and Taxation Code Section 23304.1(b), the
California contracts of a nonqualifying foreign corporation which fails to file
a tax return required under the California Revenue and Taxation Code are
voidable by the other party to the transaction. California Revenue and Taxation
Code Section 23304.5, however, specifies that such contracts may be declared
void only if determined by a final judgment of a court of competent jurisdiction
and only if the nonqualifying foreign corporation first has been allowed a
reasonable opportunity to cure the voidability by making the tax filings and
payments required in accordance with California Revenue and Taxation Code
Section 23305.1. Except as provided in Paragraph I above, we express no opinion
whether the Collateral Agent and the Creditors, or any of them, are obligated to
qualify to do business in the State or whether the Documents may be voidable in
accordance with the foregoing statutory provisions.
In rendering the opinion expressed at Paragraph 2 above as to compliance
with certain statutes, rules and regulations, we have assumed, with your
permission, that none of the Borrowers or the Guarantors is engaged in a
business which makes it subject to a regulatory body of the State whose consent,
approval or other authorization is required before such Borrower or Guarantor
may execute, deliver or perform the Documents to which it is a party. Further,
we render no opinion as to compliance with the California Subdivision Map Act or
any zoning, land use or environmental laws which may be applicable to the Real
Property.
The opinions expressed at Paragraphs 5, 6 and 7 above are subject to the
qualification that we express no opinion as to any security interest, lien or
pledge the creation, perfection or priority of which is not governed exclusively
by the UCC. In particular, we express no opinion as to the creation, perfection
or priority of security interests in vehicles, aircraft, vessels and other
property for which a state or federal statute or treaty provides for
registration or certification of title or which specifies a place of filing
different than that specified in the UCC, nor as to the creation, perfection or
priority of security interests in farm products, crops, timber, minerals and the
like (including oil and gas) or accounts resulting from the sale
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thereof, or letters of credit, patents, copyrights or trademarks; nor do we
express any opinion with respect to the creation, perfection or priority of any
security interest in any account receivable, contract right or general
intangible with respect to which the account debtor is the United States of
America, or any State of the United States, or any department, agency or
instrumentality thereof, unless such account receivable or contract right or
general intangible has been assigned to the Collateral Agent pursuant to the
Federal Assignment of Claims Act of 1940, as amended, or other applicable state
law; nor do we express any opinion as to the creation, perfection or priority of
any security interest in any other collateral specified in Section 9104 of the
UCC. Furthermore, we express no opinion as to the creation, perfection or
priority of security interests in deposit accounts, insurance policies or
beneficial interests in a trust or in a decedent's estate.
The opinions expressed at Paragraphs 5 and 6 above are also subject to the
following additional qualifications:
(a) We express no opinion as to the priority of any security interest
in, lien upon or pledge of any of the Collateral.
(b) We have assumed, with your permission, that the Collateral
consisting of Pledged Stock and Pledged Debt Securities and any other Collateral
in which the Collateral Agent's security interest is perfected by possession
will be validly delivered to the Collateral Agent in its capacity as secured
party and that such Collateral will continue in the possession of the Collateral
Agent or its successors in interest.
(c) To the extent that the Collateral consisting of Pledged Stock and
Pledged Debt Securities consists of the stock or debt securities of any entity
organized under the laws of any foreign jurisdiction, we express no opinion as
to the effect of the laws of that foreign jurisdiction upon the conclusions
expressed herein.
(d) We have assumed, with your permission, that none of the Collateral
consists of stock or debt securities in, or property of, an entity engaged in a
business which makes it subject to the jurisdiction of a regulatory body (such
as, for example, the California Department of Insurance or the Public Utilities
Commission) whose consent is required before such stock or debt securities may
be subjected to a valid lien.
(e) We have assumed, with your permission, that none of the Grantors
is a "retail merchant" for purposes of Section 9102(5) of the UCC.
In addition, in administering the Security Agreement and the Pledge
Agreement, please note that:
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(a) In the case of the issuance of additional Pledged Stock or Pledged
Debt Securities, the lien of the Pledge Agreement therein will be perfected only
by the Collateral Agent taking possession or control thereof or causing an
appropriate financing statement to be filed, in each case under the applicable
provision of the UCC.
(b) Under certain circumstances described in Section 9306 of the UCC,
the right of a secured party to enforce a perfected security interest in the
cash proceeds of, and collections pursuant to, any Collateral may be limited,
and in order to perfect a security interest in noncash proceeds of the
Collateral, it may be necessary to file a financing statement within ten days
after any such proceeds are received by the debtor.
(c) Under certain circumstances described in Sections 9307, 9308 and
9309 of the UCC, certain purchasers of collateral may acquire such collateral
free of the secured party's security interest therein.
(d) Under certain circumstances described in Section 9103 of the UCC,
the removal of certain forms of collateral from California will cause a secured
party's security interest therein to lapse unless appropriate steps are taken,
and a change in location of the debtor to another state will cause a secured
party's security interest in certain forms of collateral to lapse unless
appropriate steps are taken.
(e) Under certain circumstances described in Section 9402 of the UCC,
changes in the debtor's name, identity or corporate structure which render a
previously filed financing statement or fixture filing seriously misleading may
cause such financing statement to become ineffective as to collateral thereafter
acquired by the debtor unless appropriate steps are taken.
We note that the Documents select the laws of the State of New York as the
governing law thereunder. There have been very few recent California court
decisions regarding the enforceability of a choice of law provision contained in
a foreign (other state) loan transaction in which some or all of the security is
California real property. Moreover, these decisions have been at the
intermediate appellate court level, and, consequently, the California Supreme
Court has yet to determine this issue definitively. However, in the case of
Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459 (1992), the California
- -------------------------------------
Supreme Court did analyze a contract, not involving California real property,
which contained a choice of law clause providing that the contract was to be
governed by Hong Kong law. The Court held that the choice of law clause was
fully enforceable and applicable to claims for breach of the implied covenant of
good faith since Hong Kong had substantial connection with the parties and the
transaction and enforcement would not contravene any fundamental policy of
California.
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If an out-of-state debtor is sued personally in another state prior to
foreclosure of the California real estate security, a money judgment entered in
that state may release the California security under California Code of Civil
Procedure 726, although the judgment would be valid in California. (See, Ould v.
---- -------
Stoddard, 54 Cal. 613 (1880)).
- --------
We call your attention to United Bank of Denver v. K & W Trucking Co., 147
-------------------------------------------
Cal.App.3d 217, 195 Cal.Rptr.49 (1983) and Kerivan v. Title Ins. and Trust Co.,
-----------------------------------
147 Cal.App.3d 225, 195 Cal.Rptr.53 (1983), in which the court analyzed whether
a Colorado lender that had obtained a deficiency judgment in Colorado, following
the non-judicial sale of California real property security for a note governed
by Colorado law, could enter the judgment in California pursuant to the Sister
State Money-Judgments Act (California Code of Civil Procedure Section 1710.10 et
--
seq.). The court concluded that it was required to give full faith and credit to
- ---
the Colorado judgment, even though such a judgment could not have been obtained
in California because of California Code of Civil Procedure Section 580d which
prohibits any deficiency judgment after the sale of a parcel of real property
under a power of sale contained in a mortgage or deed of trust given to secure a
note. According to the court, the "judgment" entered in California under the
Sister State Money-Judgments Act is not the type of "judgment" proscribed by
Section 580d. The court concluded that the rare exceptions to the application of
the full faith and credit clause arise only when there is a violation of some
fundamental state public policy, or where the California court determines that
the foreign court lacked jurisdiction over the parties or the subject matter.
(Accord, Mencor Enterprises, Inc. v. Hets Equities Corp., 190 Cal.App.3d 432,
------ -----------------------------------------------
435, 235 Cal.Rptr. 464, 466 (1987) - "The parties to a contract may specify the
law to be followed in matters governing the contract and a California court will
apply the law so selected if enforcement of the contract does not result in an
evasion of settled public policy or California law protective of the rights of
its citizens.")
There is no clear definition of which California statutes and court
decisions constitute "fundamental state public policies" for purposes of
enforcing choice of law provisions. Under United Bank of Denver and Kerivan,
--------------------- -------
discussed above, the court held that deficiency judgments are only statutorily
limited and are not inherently objectionable, and thus are not so offensive as
to constitute an exception to the full faith and credit clause.
The United Bank of Denver and Kerivan cases arguably stand for the
--------------------- -------
proposition that California will enforce a sister-state civil money judgment so
long as enforcement does not violate a fundamental policy of California and so
long as the sister-state court had jurisdiction over the parties and the subject
matter. Not decided by these cases, and still possibly open in California, are
the applicability of the fair value hearing requirements under California Code
of Civil Procedure Sections 580a and 726 if the lender, relying on the foreign
state choice of law provision, tries to bring suit in California for the
deficiency judgment. Section 726 provides that any action to recover on a debt
or other rights secured by a mortgage or deed
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of trust on real property must be an action to foreclose such mortgage or deed
of trust, thus prohibiting a direct action on the debt, and this Section has
been interpreted by the California courts to require a lender to exhaust all
real property security for a debt in a single action. Because of Section 726, it
is doubtful that a suit can be brought directly on a note in a California court
when the note is secured by California real property, even if there is a foreign
state choice of law provision in the note and the foreign state permits direct
actions on the note, and even if one or more of the parties are domiciled in the
foreign state and the note is to be paid in the foreign state.
We call your attention to Stuart v. Lilves, 210 Cal.App.3d 1215, 258
----------------
Cal.Rptr. 780 (1989), in which the court acknowledged that the full faith and
credit clause of the Federal Constitution requires a California court to
recognize a judgment of another state as res judicata even if the judgment could
not have been obtained in California. However, in this case, the court held
that the full faith and credit clause did not require a California court to
honor a Colorado judgment that was inconsistent with a prior California
judgment. Following foreclosure of real property located in Colorado that had
been mortgaged as security for a Colorado loan, the lender first brought suit in
California for a deficiency judgment. After it realized that California law
prohibited such a deficiency judgment (California Code of Civil Procedure
Section 580b relating to purchase money mortgages), the lender allowed a summary
judgment to be entered against it and subsequently obtained a judgment in
Colorado for the deficiency. When the lender sought to enter the judgment in
California pursuant to the Sister State-Money Judgments Act, the court refused
to enter the Colorado judgment because the lender had chosen to first bring the
deficiency suit in California and had allowed California law to be applied.
We also call your attention to Allstate Ins. v. Hague, 449 U.S. 302, 312-
----------------------
313, 101 S.Ct. 633, 640 (1981), in which the United States Supreme Court held
that "... for a States substantive law to be selected in a constitutionally
permissible manner, that State must have a significant contact or significant
aggregation of contacts, creating state interests, such that the choice of its
law is neither arbitrary nor fundamentally unfair."
By the use of the term "enforceable", we mean that, in the event of a
material breach of a material provision of the Documents, you have a right to
foreclose on the Collateral in accordance with California law and, subject to
the anti-deficiency judgment legislation referred to below, and the provisions
of California Code of Civil Procedure Sections 726.5 and 736 with respect to any
environmental indemnity, a right to recover damages in an action at law, but we
are expressing no opinion with respect to the availability of specific
performance or other equitable remedies. We advise you also that enforcement of
your rights and remedies under the Documents (i) must be undertaken in a
reasonable manner, (ii) may be limited by bankruptcy, insolvency, liquidation,
receivership, reorganization, moratorium or other similar
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laws and court decisions relating to, limiting or affecting the rights of
creditors generally (including, without limitation, any law pertaining to
preferences, automatic stays, avoiding powers, limitations on ipso facto and
anti-assignment clauses, the coverage of pre-petition security agreements
applicable to property acquired after a petition is filed, or fraudulent
transfers and obligations), (iii) is subject to the availability of equitable
defenses (e.g. waiver, laches and estoppel) against a party seeking enforcement,
----
and (iv) is subject to general legal and equitable principles of good faith,
fair dealing and equity, as the same may be construed in the context of emerging
judicial doctrines of lender liability or otherwise.
We further advise you that certain rights, remedies and waivers contained
in the Documents and certain provisions contained therein may be limited or
rendered ineffective by applicable California laws or judicial decisions
governing such provisions. While California statutory and case law on the
subject is extensive and varied, such statutory and case law does not render the
Documents invalid as a whole, and there exists, in the Documents or pursuant to
applicable law but subject to the qualifications and limitations set forth in
this opinion, legally adequate remedies for a substantial realization of the
principal benefits and/or security intended to be provided by the Security
Documents.
With respect to the enforcement of your rights and remedies under the
Documents generally, we call your attention to the provisions of Sections
580(a), 580(d) and 726 of the UCC. Sections 580(a) and 726 limit the size of a
deficiency judgment after a foreclosure of real property to either (i) the
amount by which the entire amount of the indebtedness due at the time of sale
exceeded the fair value of the foreclosed property at the time of sale, or (ii)
the difference between the amount for which the property was sold and the entire
amount of the indebtedness secured by the deed of trust or mortgage, whichever
is smaller. Section 580(d) prohibits any deficiency judgement after the sale of
real property under a power of sale contained in a mortgage or deed of trust
given to secure a note. Section 726 provides that any action to recover on a
debt or other rights secured by a mortgage or deed of trust on real property
must be an action to foreclose such mortgage or deed of trust, thus prohibiting
a direct action on the debt or the exercise of other rights by the holder of
such mortgage or deed of trust, and has been interpreted by the California
courts to require a lender to exhaust all collateral security for a debt in a
single action. (But see California Uniform Commercial Code Section 9501(4)(b)
-------
with respect to the applicability of Section 726 to personal property collateral
and California Code of Civil Procedure Sections 726.5 and 736 (discussed below)
with respect to the applicability of Section 726 to environmentally impaired
real property collateral and to breaches by a borrower of environmental
provisions in real property secured loan documents.)
With respect to any provisions of the Documents that relate to the
application of insurance proceeds, we call your attention to Schoolcraft v.
--------------
Ross, 81 Cal. App. 3d 75, 146
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Cal. Rptr. 57 (1978), in which the court examined provisions in a deed of trust
(i) requiring the trustor to restore the property if damaged and (ii)
authorizing the beneficiary to apply insurance proceeds either to restore the
property or to reduce the indebtedness. The court concluded that the deed of
trust was subject to an implied covenant requiring good faith and fair dealing
on the part of the beneficiary, and held that the right of a beneficiary to
apply insurance proceeds to reduce the balance of a note secured by a deed of
trust must be performed in good faith and with fair dealing and that, to the
extent the security is not impaired, the beneficiary must permit those proceeds
to be used for the costs of rebuilding. Accord, Kreshek v. Sperling, 157 Cal.
-------------------
App. 3d 279, 204 Cal. Rptr. 30 (1984). See also California Civil Code Section
--- ----
2924.7.
With respect to any provisions of the Documents that relate to the
application of condemnation proceeds, we call your attention to Section 1265.225
of the California Code of Civil Procedure, which provides that, where there is a
partial taking of property encumbered by a lien, the lienholder may share in the
award only to the extent determined by the court to be necessary to prevent an
impairment of the security, and the lien shall continue upon the part of the
property not taken as security for the unpaid portion of the indebtedness.
Accord, Milstein v. Security Pacific National Bank, 27 Cal. App. 3d 482, 103
------------------------------------------
Cal. Rptr. 16 (1972). The lienholder and the property owner may agree, however,
at any time after commencement of the condemnation proceeding, that some or all
of the award shall be apportioned to the lienholder on the indebtedness.
With respect to any provisions of the Documents that relate to impounds, we
call your attention to Section 2954.1 of the California Civil Code, which
provides that no lender or person who purchases obligations secured by real
property, or any agent of such lender or purchaser, who maintains an impound,
trust or other type of account for the payment of taxes and assessments on real
property, insurance premiums or other purposes relating to such property shall
do either of the following: (i) require the borrower or vendee to deposit in
such account in any month a sum in excess of the amount that would be permitted
in connection with a federally related mortgage loan pursuant to Section 10 of
the Real Estate Settlement Procedures Act of 1974, as amended, or (ii) require
the sums maintained in such account to exceed at any time the amount or amounts
reasonably necessary to pay such obligations as they become due. Any sum held
in excess of the reasonable amount shall be refunded within thirty (30) days,
unless the parties mutually agree to the contrary. Such an agreement may be
rescinded at any time by any party.
Section 1717 of the California Civil Code provides that, in any action on a
contract where such contract specifically provides that attorneys' fees and
costs incurred to enforce the provisions of such contract shall be awarded
either to one of the parties or to the prevailing party, the prevailing party,
whether or not it is the party specified in the contract, shall be
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entitled to an award of reasonable attorneys' fees in addition to an award of
costs and necessary disbursements.
Sections 2924 and 2924b of the California Civil Code provide that a power
of sale contained in a deed of trust or mortgage shall not be exercised until
recordation of a notice of default (identifying the mortgage or deed of trust
and containing a statement that a default has occurred, and setting forth, among
other things, the nature of the default and of the election to sell), and that
within ten (10) days following recordation of the notice of default, a copy of
such notice shall be delivered to each trustor or mortgagor and to any party
that previously filed a request for such a copy.
Section 2924c of the California Civil Code provides that, whenever the
maturity of an obligation secured by a deed of trust or mortgage is accelerated
by reason of a default in the payment of interest or of any installment of
principal or other sums secured thereby, the trustor and certain other entitled
persons have the night, at any time within the period commencing with the date
of recordation of the notice of default until five (5) business days prior to
the date of sale set forth in the initial recorded notice of sale, if the power
of sale therein is to be exercised, or otherwise at any time prior to the entry
of the decree of foreclosure, to cure such default by paying the entire amount
then due (including certain reasonable costs and expenses incurred in enforcing
such obligations, but excluding any amount that otherwise would not be due but
for such acceleration) and thereby reinstate such deed of trust and the
obligations secured thereby to the same effect as if no such acceleration had
occurred.
Section 564 of the California Code of Civil Procedure describes and limits
the types of litigation in which receivers can be appointed. Under Section
564(b)(10), a receiver may be appointed in an action "by a secured lender for
specific performance of an assignment of rents provision in a deed of trust" and
"may be continued after entry of a judgment for specific performance in that
action, if appropriate to protect, operate, or maintain real property encumbered
by the deed of trust" or "to collect the rents therefrom while a pending
nonjudicial foreclosure under power of sale in the deed of trust or mortgage is
being completed".
With respect to any provisions of the Documents that relate to late payment
charges, we call your attention to Section 2954.5 of the California Civil Code,
which provides that before the first late payment charge may be assessed by any
lender on a delinquent payment of a loan secured by real property, the borrower
shall either (i) be notified in writing and given at least ten (10) days from
mailing of such notice in which to cure the delinquency, or (ii) be informed, by
a billing or notice sent for each payment due on the loan, of the date after
which such a charge will be assessed. Said notice shall contain the amount of
such charge or the method by which it is calculated. If a subsequent payment
becomes delinquent, the
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borrower shall be notified in writing, before the late charge is to be imposed,
that the charge will be imposed if payment is not received, or the borrower
shall be notified at least semiannually of the total amount of late charges
imposed during the period covered by the notice. The failure of the lender to
comply therewith does not excuse or defer the borrower's performance of any
obligation incurred in the loan transaction other than its obligation to pay a
late charge.
With respect to any provisions of the Documents that purport to waive any
statutes of limitations, we call your attention to Section 360.5 of the
California Code of Civil Procedure, which provides that no waiver executed prior
to the expiration of the time limited for the commencement of the action shall
be effective for a period exceeding four (4) years from the date of expiration
of the time limited for commencement of the action, unless renewed for a further
period not exceeding four (4) years from the expiration of the immediately
preceding waiver.
With respect to any provisions of the Documents that purport to waive
marshaling of assets, you should be aware that such a waiver would not affect
the rights of a third party junior creditor.
We advise you that although the power of sale is created by contract, its
exercise in a given case may still be subject to judicial scrutiny. Various
limitations have been imposed by California law and court decisions upon the
strict enforcement of certain covenants in debt instruments absent a showing of
damage to the lender, impairment of the value of collateral or impairment of the
borrower's ability to pay (such covenants may include, without limitation,
covenants to provide reports or notices, covenants to comply with requirements
of law, covenants to maintain and repair, covenants with respect to alterations
and additions, and covenants relating to the rights or remedies of a lessor
under a lease that may constitute collateral for a loan); e.g., Freeman v. Lind,
---- ---------------
181 Cal.App.3d 791 (1986); Kreshek v. Sperling, supra; Schoolcraft v. Ross,
------------------- -------------------
supra; Milstein v. Security Pacific National Bank, supra. In addition, a
------------------------------------------
California court might refuse to give strict and literal effect to provisions
accelerating indebtedness under certain circumstances if it concluded that
enforcement of such provisions, on the basis of the facts and circumstances then
before such court, was not reasonably necessary to protect against impairment of
a lender's security or the risk of default. Depending on the particular facts
then before the court, such refusal might rest on one or more public policies as
expressed in the statutes and appellate authorities in California disfavoring
forfeitures, penalties and restraints against, or the imposition of burdens
upon, the alienation of property. We also note the effect of case authority
indicating that a lender may be preliminarily enjoined from exercising its
remedies under a deed of trust pending a judicial determination of the
underlying merits if a court determines that the quantum of harm suffered by a
lender as a result of being so enjoined is outweighed by the quantum of harm
that would
<PAGE>
LOEB&LOEB LLP
Credit Suisse First Boston,
April 30, 1998
Page 16
be suffered by a debtor as a result of such exercise. See e.g., Baypoint
------- --------
Mortgage Corp. v. Crest Premium Real Estate Investments Retirement Trust, 168
- ------------------------------------------------------------------------
Cal.App.3d 818 (1985). If such sale is not enjoined or set aside, the lender may
be liable for wrongful foreclosure following a non-judicial sale of the
property.
To the extent that the Documents purport to assign to you certain
governmental permits and licenses or to grant to you a security interest in such
]licenses and permits or to require the Borrowers or some other party to
transfer such licenses or permits incident to any foreclosure, we express no
opinion whatsoever as to the transferability of any such permits or licenses or
the enforceability of any such provisions.
The exercise or attempted exercise of any right or remedy provided in the
Documents relating to California Collateral covered by the UCC is subject to the
limitations set forth in the California Commercial Code. Without limiting the
generality of the foregoing, we call your attention to Section 9501 of the
California Commercial Code which relates to the enforcement and foreclosure of
security interests and to Section 9504(3) of the California Commercial Code
which requires that a secured party act in good faith and in a commercially
reasonable manner in any sale or lease of collateral. We call your attention
to the fact that the California courts have repeatedly held that the sanction
for a secured party's failure to fulfill its burden of acting in a commercially
reasonable manner is the loss of any right whatsoever to recover a deficiency
judgment. See e.g. Rutan v. Summit Sports, 173 Cal.App.3d 965 (1985); Atlas
------------------------------- -----
Thrift v. Horan, 27 Cal.App.3d 999 (1972). Section 9504(3) of the California
- ---------------
Commercial Code also provides that a secured party may not purchase collateral
at a private sale unless the collateral is customarily sold in a recognized
market or is the subject of widely or regularly distributed standard price
quotations.
Under certain circumstances, contractual provisions respecting various
self-help or summary remedies without notice or opportunity for hearing or
correction, including, without limitation, sales not in compliance with Sections
9504-9506 of the California Commercial Code, may be unenforceable especially if
their operation would work a substantial forfeiture or impose a substantial
penalty upon the burdened party.
Under the case of Karoutas v. HomeFed Bank, 232 Cal.App.3d 767 (1991), if
------------------------
you learn of any material defects in the California Mortgage Property, you may
be required to disclose such defects to prospective purchasers in any
foreclosure sale.
Under certain circumstances, the following provisions may be unenforceable:
(a) provisions waiving (i) vaguely or broadly stated rights, (ii) unknown future
rights (including without limitation a waiver of the right to trial by jury),
(iii) unknown future defenses, (iv) rights to damages, or (v) the benefits of
statutory, regulatory, or constitutional rights, unless
<PAGE>
LOEB&LOEB LLP
Credit Suisse First Boston,
April 30, 1998
Page 17
and to the extent the statute, regulation or constitution explicitly allows
waiver; and (b) provisions stating (i) that rights or remedies are not
exclusive, (ii) that every right or remedy is cumulative and may be exercised in
addition to or with any other right or remedy, or (iii) that the election of
some particular remedy or remedies does not preclude recourse to one or more
others; provided, however, that the unenforceability of such provisions will not
prevent the practical realization of the benefits intended to be granted by the
Mortgages.
The collectability of interest under the Documents, to the extent that
interest computed at the rate set forth in the Documents based upon a 360-day
year exceeds interest that would accrue at the same rate but computed upon a
365-day year, is subject to certain judicial precedents in California, including
but not limited to Fletcher v. Security National Bank, 23 Cal. 3d 442 (1979),
----------------------------------
which indicate that a California court would enjoin collection of such interest
and award restitution thereof to a borrower, if, on the basis of the facts and
circumstances then before the court, the court determined that such relief was
necessary to prevent the use or employment of an unfair trade practice.
With respect to the enforceability of any environmental provisions of the
Documents, provisions that provide protection or indemnification for
environmentally related liabilities may be unenforceable or limited by
applicable law. We call your attention to Section 736 of the California Code of
Civil Procedure which limits the damages a secured lender may recover against a
borrower for breach of any environmental provisions relating to real property
security to reimbursement or indemnification of the following: (a) if not
pursuant to an order of any federal, state or local governmental agency relating
to the cleanup, remediation or other response action required by applicable law,
those costs relating to a reasonable and good faith response action concerning a
release or threatened release of hazardous substances which is anticipated by
the environmental provision; (b) if pursuant to such an order of any
governmental agency, all amounts reasonably advanced in good faith by the
secured lender in connection therewith, provided the lender negotiated, or
attempted to negotiate, in good faith to minimize the amounts it was required to
advance under the order; (c) all liabilities of the secured lender to any third
party relating to the breach and not arising from acts, omissions or other
conduct which occur after the borrower is no longer an "owner or operator" (as
defined in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended (42 U.S.C. Sec. 9601, et seq.)) of the real property
security, and provided the secured lender is not responsible for the
environmentally impaired condition of the real property security; and (d)
attorney's fees and costs incurred by the secured lender relating to the breach.
See also Section 726.5 of the California Code of Civil Procedure which limits a
- --- ----
lender's right to waive its lien against "environmentally impaired" or
"affected" collateral (as such terms are therein defined).
<PAGE>
LOEB&LOEB LLP
Credit Suisse First Boston,
April 30, 1998
Page 18
Various restrictions have been established by California statutory and case
law upon the enforceability of waivers contained in indemnity agreements where
such waivers purport to waive generally various statutory and other rights
accorded to indemnitors and other sureties under California law, including,
without limitation, the provisions of Civil Code Sections 2787 through 2855,
inclusive. Without limiting the generality of the foregoing, we expressly note
the effect of California Civil Code Sections 2809, which provides that the
obligations of a surety may not exceed or be more burdensome than those of the
principal obligor, 2819 providing that, unless otherwise consented to by a
surety, a surety is exonerated by any act of a creditor which alters the
principal's obligations or impairs or suspends any rights or remedies of such
creditor against a principal obligor, 2825 indicating that any intervention or
omission by a creditor which discharges the principal obligor by operation of
law will exonerate a surety, 2845 authorizing a surety to require its creditor
to proceed against the principal obligor or pursue other remedies within the
creditor's power and providing for exoneration of a surety to the extent that a
surety is prejudiced by the creditor's failure to so proceed, and 2848 and 2849
which, respectively, grant subrogation rights to a surety and entitle a surety
to the benefit of any security held by a creditor for performance of the
principal's obligations. We also call your attention to the judicially created
exoneration defenses accorded to a surety in any setting in which a creditor
proceeds against the principal obligor or any security in a manner which impairs
a surety's right of reimbursement under Civil Code Sections 2848 and 2849. See
---
e.g., Krueger v. Bank of America, 145 Cal.App.3d 204 (1983); Union Bank v.
- --- -------------------------- -------------
Gradsky, 265 Cal.App.2d 40 (1968). We also note the effect of California Civil
- -------
Code Section 3268, which provides, in essence, that statutory protections
available by law under Part 4 of Division III of the Civil Code to contracting
parties can be waived, unless such waiver would be against public policy.
We express no opinion as to (a) the validity or enforceability of any
provision of any of the Documents which provides for any penalty, prepayment
fee, late charge, acceleration of future amounts due (other than principal)
without appropriate discount to present value, or an increase in the rate of
interest due after a default on the Loan; (b) the enforceability of the
appointment of, and the rights of, a lender or other parties as attorney-in-fact
of any debtor under any of the Documents; (c) the indemnification provisions of
any of the Documents, to the extent such provisions might be violative of public
policy; (d) the survivability or severability provisions of any of the
Documents; (e) any provision in any of the Documents which provides that oral
modifications to such Documents will be unenforceable or which limits the
applicability of the doctrine of promissory estoppel; (f) any liquidated damage
provision in any of the Documents to the extent the same may be deemed
unreasonable; (g) any provision which prohibits assignment by operation of law
or in any other respect which may be deemed unreasonable under the
circumstances, or (h) time-is-of-the-essence clauses.
<PAGE>
LOEB&LOEB LLP
Credit Suisse First Boston,
April 30, 1998
Page 19
Please note that, under certain circumstances, claims and interests of
senior creditors have been equitably subordinated to claims and interests of
junior creditors and/or treated as unsecured claims and interests as a result of
acts, conduct or omissions (including actual or constructive knowledge thereof)
by such senior creditors. Accordingly, our opinion with respect to
enforceability of the security interests granted by the Documents is also
subject to the effect of any laws and rulings which may be applicable as a
result of your acts, conduct, or omissions (including actual or constructive
knowledge thereof).
We express no opinion with respect to any savings clause set forth in the
Documents.
We express no opinion as to the remedies available to the parties for non-
material violations or breaches of the Documents.
We express no opinion as to the validity or enforceability of any
provisions of the Documents which (a) prohibit the Borrower from further
encumbering the Collateral or (b) permit the acceleration of the indebtedness
secured by the Collateral in the event of any breach of any provision against
further encumbrances by the Loan Party thereto.
California Civil Code Section 882.020, provides that a deed of trust or
similar instrument becomes unenforceable: (1) ten years after the last date for
performance of the obligations secured thereby ascertainable from the record; or
(2) if the last date for performance cannot be ascertained from the record, then
sixty years after being recorded, in either case subject to certain other
provisions more fully set forth in the statute.
Section 1670.5 of the California Civil Code provides that if a court as a
matter of law finds a contract or any clause of a contract to be
"unconscionable" at the time it was made, the court may refuse to enforce the
contract, or the court may enforce the remainder of the contract without the
"unconscionable" clause so as to avoid an "unconscionable" result. That section
also permits parties to present evidence as to the commercial setting, purpose
and effect of any contract or clause thereof claimed to be "unconscionable" to
aid the court in making its determination.
Certain provisions of the California Code of Civil Procedure (including but
not limited to Sections 726(e) and 729.010 through 729.090, inclusive) grant to
the judgment debtor and its successor in interest certain rights of redemption
in the event of a judicial foreclosure of a deed of trust or mortgage.
To the extent that any of the Documents provide that, upon default
thereunder, the Collateral Agent or the other Creditors may apply any sums
deposited with them by the Borrowers to cover amounts secured thereby and to the
extent they do not have a perfected
<PAGE>
LOEB&LOEB LLP
Credit Suisse First Boston,
April 30, 1998
Page 20
security interest in such sums, we call your attention to Security Pacific
----------------
National Bank v. Wozab, 51 Cal.3d 991, 275 Cal. Rptr. 201 (1990), in which the
- ----------------------
California Supreme Court held that the lender was prevented under Section 726 of
the California Code of Civil Procedure (discussed above) from foreclosing under
its deed of trust because the lender's action to set off against a general
deposit account of the borrower the amount due and owing by said borrower under
a note secured by the lender's deed of trust violated the "security-first" rule
embodied in Section 726, which requires a secured creditor to proceed against
the real property security before enforcing the underlying debt or else be held
to have waived its lien on the real property security.
We are admitted to practice in the State. We express no opinion as to
matters under or involving the laws of any jurisdiction other than laws of the
United States and the State and its political subdivisions.
This opinion may be relied upon by each of you, by any successors and
assigns of the Administrative Agent, the Collateral Agent or the Issuing Bank,
and any participant, assignee or successor to the interests of the Lenders under
the Documents but may not be relied upon by any other "person" for any other
purpose.
Very truly yours,
Loeb & Loeb LLP
<PAGE>
EXHIBIT 4.7
CONFORMED COPY
AMENDMENT NO. 1 dated as of August 26, 1998
(this "Amendment"), to the Credit Agreement
dated as of April 30, 1998 (the "Credit
Agreement"), among JAFRA COSMETICS
INTERNATIONAL, INC. (formerly CDRJ Acquisition
Corporation), a Delaware corporation ("JCI"),
JAFRA COSMETICS INTERNATIONAL, S.A. de C.V., a
sociedad anonima de capital variable organized
under the laws of Mexico ("JCISA" and, together
with JCI, the "Borrowers"), CDRJ INVESTMENTS
(LUX) S.A., a societe anonyme organized under
the laws of Luxemburg ("Parent"), the several
banks and financial institutions party to the
Credit Agreement (the "Lenders"), the Issuing
Bank and CREDIT SUISSE FIRST BOSTON, a bank
organized under the laws of Switzerland, acting
through its New York Branch, as administrative
agent (in such capacity, the "Administrative
Agent").
A. Pursuant to the Credit Agreement, the Lenders and the Issuing Bank
have extended, and have agreed to extend, credit to the Borrowers.
B. Section 7.02(j) of the Credit Agreement requires that it shall be an
Event of Default if a cash equity contribution (including from the sale of any
capital stock of Parent, to Parent shall fail to be made within 120 days after
the Closing Date in an amount at least equal to the difference between (a)
$80,000,000 and (b) the cash equity contribution made to Parent on the Closing
Date.
C. Parent and the Borrowers have requested that the Required Lenders and
the Administrative Agent consent to an amendment to Section 7.02(j) of the
Credit Agreement, and the Administrative Agent and the Required Lenders are
willing to consent to such amendment, on the terms and subject to the
conditions set forth herein.
D. Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Credit Agreement.
Accordingly, in consideration of the mutual agreements herein contained
and other good and valuable consideration, the sufficiency and receipt of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Amendment to Section 7.02(j). Section 7.02(j) of the Credit
Agreement is hereby amended by deleting the number "120" in such Section and
substituting therefor the number "165".
SECTION 2. Representations and Warranties. To induce the other parties
hereto to enter into this Amendment, each of Parent and each Borrower represents
and warrants to each of the Lenders and the Administrative Agent that (a) the
representations and warranties set forth in Article III of the Credit Agreement
are true and correct in all material respects on and as of the date hereof with
the same effect as though made on and as of the date hereof, except to the
extent such representations and warranties expressly
<PAGE>
2
relate to an earlier date, and (b) as of the date hereof no Default or Event of
Default has occurred and is continuing.
SECTION 3. Conditions to Effectiveness. This Amendment shall become
effective as of the date hereof upon receipt by the Administrative Agent of
counterparts of this Amendment that, when taken together, bear the signatures of
Parent, the Borrowers, the Administrative Agent and the Required Lenders.
SECTION 4. Effect of Amendment. Except as expressly set forth herein,
this Amendment shall not by implication or otherwise limit, impair, constitute a
waiver of, or otherwise affect the rights and remedies of the Lenders, the
Administrative Agent, Parent or either Borrower under the Credit Agreement or
any other Loan Document, and shall not alter, modify, amend or in any way affect
any of the terms, conditions, obligations, covenants or agreements contained in
the Credit Agreement or any other Loan Document, all of which are ratified and
affirmed in all respects and shall continue in full force and effect. Nothing
herein shall be deemed to entitle Parent or either Borrower to a consent to, or
a waiver, amendment, modification or other change of, any of the terms,
conditions, obligations, covenants or agreements contained in the Credit
Agreement or any other Loan Document in similar or different circumstances.
After the date hereof, any reference to the Credit Agreement shall mean the
Credit Agreement as modified hereby. This Amendment shall constitute a "Loan
Document" for all purposes of the Credit Agreement and the other Loan Documents.
SECTION 5. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Delivery
of any executed counterpart of an signature page of this Amendment by facsimile
transmission shall be effective as delivery of a manually executed counterpart
hereof.
SECTION 6. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE
EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.
SECTION 7. Notices. All notices hereunder shall be given in accordance
with the provisions of Section 9.02 of the Credit Agreement.
<PAGE>
3
SECTION 8. Headings. The headings of this Amendment are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, The parties hereto have caused this Amendment to be
duly executed by their duly authorized officers, all as of the date and year
first above written.
JAFRA COSMETICS INTERNATIONAL,
INC.
by /s/ Ralph S. Mason, III
---------------------------------
Name: Ralph S. Mason, III
Title: Executive Vice President
JAFRA COSMETICS INTERNATIONAL,
S.A. DE C.V.,
by /s/ Ralph S. Mason, III
---------------------------------
Name: Ralph S. Mason
Title: Executive Vice President
CDRJ INVESTMENTS (LUX) S.A.,
by /s/ Ralph S. Mason, III
---------------------------------
Name: Ralph S. Mason
Title: fonde de pouvoir
<PAGE>
4
CREDIT SUISSE FIRST BOSTON,
individually and as Administrative Agent,
by /s/ David W. Kratovil
---------------------------------
Name: DAVID W. KRATOVIL
Title: DIRECTOR
by /s/ Joel Glodowski
---------------------------------
Name: JOEL GLODOWSKI
Title: MANAGING DIRECTOR
<PAGE>
5
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
by /s/ Daniel T. Rencrien
---------------------------------
Name: Daniel T. Rencrien
Title: Vice President
<PAGE>
6
THE BANK OF NEW YORK
by /s/ Julie B. Follosco
---------------------------------
Name: JULIE B. FOLLOSCO
Title: VICE PRESIDENT
<PAGE>
7
THE CHASE MANHATTAN BANK,
by /s/ Kathryn A. Duncan
---------------------------------
Name: Kathryn A. Duncan
Title: Vice President
<PAGE>
8
CITY NATIONAL BANK,
by /s/ Steven K. Sloan
---------------------------------
Name: Steven K. Sloan
Title: Vice President
<PAGE>
9
MARINE MIDLAND BANK,
by /s/ Christopher F. French
---------------------------------
Name: CHRISTOPHER F. FRENCH
Title: AUTHORIZED SIGNATORY
<PAGE>
10
UNION BANK OF CALIFORNIA, N.A.,
by /s/ J. Scott Jessup
---------------------------------
Name: J. Scott Jessup
Title: Vice-President
<PAGE>
11
NATEXIS BANQUE-BFCE,
by /s/ Iain A. Whyte
---------------------------------
Name: Iain A. Whyte
Title: Vice President
by /s/ Daniel Touffu
---------------------------------
Name: DANIEL TOUFFU
Title: FIRST VP AND REGIONAL MANAGER
<PAGE>
EXHIBIT 4.8
CONFORMED COPY
INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT dated as
of April 30, 1998, among JAFRA COSMETICS INTERNATIONAL, S.A. DE
C.V., a sociedad anonima de capital variable organized under the
laws of the United Mexican States ("JCISA"), each Subsidiary of
JCISA listed on Schedule I hereto (the "Guarantors") and CREDIT
SUISSE FIRST BOSTON, a bank organized under the laws of
Switzerland, acting through its New York branch, as collateral
agent (in such capacity, the "Collateral Agent") for the Secured
Parties (as defined in the Credit Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of April 30, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme,
CDRJ Acquisition Corporation (to be renamed Jafra Cosmetics International,
Inc.), a Delaware corporation ("JCI"), JCISA (together with JCI, the
"Borrowers"), the lenders from time to time party thereto (the "Lenders"), the
Issuing Bank (as defined therein) and Credit Suisse First Boston, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), as swingline lender and as Collateral Agent, and (b) the JCISA
Subsidiary Guarantee Agreement dated as of April 30, 1998, among the Guarantors
and the Collateral Agent (the "JCISA Subsidiary Guarantee Agreement").
Capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in the Credit Agreement.
The Lenders have agreed to make Loans to JCISA and the Issuing Bank has
agreed to issue Letters of Credit for the account of JCISA pursuant to, and upon
the terms and subject to the conditions specified in, the Credit Agreement. The
Guarantors have guaranteed such Loans and the other Obligations (as defined in
the Guarantee Agreement) of JCISA pursuant to the JCISA Subsidiary Guarantee
Agreement; certain Guarantors have granted Liens on and security interests in
certain of their assets to secure such guarantees. The obligations of the
Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are
conditioned on, among other things, the execution and delivery by JCISA and the
Guarantors of an agreement in the form hereof.
Accordingly, JCISA, each Guarantor and the Collateral Agent agree as
follows:
SECTION 1. Indemnity and Subrogation. In addition to all such rights of
indemnity and subrogation as the Guarantors may have under applicable law (but
subject to Section 3), JCISA agrees that (a) in the event a payment shall be
made by any Guarantor under the JCISA Subsidiary Guarantee Agreement, JCISA
shall indemnify such Guarantor for the full amount of such payment and such
Guarantor shall be subrogated to the rights of the Person to whom such payment
shall have been made to the extent of such payment and (b) in the event any
assets of any Guarantor shall be sold pursuant to any Security Document to
satisfy a claim of any Secured Party, JCISA shall indemnify such Guarantor in an
amount equal to the greater of the book value or the fair market value of the
assets so sold.
SECTION 2. Contribution and Subrogation. Each Guarantor (a "Contributing
Guarantor") agrees (subject to Section 3) that, in the event a payment shall be
made by any other Guarantor under the Guarantee Agreement or assets of any other
Guarantor shall be sold pursuant to any Security Document to satisfy a claim of
any Secured Party and such other Guarantor (the "Claiming Guarantor") shall not
have been fully indemnified by JCISA as provided in Section 1, the Contributing
Guarantor shall indemnify the Claiming Guarantor in an amount equal to the
amount of such payment or the greater of the book value or the fair market value
of such assets, as the case may be, in each case multiplied by a fraction of
which the numerator shall be the net worth of the Contributing Guarantor on the
date hereof and the denominator shall be the aggregate net worth of all the
Guarantors on the date hereof (or, in the case of any Guarantor becoming a party
hereto pursuant to Section 12, the date of the Supplement hereto executed and
delivered by such Guarantor). Any Contributing Guarantor making any payment to a
Claiming Guarantor pursuant to this Section 2
<PAGE>
2
shall be subrogated to the rights of such Claiming Guarantor under Section 1 to
the extent of such payment.
SECTION 3. Subordination. Notwithstanding any provision of this Agreement
to the contrary, all rights of the Guarantors under Sections 1 and 2 and all
other rights of indemnity, contribution or subrogation under applicable law or
otherwise shall be fully subordinated to the indefeasible payment in full in
cash of the Obligations. No failure on the part of JCISA or any Guarantor to
make the payments required by Sections 1 and 2 (or any other payments required
under applicable law or otherwise) shall in any respect limit the obligations
and liabilities of any Guarantor with respect to its obligations hereunder, and
each Guarantor shall remain liable for the full amount of the obligations of
such Guarantor hereunder.
SECTION 4. Termination. This Agreement shall survive and be in full force
and effect so long as any Obligation is outstanding and has not been paid in
full, and so long as the L/C Exposure has not been reduced to zero or any of the
Commitments under the Credit Agreement have not been terminated, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any Obligation is rescinded or must otherwise
be restored by any Secured Party or any Guarantor upon the bankruptcy or
reorganization of JCISA, any Guarantor or otherwise. Notwithstanding the
foregoing, at the time any Guarantor is released from its obligations under the
Guarantee Agreement in accordance with such Guarantee Agreement or the Credit
Agreement, such Guarantor will cease to have any rights or obligations under
this Agreement.
SECTION 5. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH
PRINCIPLES OR RULES WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
SECTION 6. No Waiver; Amendment. (a) No failure on the part of the
Collateral Agent, JCISA or any Guarantor to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy by the Collateral Agent or any Guarantor preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. All
remedies hereunder are cumulative and are not exclusive of any other remedies
provided by law. None of the Collateral Agent, JCISA and the Guarantors shall
be deemed to have waived any rights hereunder unless such waiver shall be in
writing and signed by such parties.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between JCISA,
the Guarantors and the Collateral Agent, with (if required by the Credit
Agreement) the prior written consent of the Required Lenders.
SECTION 7. Notices. All communications and notices hereunder shall be in
writing and given as provided in the JCISA Subsidiary Guarantee Agreement and
addressed as specified therein or with respect to JCISA as provided in the
Credit Agreement.
SECTION 8. Binding Agreement; Assignments. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of the parties that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and assigns.
Neither JCISA nor any Guarantor may assign or transfer any of its rights or
obligations hereunder without the prior written consent of the Collateral
Agent.
SECTION 9. Survival of Agreement; Severability. (a) All covenants and
agreements made by JCISA and each Guarantor herein shall survive the making by
the Lenders of the Loans and the issuance of the Letters of Credit by the
Issuing Bank.
<PAGE>
3
(b) Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 10. Counterparts. This Agreement may be executed by one or more
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. This Agreement shall be
effective with respect to any Guarantor when a counterpart bearing the signature
of such Guarantor shall have been delivered to the Collateral Agent.
SECTION 11. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 12. Additional Guarantors. Pursuant to Section 5.11 of the Credit
Agreement, certain Subsidiaries of JCISA are required to become parties to the
JCISA Subsidiary Guarantee Agreement and this Agreement. Upon execution and
delivery, after the date hereof, by the Collateral Agent and such Subsidiary of
an instrument in the form of Annex 1 hereto, such Subsidiary shall become a
Guarantor hereunder with the same force and effect as if originally named as a
Guarantor hereunder. The execution and delivery of any instrument adding an
additional Guarantor as a party to this Agreement shall not require the consent
of any Guarantor hereunder. The rights and obligations of each Guarantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Guarantor as a party to this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first appearing above.
JAFRA COSMETICS INTERNATIONAL, S.A.
DE C.V.,
By /s/ David A. Novak
------------------------------
Name: David A. Novak
Title: Vice President
REDAY, S.A. DE C.V.,
as a Guarantor,
By /s/ David A. Novak
------------------------------
Name: David A. Novak
Title: Vice President
DISTRIBUIDORA VENUS, S.A. DE C.V.,
as a Guarantor,
By /s/ David A. Novak
------------------------------
Name: David A. Novak
Title: Vice President
DIRSAMEX, S.A. DE C.V.,
as a Guarantor,
By /s/ David A. Novak
------------------------------
Name: David A. Novak
Title: Vice President
QUALIFAX, S.A. DE C.V.,
as a Guarantor,
By /s/ David A. Novak
------------------------------
Name: David A. Novak
Title: Vice President
<PAGE>
6
JAFRA COSMETICS, S. DE R.L. DE C.V.,
as a Guarantor,
By /s/ David A. Novak
------------------------------
Name: David A. Novak
Title: Vice President
CONSULTORIA JAFRA, S.A. DE C.V.,
as a Guarantor,
By /s/ David A. Novak
------------------------------
Name: David A. Novak
Title: Vice President
CREDIT SUISSE FIRST BOSTON,
as Collateral Agent,
by /s/ Laurie Sivaslian
-------------------------------
Name: Laurie Sivaslian
Title: Director
by /s/ David Kratovil
-------------------------------
Name: David Kratovil
Title: Director
<PAGE>
SCHEDULE I
to the Indemnity, Subrogation
and Contribution Agreement
Guarantors
----------
Name
- ----
Reday, S.A. de C.V.
Distribuidora Venus, S.A. de C.V.
Dirsamex, S.A. de C.V.
Qualifax, S.A. de C.V.
Jafra Cosmetics, S. de RL. de C.V.
Consultoria Jafra, S.A. de C.V.
<PAGE>
Annex 1 to
the Indemnity, Subrogation and
Contribution Agreement
SUPPLEMENT NO. dated as of , to the Indemnity,
Subrogation and Contribution Agreement dated as of April 30, 1998
(as the same may be amended, supplemented or otherwise modified
from time to time, the "Indemnity, Subrogation and Contribution
Agreement"), among JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V., a
sociedad anonima de capital variable organized under the laws of
the United Mexican States ("JCISA"), each Subsidiary of JCISA
listed on Schedule I thereto (the "Guarantors"), and CREDIT
SUISSE FIRST BOSTON, a bank organized under the laws of
Switzerland acting through its New York branch, as collateral
agent (the "Collateral Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
A. Reference is made to (a) the Credit Agreement dated as of April 30,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe
anonyme, CDRJ Acquisition Corporation ([to be] renamed Jafra Cosmetics
International, Inc.), a Delaware corporation ("JCI"), JCISA (together with JCI,
the "Borrowers"), the lenders from time to time party thereto (the "Lenders"),
the Issuing Bank (as defined therein) and Credit Suisse First Boston, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), as swingline lender and as Collateral Agent, and (b) the JCISA
Subsidiary Guarantee Agreement dated as of April 30, 1998, among the Guarantors
and the Collateral Agent (the "JCISA Subsidiary Guarantee Agreement").
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Indemnity, Subrogation and
Contribution Agreement and the Credit Agreement.
C. JCISA and the Guarantors have entered into the Indemnity, Subrogation
and Contribution Agreement in order to induce the Lenders to make Loans and the
Issuing Bank to issue Letters of Credit. Pursuant to Section 5.11 of the Credit
Agreement, certain Subsidiaries of JCISA are required to become parties to the
JCISA Subsidiary Guarantee Agreement and this Agreement. Section 12 of the
Indemnity, Subrogation and Contribution Agreement provides that additional
Subsidiaries of JCISA may become Guarantors under the Indemnity, Subrogation and
Contribution Agreement by execution and delivery of an instrument in the form of
this Supplement. The undersigned Subsidiary of JCISA (the "New Guarantor") is
executing this Supplement in accordance with the requirements of the Credit
Agreement to become a Guarantor under the Indemnity, Subrogation and
Contribution Agreement in order to induce the Lenders to make additional Loans
and the Issuing Bank to issue additional Letters of Credit and as consideration
for Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Guarantor agree as follows:
SECTION 1. In accordance with Section 12 of the Indemnity, Subrogation and
Contribution Agreement, the New Guarantor by its signature below becomes a
Guarantor under the Indemnity, Subrogation and Contribution Agreement with the
same force and effect as if originally named therein as a Guarantor and the New
Guarantor hereby agrees to all the terms and provisions of the Indemnity,
Subrogation and Contribution Agreement applicable to it as a Guarantor
thereunder. Each reference to a "Guarantor" in the Indemnity, Subrogation and
Contribution Agreement shall be deemed to include the New Guarantor. The
Indemnity, Subrogation and Contribution Agreement is hereby incorporated herein
by reference.
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, or similar laws relating to or affecting creditors'
rights generally and by
<PAGE>
2
general equitable principles (regardless of whether enforcement is sought in a
proceeding in equity or at law).
SECTION 3. This Supplement may be executed by one or more parties to this
Supplement on any number of separate counterparts (including by facsimile
transmission), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. This Supplement shall become effective
when the Collateral Agent shall have received counterparts of this Supplement
that, when taken together, bear the signatures of the New Guarantor and the
Collateral Agent.
SECTION 4. Except as expressly supplemented hereby, the Indemnity,
Subrogation and Contribution Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES
WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
SECTION 6. Any provision of this Supplement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 7 of the Indemnity, Subrogation and
Contribution Agreement. All communications and notices hereunder to the New
Guarantor shall be given to it at the address set forth under its signature.
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly
executed this Supplement to the Indemnity, Subrogation and Contribution
Agreement as of the day and year first above written.
[Name of New Guarantor],
by _______________________________
Name:
Title:
Address:
CREDIT SUISSE FIRST BOSTON, as Collateral
Agent,
by _______________________________
Name:
Title:
Address:
by _______________________________
Name:
Title:
Address:
<PAGE>
SCHEDULE I
to Supplement No.___ to the Indemnity,
Subrogation and Contribution Agreement
Guarantors
----------
Name Address
- ---- -------
<PAGE>
EXHIBIT 4.9
CONFORMED COPY
JCI GUARANTEE AGREEMENT dated as of April 30, 1998, between
CDRJ ACQUISITION CORPORATION (to be renamed Jafra Cosmetics
International, Inc.), a Delaware corporation (the "Guarantor"),
and CREDIT SUISSE FIRST BOSTON, a bank organized under the laws
of Switzerland, acting through its New York branch, as collateral
agent (the "Collateral Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
Reference is made to the Credit Agreement dated as of April 30, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme,
the Guarantor, Jafra Cosmetics International, S.A. de C.V., a sociedad anonima
de capital variable organized under the laws of the United Mexican States
("JCISA" and, together with the Guarantor, the "Borrowers"), the lenders from
time to time party thereto (the "Lenders"), the Issuing Bank (as defined
therein) and Credit Suisse First Boston, as administrative agent for the Lenders
(in such capacity, the "Administrative Agent"), as swingline lender and as
Collateral Agent. Capitalized terms used herein and not defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrowers and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrowers pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. The Guarantor acknowledges that it will derive substantial benefit
from the making of the Loans by the Lenders and the issuance of the Letters of
Credit by the Issuing Bank. The obligations of the Lenders to make Loans and of
the Issuing Bank to issue Letters of Credit are conditioned on, among other
things, the execution and delivery by the Guarantor of a Guarantee Agreement in
the form hereof. As consideration therefor and in order to induce the Lenders
to make Loans and the Issuing Bank to issue Letters of Credit, the Guarantor is
willing to execute this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. The Guarantor unconditionally guarantees, as a
primary obligor and not merely as a surety, all obligations of JCISA:
(a) under the Credit Agreement, including (a) the due and punctual
payment of (i) the principal of and premium, if any, and interest
(including interest accruing at the applicable rate provided in the Credit
Agreement during the pendency of any bankruptcy, insolvency, receivership
or other similar proceeding, regardless of whether allowed or allowable in
such proceeding) on the Loans to JCISA, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (ii) each payment required to be made by JCISA under the Credit
Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements and interest thereon
and (iii) all other monetary obligations, including fees, costs, expenses
and indemnities, whether direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), of JCISA to the Secured Parties
under the Credit Agreement and the other Loan Documents;
(b) for the due and punctual performance of all covenants, agreements,
obligations and liabilities of JCISA under or pursuant to the Credit
Agreement and the other Loan Documents;
(c) unless otherwise agreed upon in writing by the counterparty
thereto, for the due and punctual payment and performance of all
obligations of JCISA, monetary or otherwise,
<PAGE>
2
under each Hedging Agreement entered into with a counterparty (whether or
not a Lender or an Affiliate thereof); and
(d) for the due and punctual payment and performance of all guarantee
obligations of JCISA referred to in Section 6.01(d)(ii) of the Credit
Agreement as to which any Lender or any Affiliate thereof is originally a
beneficiary (all the monetary and other obligations referred to in the
preceding clauses (a) through (d) being collectively called the
"Obligations");
provided, however, that no legal proceedings or other remedial actions to
enforce the guarantee of the Obligations hereunder may be initiated or taken
until the earlier to occur of (a) 30 days after written demand for payment or
performance thereof has been made by the Collateral Agent to the Guarantor and
(b) an event specified in Section 7.01 of the Credit Agreement with respect to
the Guarantor.
The Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice to or further assent from it, and
that it will remain bound upon its guarantee notwithstanding any extension or
renewal of any Obligation.
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, the Guarantor waives presentment to, demand of payment from and
protest to JCISA of any of the Obligations, and also waives notice of acceptance
of its guarantee and notice of protest for nonpayment. To the fullest extent
permitted by applicable law, the obligations of the Guarantor hereunder shall
not be affected by (a) the failure of the Collateral Agent or any other Secured
Party to assert any claim or demand or to enforce or exercise any right or
remedy against JCISA or any other guarantor of the Obligations under the
provisions of the Credit Agreement, any other Loan Document or otherwise, (b)
any rescission, waiver, amendment or modification of, or any release from any of
the terms or provisions of this Agreement, any other Loan Document, any
Guarantee or any other agreement, including with respect to any other guarantor
of the Obligations or (c) the failure to perfect any security interest in, or
the release of, any of the security held by or on behalf of the Collateral Agent
or any other Secured Party.
SECTION 3. Security. The Guarantor authorizes the Collateral Agent, for
the ratable benefit of the Secured Parties, to (a) take and hold security
pursuant to the terms of the Credit Agreement, the Pledge Agreement and the
other Security Documents for the payment of this guarantee and the Obligations
and exchange, enforce, waive and release any such security, (b) apply such
security and direct the order or manner of sale thereof pursuant to the terms
of the Credit Agreement, the Pledge Agreement and the other Security Documents
and (c) release or substitute any one or more endorsees, other guarantors or
other obligors.
SECTION 4. Guarantee of Payment. The Guarantor further agrees that its
guarantee constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Collateral Agent or
any other Secured Party to any of the security held for payment of the
Obligations or to any balance of any deposit account or credit on the books of
the Collateral Agent or any other Secured Party in favor of JCISA or any other
Person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of
the Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the performance or payment
in full of the Obligations, as the case may be), including any claim of waiver,
release, surrender, alteration or compromise of any of the Obligations, and
shall not be subject to any defense or set off, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of the Guarantor hereunder shall
not be discharged or impaired or otherwise affected by the failure of the
Collateral Agent or any other Secured Party to assert any claim or demand or to
enforce any remedy under the Credit Agreement, any other Loan Document or any
other agreement, by any waiver or modification of any provision of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
Obligations, or by any
<PAGE>
3
other act or omission that may or might in any manner or to any extent vary the
risk of the Guarantor or that would otherwise operate as a discharge of the
Guarantor as a matter of law or equity (other than the performance or payment in
full of all the Obligations, as the case may be).
SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted
by applicable law, the Guarantor waives any defense based on or arising out of
any defense of JCISA or the unenforceability of the Obligations or any part
thereof from any cause, or the cessation from any cause of the liability of
JCISA, other than the performance or payment in full of the Obligations then due
and owing. The Collateral Agent, for the ratable benefit of the Secured
Parties, may, at its election, foreclose on any security held by one or more of
them by one or more judicial or nonjudicial sales, accept an assignment of any
such security in lieu of foreclosure, compromise or adjust any part of the
Obligations, make any other accommodation with JCISA or any other guarantor or
exercise any other right or remedy available to them against JCISA or any other
guarantor, without affecting or impairing in any way the liability of the
Guarantor hereunder except to the extent the Obligations then due and owing have
been fully paid.
SECTION 7. Agreement to Pay; Subrogation. In furtherance of the foregoing
and not in limitation of any other right that the Collateral Agent or any other
Secured Party has at law or in equity against the Guarantor by virtue hereof,
upon the failure of JCISA or any other Loan Party to pay any Obligation when and
as the same shall become due, whether at maturity, by acceleration, after notice
of prepayment or otherwise, the Guarantor hereby promises to and will forthwith
pay, or cause to be paid, to the Collateral Agent the amount of such unpaid
Obligations. Upon payment by the Guarantor of any sums to the Collateral Agent
as provided above, all rights of the Guarantor against JCISA arising as a result
thereof by way of right of subrogation, contribution, reimbursement, indemnity
or otherwise shall in all respects be subordinate and junior in right of payment
to the prior payment in full of all the Obligations. If any amount shall
erroneously be paid to the Guarantor on account of such subrogation,
contribution, reimbursement, indemnity or similar right, such amount shall be
held in trust for the benefit of the Secured Parties and shall forthwith be paid
to the Collateral Agent to be credited against the payment of the Obligations,
whether matured or unmatured, in accordance with the terms of the Loan
Documents.
SECTION 8. Information. The Guarantor assumes all responsibility for
being and keeping itself informed of JCISA's financial condition and assets, and
of all other circumstances bearing upon the risk of nonpayment of the
Obligations and the nature, scope and extent of the risks that the Guarantor
assumes and incurs hereunder, and agrees that none of the Collateral Agent or
the other Secured Parties will have any duty to advise the Guarantor of
information known to it or any of them regarding such circumstances or risks.
SECTION 9. Termination. The Guarantee made hereunder (a) shall terminate
when all the Obligations have been paid in full and the Lenders have no further
commitment to lend under the Credit Agreement, the L/C Exposure has been reduced
to zero and the Issuing Bank has no further obligation to issue Letters of
Credit under the Credit Agreement and (b) shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by any Secured Party
or the Guarantor upon the bankruptcy or reorganization of JCISA, the Guarantor
or otherwise.
SECTION 10. Binding Agreement; Assignments. Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the Guarantor that are contained in this
Agreement shall bind and inure to the benefit of each party hereto and their
respective successors and assigns. This Agreement shall become effective when a
counterpart hereof executed on behalf of the Guarantor shall have been delivered
to the Collateral Agent and a counterpart hereof shall have been executed on
behalf of the Collateral Agent, and thereafter shall be binding upon the
Guarantor and the Collateral Agent and their respective successors and assigns,
and shall inure to the benefit of the Guarantor, the Collateral Agent and the
other Secured Parties, and their respective successors and assigns, except that
the Guarantor shall not have the right to assign its
<PAGE>
4
rights or obligations hereunder or any interest herein except with the written
consent of the Collateral Agent (and any such attempted assignment shall be
void).
SECTION 11. Waivers; Amendment. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and
of the other Secured Parties under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of this Agreement or consent to any departure by the
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on the Guarantor in any case shall entitle the Guarantor to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Guarantor and the Collateral Agent, with the prior written consent of the
Required Lenders (except as otherwise provided in the Credit Agreement).
SECTION 12. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH
PRINCIPLES OR RULES WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
SECTION 13. Notices. All communications and notices hereunder shall be in
writing (including by facsimile transmission) and given as provided in Section
9.02 of the Credit Agreement.
SECTION 14. Survival of Agreement. All covenants and agreements made by
the Guarantors herein shall survive the making by the Lenders of the Loans and
the issuance of the Letters of Credit by the Issuing Bank.
SECTION 15. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 10. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 16. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 17. Integration. This Agreement represents the agreement between
the parties with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by any of the parties
hereto relative to the subject matter hereof not expressly set forth or referred
to herein or in the other Loan Documents.
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
CDRJ ACQUISITION CORPORATION,
as Guarantor,
By /s/ Ralph S. Mason
--------------------------------
Name: Ralph S. Mason
Title: Vice Chairman and EVP
CREDIT SUISSE FIRST BOSTON,
as Collateral Agent,
By /s/ Laurie Sivaslian
--------------------------------
Name: Laurie Sivaslian
Title: Director
By /s/ David Kratovil
--------------------------------
Name: David Kratovil
Title: Director
<PAGE>
EXHIBIT 4.10
CONFORMED COPY
JCISA GUARANTEE AGREEMENT dated as of April 30, 1998,
between JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V., a sociedad
anonima de capital variable organized under the laws of the
United Mexican States (the "Guarantor") and CREDIT SUISSE FIRST
BOSTON, a bank organized under the laws of Switzerland, acting
through its New York branch, as collateral agent (the "Collateral
Agent") for the Secured Parties (as defined in the Credit
Agreement referred to below).
Reference is made to the Credit Agreement dated as of April 30, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme,
CDRJ Acquisition Corporation (to be renamed Jafra Cosmetics International,
Inc.), a Delaware corporation ("JCI" and, together with the Guarantor, the
"Borrowers"), the Guarantor, the lenders from time to time party thereto (the
"Lenders"), the Issuing Bank (as defined therein) and Credit Suisse First
Boston, as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"), as swingline lender and as Collateral Agent.
Capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrowers and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrowers pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. The Guarantor acknowledges that it will derive substantial benefit
from the making of the Loans by the Lenders and the issuance of the Letters of
Credit by the Issuing Bank. The obligations of the Lenders to make Loans and of
the Issuing Bank to issue Letters of Credit are conditioned on, among other
things, the execution and delivery by the Guarantor of a Guarantee Agreement in
the form hereof. As consideration therefor and in order to induce the Lenders
to make Loans and the Issuing Bank to issue Letters of Credit, the Guarantor is
willing to execute this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. The Guarantor unconditionally guarantees, as a
primary obligor and not merely as a surety, all obligations of JCI:
(a) under the Credit Agreement, including (a) the due and punctual
payment of (i) the principal of and premium, if any, and interest
(including interest accruing at the applicable rate provided in the Credit
Agreement during the pendency of any bankruptcy, insolvency, receivership
or other similar proceeding, regardless of whether allowed or allowable in
such proceeding) on the Loans to JCI, when and as due, whether at maturity,
by acceleration, upon one or more dates set for prepayment or otherwise,
(ii) each payment required to be made by JCI under the Credit Agreement in
respect of any Letter of Credit, when and as due, including payments in
respect of reimbursement of disbursements and interest thereon and (iii)
all other monetary obligations, including fees, costs, expenses and
indemnities, whether direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), of JCI to the Secured Parties
under the Credit Agreement and the other Loan Documents;
(b) for the due and punctual performance of all covenants, agreements,
obligations and liabilities of JCI under or pursuant to the Credit
Agreement and the other Loan Documents;
(c) for unless otherwise agreed upon in writing by the counterparty
thereto, the due and punctual payment and performance of all obligations of
JCI, monetary or otherwise,
<PAGE>
2
under each Hedging Agreement entered into with a counterparty (whether or
not a Lender or an Affiliate thereof); and
(d) for the due and punctual payment and performance of all guarantee
obligations of JCI referred to in Section 6.01(d)(ii) of the Credit
Agreement as to which any Lender or any Affiliate thereof originally is a
beneficiary (all the monetary and other obligations referred to in the
preceding clauses (a) through (d) being collectively called the
"Obligations");
provided, however, that no legal proceedings or other remedial actions to
enforce the guarantee of the Obligations hereunder may be initiated or taken
until the earlier to occur of (a) 30 days after written demand for payment or
performance thereof has been made by the Collateral Agent to the Guarantor and
(b) an event specified in Section 7.01 of the Credit Agreement with respect to
the Guarantor.
The Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice to or further assent from it, and
that it will remain bound upon its guarantee notwithstanding any extension or
renewal of any Obligation.
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, the Guarantor waives presentment to, demand of payment from and
protest to JCI of any of the Obligations, and also waives notice of acceptance
of its guarantee and notice of protest for nonpayment. To the fullest extent
permitted by applicable law, the obligations of the Guarantor hereunder shall
not be affected by (a) the failure of the Collateral Agent or any other Secured
Party to assert any claim or demand or to enforce or exercise any right or
remedy against JCI or any other guarantor of the Obligations under the
provisions of the Credit Agreement, any other Loan Document or otherwise, (b)
any rescission, waiver, amendment or modification of, or any release from any of
the terms or provisions of this Agreement, any other Loan Document, any
Guarantee or any other agreement, including with respect to any other guarantor
of the Obligations or (c) the failure to perfect any security interest in, or
the release of, any of the security held by or on behalf of the Collateral Agent
or any other Secured Party.
SECTION 3. Security. The Guarantor authorizes the Collateral Agent, for
the ratable benefit of the Secured Parties, to (a) take and hold security for
the payment of this guarantee and the Obligations and exchange, enforce, waive
and release any such security, (b) apply such security and direct the order or
manner of sale thereof as they in their sole discretion may determine and (c)
release or substitute any one or more endorsees, other guarantors or other
obligors.
SECTION 4. Guarantee of Payment. The Guarantor further agrees that its
guarantee constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Collateral Agent or
any other Secured Party to any of the security held for payment of the
Obligations or to any balance of any deposit account or credit on the books of
the Collateral Agent or any other Secured Party in favor of JCI or any other
Person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of
the Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the performance or payment
in full of the Obligations, as the case may be), including any claim of waiver,
release, surrender, alteration or compromise of any of the Obligations, and
shall not be subject to any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of the Guarantor hereunder shall
not be discharged or impaired or otherwise affected by the failure of the
Collateral Agent or any other Secured Party to assert any claim or demand or to
enforce any remedy under the Credit Agreement, any other Loan Document or any
other agreement, by any waiver or modification of any provision of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
Obligations, or by any other act or omission that may or might in any manner or
to any extent vary the risk of the Guarantor
<PAGE>
3
or that would otherwise operate as a discharge of the Guarantor as a matter of
law or equity (other than the performance or payment in full in cash of all the
Obligations, as the case may be).
SECTION 6. Defenses of JCI Waived. To the fullest extent permitted by
applicable law, the Guarantor waives any defense based on or arising out of any
defense of JCI or the unenforceability of the Obligations or any part thereof
from any cause, or the cessation from any cause of the liability of JCI, other
than the performance or payment in full of the Obligations then due and owing.
The Collateral Agent, for the ratable benefit of the Secured Parties, may, at
its election, foreclose on any security held by one or more of them by one or
more judicial or nonjudicial sales, accept an assignment of any such security in
lieu of foreclosure, compromise or adjust any part of the Obligations, make any
other accommodation with JCI or any other guarantor or exercise any other right
or remedy available to them against JCI or any other guarantor, without
affecting or impairing in any way the liability of the Guarantor hereunder
except to the extent the Obligations then due and owing have been fully paid.
SECTION 7. Agreement to Pay; Subrogation. In furtherance of the foregoing
and not in limitation of any other right that the Collateral Agent or any other
Secured Party has at law or in equity against the Guarantor by virtue hereof,
upon the failure of JCI or any other Loan Party to pay any Obligation when and
as the same shall become due, whether at maturity, by acceleration, after notice
of prepayment or otherwise, the Guarantor hereby promises to and will forthwith
pay, or cause to be paid, to the Collateral Agent in cash the amount of such
unpaid Obligations. Upon payment by the Guarantor of any sums to the Collateral
Agent as provided above, all rights of the Guarantor against JCI arising as a
result thereof by way of right of subrogation, contribution, reimbursement,
indemnity or otherwise shall in all respects be subordinate and junior in right
of payment to the prior payment in full of all the Obligations. If any amount
shall erroneously be paid to the Guarantor on account of such subrogation,
contribution, reimbursement, indemnity or similar right, such amount shall be
held in trust for the benefit of the Secured Parties and shall forthwith be paid
to the Collateral Agent to be credited against the payment of the Obligations,
whether matured or unmatured, in accordance with the terms of the Loan
Documents.
SECTION 8. Information. The Guarantor assumes all responsibility for
being and keeping itself informed of JCI's financial condition and assets, and
of all other circumstances bearing upon the risk of nonpayment of the
Obligations and the nature, scope and extent of the risks that the Guarantor
assumes and incurs hereunder, and agrees that none of the Collateral Agent or
the other Secured Parties will have any duty to advise the Guarantor of
information known to it or any of them regarding such circumstances or risks.
SECTION 9. Termination. The Guarantee made hereunder (a) shall terminate
when all the Obligations have been paid in full and the Lenders have no further
commitment to lend under the Credit Agreement, the L/C Exposure has been reduced
to zero and the Issuing Bank has no further obligation to issue Letters of
Credit under the Credit Agreement and (b) shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by any Secured Party
or the Guarantor upon the bankruptcy or reorganization of JCI, the Guarantor or
otherwise.
SECTION 10. Binding Agreement; Assignments. Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the Guarantor that are contained in this
Agreement shall bind and inure to the benefit of each party hereto and their
respective successors and assigns. This Agreement shall become effective when a
counterpart hereof executed on behalf of the Guarantor shall have been delivered
to the Collateral Agent and a counterpart hereof shall have been executed on
behalf of the Collateral Agent, and thereafter shall be binding upon the
Guarantor and the Collateral Agent and their respective successors and assigns,
and shall inure to the benefit of the Guarantor, the Collateral Agent and the
other Secured Parties, and their respective successors and assigns, except that
the Guarantor shall not have the right to assign its
<PAGE>
4
rights or obligations hereunder or any interest herein except with the written
consent of the Collateral Agent (and any such attempted assignment shall be
void).
SECTION 11. Waivers; Amendment. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and
of the other Secured Parties under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of this Agreement or consent to any departure by the
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on the Guarantor in any case shall entitle the Guarantor to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Guarantor and the Collateral Agent, with the prior written consent of the
Required Lenders (except as otherwise provided in the Credit Agreement).
SECTION 12. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH
PRINCIPLES OR RULES WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
SECTION 13. Notices. All communications and notices hereunder shall be in
writing (including by facsimile transmission) and given as provided in Section
9.02 of the Credit Agreement.
SECTION 14. Survival of Agreement. All covenants and agreements made by
the Guarantors herein shall survive the making by the Lenders of the Loans and
the issuance of the Letters of Credit by the Issuing Bank.
SECTION 15. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 10. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 16. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 17. Integration. This Agreement represents the agreement between
the parties with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by any of the parties
hereto relative to the subject matter hereof not expressly set forth or referred
to herein or in the other Loan Documents.
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V., as
Guarantor,
by /s/ David A. Novak
-----------------------------------------
Name: David A. Novak
Title: Vice President
CREDIT SUISSE FIRST BOSTON, as Collateral Agent,
by /s/ Laurie Sivaslian
-----------------------------------------
Name: Laurie Sivaslian
Title: Director
by /s/ David Kratovil
-----------------------------------------
Name: David Kratovil
Title: Director
<PAGE>
EXHIBIT 4.11
CONFORMED COPY
JCISA SUBSIDIARY GUARANTEE AGREEMENT dated as of April 30,
1998, among each of the subsidiaries listed on Schedule I hereto
(each such subsidiary individually, a "Guarantor" and
collectively, the "Guarantors") of Jafra Cosmetics International,
S.A. de C.V., a sociedad anonima de capital variable organized
under the laws of the United Mexican States ("JCISA"), and CREDIT
SUISSE FIRST BOSTON, a bank organized under the laws of
Switzerland, acting through its New York branch, as collateral
agent (the "Collateral Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
Reference is made to the Credit Agreement dated as of April 30, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme,
CDRJ Acquisition Corporation (to be renamed Jafra Cosmetics International,
Inc.), a Delaware corporation ("JCI"), JCISA (together with JCI, the
"Borrowers"), the lenders from time to time party thereto (the "Lenders"), the
Issuing Bank (as defined therein) and Credit Suisse First Boston, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), as swingline lender and as Collateral Agent. Capitalized terms used
herein and not defined herein shall have the meanings assigned to such terms in
the Credit Agreement.
The Lenders have agreed to make Loans to the Borrowers and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrowers pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. Each of the Guarantors is a wholly owned Subsidiary of JCISA and
acknowledges that it will derive substantial benefit from the making of the
Loans by the Lenders and the issuance of the Letters of Credit by the Issuing
Bank. The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit are conditioned on, among other things, the execution
and delivery by the Guarantors of a Guarantee Agreement in the form hereof. As
consideration therefor and in order to induce the Lenders to make Loans and the
Issuing Bank to issue Letters of Credit, the Guarantors are willing to execute
this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. Each Guarantor unconditionally guarantees,
severally, as a primary obligor and not merely as a surety, all obligations of
JCISA:
(a) under the Credit Agreement and the JCISA Guarantee Agreement,
including the due and punctual payment of (i) the principal of and premium,
if any, and interest (including interest accruing at the applicable rate
provided in the Credit Agreement during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the Loans to JCISA, when and as
due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, (ii) each payment required to be made by JCISA
under the Credit Agreement in respect of any Letter of Credit, when and as
due, including payments in respect of reimbursement of disbursements and
interest thereon and (iii) all other monetary obligations, including fees,
costs, expenses and indemnities, whether direct, contingent, fixed or
otherwise (including monetary obligations incurred during the pendency of
any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding), of JCISA to
the Secured Parties under the Credit Agreement, the JCISA Guarantee
Agreement and the other Loan Documents;
(b) for the due and punctual performance of all covenants, agreements,
obligations and liabilities of JCISA under or pursuant to the Credit
Agreement and the other Loan Documents;
<PAGE>
2
(c) unless otherwise agreed upon in writing by the applicable
counterparty thereto, for the due and punctual payment and performance of
all obligations of JCISA, monetary or otherwise, under each Hedging
Agreement entered into with a counterparty (whether or not a Lender or an
Affiliate thereof); and
(d) the due and punctual payment and performance of all guarantee
obligations of JCISA referred to in Section 6.01(d)(ii) of the Credit
Agreement as to which any Lender or any Affiliate thereof originally is a
beneficiary (all the monetary and other obligations referred to in the
preceding clauses (a) through (d) being collectively called the
"Obligations").
Each Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice to or further assent from it, and
that it will remain bound upon its guarantee notwithstanding any extension or
renewal of any Obligation.
Anything contained in this Agreement to the contrary notwithstanding, the
obligations of each Guarantor hereunder shall be limited to a maximum aggregate
amount equal to the greatest amount that would not render such Guarantor's
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
provisions of applicable state or foreign law (collectively, the "Fraudulent
Transfer Laws"), in each case after giving effect to all other liabilities of
such Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (a) in respect of intercompany indebtedness to JCISA or Affiliates of
JCISA to the extent that such indebtedness would be discharged in an amount
equal to the amount paid by such Guarantor hereunder and (b) under any Guarantee
of senior unsecured indebtedness or Indebtedness subordinated in right of
payment to the Obligations which Guarantee contains a limitation as to maximum
amount similar to that set forth in this paragraph, pursuant to which the
liability of such Guarantor hereunder is included in the liabilities taken into
account in determining such maximum amount) and after giving effect as assets to
the value (as determined under the applicable provisions of the Fraudulent
Transfer Laws) of any rights to subrogation, contribution, reimbursement,
indemnity or similar rights of such Guarantor pursuant to (i) applicable law or
(ii) any agreement providing for an equitable allocation among such Guarantor
and other Affiliates of JCISA of obligations arising under Guarantees by such
parties (including the Indemnity, Subrogation and Contribution Agreement).
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, each Guarantor waives presentment to, demand of payment from and
protest to JCISA of any of the Obligations, and also waives notice of acceptance
of its guarantee and notice of protest for nonpayment. To the fullest extent
permitted by applicable law, the obligations of each Guarantor hereunder shall
not be affected by (a) the failure of the Collateral Agent or any other Secured
Party to assert any claim or demand or to enforce or exercise any right or
remedy against the Borrower or any other Guarantor under the provisions of the
Credit Agreement, any other Loan Document or otherwise, (b) any rescission,
waiver, amendment or modification of, or any release from any of the terms or
provisions of this Agreement, any other Loan Document, any Guarantee or any
other agreement, including with respect to any other Guarantor under this
Agreement or (c) the failure to perfect any security interest in, or the release
of, any of the security held by or on behalf of the Collateral Agent or any
other Secured Party.
SECTION 3. Security. Each of the Guarantors authorizes the Collateral
Agent to (a) take and hold security pursuant to the terms of the Credit
Agreement, the Pledge Agreement and the other Security Documents for the payment
of this guarantee and the Obligations and exchange, enforce, waive and release
any such security, (b) apply such security and direct the order or manner of
sale thereof pursuant to the terms of the Credit Agreement, the Pledge Agreement
and the other Security Documents and (c) release or substitute any one or more
endorsees, other guarantors of other obligors.
<PAGE>
3
SECTION 4. Guarantee of Payment. Each Guarantor further agrees that its
guarantee constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Collateral Agent or
any other Secured Party to any of the security held for payment of the
Obligations or to any balance of any deposit account or credit on the books of
the Collateral Agent or any other Secured Party in favor of JCISA or any other
Person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of
each Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the performance or payment
in full of the Obligations, as the case may be), including any claim of waiver,
release, surrender, alteration or compromise of any of the Obligations, and
shall not be subject to any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Guarantor hereunder shall
not be discharged or impaired or otherwise affected by the failure of the
Collateral Agent or any other Secured Party to assert any claim or demand or to
enforce any remedy under the Credit Agreement, any other Loan Document or any
other agreement, by any waiver or modification of any provision of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
Obligations, or by any other act or omission that may or might in any manner or
to any extent vary the risk of any Guarantor or that would otherwise operate as
a discharge of each Guarantor as a matter of law or equity (other than the
performance or payment in full of all the Obligations, as the case may be).
SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted
by applicable law, each of the Guarantors waives any defense based on or arising
out of any defense of JCISA or the unenforceability of the Obligations or any
part thereof from any cause, or the cessation from any cause of the liability of
JCISA, other than the performance or payment in full of the Obligations then due
and owing. The Collateral Agent may, at its election, foreclose on any security
held by one or more of them by one or more judicial or nonjudicial sales, accept
an assignment of any such security in lieu of foreclosure, compromise or adjust
any part of the Obligations, make any other accommodation with JCISA or any
other guarantor or exercise any other right or remedy available to them against
JCISA or any other guarantor, without affecting or impairing in any way the
liability of any Guarantor hereunder except to the extent the Obligations then
due and owing have been fully paid.
SECTION 7. Agreement to Pay; Subordination. In furtherance of the
foregoing and not in limitation of any other right that the Collateral Agent or
any other Secured Party has at law or in equity against any Guarantor by virtue
hereof, upon the failure of JCISA or any other Loan Party to pay any Obligation
when and as the same shall become due, whether at maturity, by acceleration,
after notice of prepayment or otherwise, each Guarantor hereby promises to and
will forthwith pay, or cause to be paid, to the Collateral Agent in cash the
amount of such unpaid Obligations. Upon payment by any Guarantor of any sums to
the Collateral Agent as provided above, all rights of such Guarantor against
JCISA arising as a result thereof by way of right of subrogation, contribution,
reimbursement, indemnity or otherwise shall in all respects be subordinate and
junior in right of payment to the prior payment in full of all the Obligations.
If any amount shall erroneously be paid to any Guarantor on account of such
subrogation, contribution, reimbursement, indemnity or similar right, such
amount shall be held in trust for the benefit of the Secured Parties and shall
forthwith be paid to the Collateral Agent to be credited against the payment of
the Obligations, whether matured or unmatured, in accordance with the terms of
the Loan Documents.
SECTION 8. Information. Each of the Guarantors assumes all responsibility
for being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks that such
Guarantor assumes and incurs hereunder, and agrees that none of the Collateral
Agent or the other Secured Parties will have any duty to advise any of the
Guarantors of information known to it or any of them regarding such
circumstances or risks.
<PAGE>
4
SECTION 9. Representations and Warranties. Each of the Guarantors
represents and warrants as to itself that all representations and warranties
relating to it contained in the Credit Agreement are true and correct, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
SECTION 10. Termination. The Guarantees made hereunder (a) shall
terminate when all the Obligations have been paid in full and the Lenders have
no further commitment to lend under the Credit Agreement, the L/C Exposure has
been reduced to zero and the Issuing Bank has no further obligation to issue
Letters of Credit under the Credit Agreement and (b) shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any Obligation is rescinded or must otherwise be restored by
any Secured Party or any Guarantor upon the bankruptcy or reorganization of
JCISA, any Guarantor or otherwise.
SECTION 11. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Guarantors that are contained in
this Agreement shall bind and inure to the benefit of each party hereto and
their respective successors and assigns. This Agreement shall become effective
as to any Guarantor when a counterpart hereof executed on behalf of such
Guarantor shall have been delivered to the Collateral Agent, and a counterpart
hereof shall have been executed on behalf of the Collateral Agent, and
thereafter shall be binding upon such Guarantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Guarantor, the Collateral Agent and the other Secured Parties, and their
respective successors and assigns, except that no Guarantor shall have the right
to assign its rights or obligations hereunder or any interest herein (and any
such attempted assignment shall be void), except with the written consent of the
Collateral Agent. If all of the capital stock of a Guarantor is sold,
transferred or otherwise disposed of pursuant to a transaction permitted by
Section 6.04 of the Credit Agreement, such Guarantor shall be released from its
obligations under this Agreement without further action. This Agreement shall
be construed as a separate agreement with respect to each Guarantor and may be
amended, modified, supplemented, waived or released with respect to any
Guarantor without the approval of any other Guarantor and without affecting the
obligations of any other Guarantor hereunder.
SECTION 12. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the other Secured Parties under the other Loan Documents are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of this Agreement or consent to any departure by any
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on any Guarantor in any case shall entitle such Guarantor to
any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Guarantors with respect to which such waiver, amendment or modification relates
and the Collateral Agent, with the prior written consent of the Required Lenders
(except as otherwise provided in the Credit Agreement).
SECTION 13. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ITS PRINCIPLES OR
<PAGE>
5
RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
SECTION 14. Notices. All communications and notices hereunder shall be in
writing (including by facsimile transmission) and given as provided in Section
9.02 of the Credit Agreement. All communications and notices hereunder to each
Guarantor shall be given to it in care of JCI.
SECTION 15. Survival of Agreement; Severability. (a) All covenants and
agreements made by the Guarantors herein shall survive the making by the Lenders
of the Loans and the issuance of the Letters of Credit by the Issuing Bank.
(b) In the event any one or more of the provisions contained in this
Agreement or in any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 16. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 11. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 17. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
SECTION 18. Integration. This Agreement represents the agreement between
the parties with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by any of the parties
hereto relative to the subject matter hereof not expressly set forth or referred
to herein or in the other Loan Documents.
SECTION 19. Jurisdiction; Consent to Service of Process. Each party hereto
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or proceeding
relating to this Agreement, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts of any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient forum and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to the applicable party at
the address specified in Section 7.01 or at such other address of which the
parties hereto shall have been notified pursuant thereto.
(d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and
<PAGE>
6
(e) waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
Section 19 any punitive damages.
SECTION 20. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 21. Additional Guarantors. Pursuant to Section 5.11 of the Credit
Agreement, certain Subsidiaries of JCISA are required to become Subsidiary
Grantors hereunder. Upon execution and delivery after the date hereof by the
Collateral Agent and such Subsidiary of an instrument in the form of Annex 1,
such Subsidiary shall become a Guarantor hereunder with the same force and
effect as if originally named as a Guarantor herein. The execution and delivery
of any instrument adding an additional Guarantor as a party to this Agreement
shall not require the consent of any other Guarantor hereunder. The rights and
obligations of each Guarantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Guarantor as a party to this Agreement.
SECTION 22. Right of Setoff. If an Event of Default under Section 7.02(a)
of the Credit Agreement shall have occurred and be continuing, each Secured
Party shall have the right to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
Indebtedness at any time owing by such Secured Party to or for the credit or the
account of such Guarantor against any or all the obligations of such Guarantor
now or hereafter existing under this Agreement and the other Loan Documents held
by such Secured Party, irrespective of whether or not such Secured Party shall
have made any demand under this Agreement or any other Loan Document and
although such obligations may be unmatured. Each Secured Party agrees promptly
to notify the Borrowers, the Administrative Agent and the applicable Guarantor
after any such set-off and application made by such Secured Party, provided that
the failure to give such notice shall not affect the validity of such set-off
and application. The rights of each Secured Party under this Section 22 are in
addition to other rights and remedies (including other rights of setoff) which
such Secured Party may have.
<PAGE>
7
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
REDAY, S.A. DE C.V.,
as a Guarantor,
By /s/ David A. Novak
-----------------------------------
Name: David A. Novak
Title: Vice President
DISTRIBUIDORA VENUS, S.A. DE C.V.,
as a Guarantor,
By /s/ David A. Novak
-----------------------------------
Name: David A. Novak
Title: Vice President
DIRSAMEX, S.A. DE C.V.,
as a Guarantor,
By /s/ David A. Novak
------------------------------------
Name: David A. Novak
Title: Vice President
QUALIFAX, S.A. DE C.V.,
as a Guarantor,
By /s/ David A. Novak
------------------------------------
Name: David A. Novak
Title: Vice President
JAFRA COSMETICS, S. DE R.L. DE C.V.,
as a Guarantor,
By /s/ David A. Novak
------------------------------------
Name: David A. Novak
Title: Vice President
<PAGE>
8
CONSULTORIA JAFRA, S.A. DE C.V.,
as a Guarantor,
By /s/ David A. Novak
-------------------------------------
Name: David A. Novak
Title: Vice President
CREDIT SUISSE FIRST BOSTON,
as Collateral Agent,
By_____________________________________
Name:
Title:
By_____________________________________
Name:
Title:
<PAGE>
9
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by /s/ Laurie Sivaslian
--------------------------------------
Name: Laurie Sivaslian
Title: Director
by /s/ David Kratovil
--------------------------------------
Name: David Kratovil
Title: Director
<PAGE>
Schedule I to the
Guarantee Agreement
Guarantor
---------
Reday, S.A. de C.V.
Distribuidora Venus, S.A. de C.V.
Dirsamex, S.A. de C.V.
Qualifax, S.A. de C.V.
Jafra Cosmetics, S. de RL. de C.V.
Consultoria Jafra, S.A. de C.V.
<PAGE>
Annex 1 to the
Subsidiary Guarantee Agreement
SUPPLEMENT NO. dated as of , to the JCISA
Subsidiary Guarantee Agreement dated as of April 30, 1998, among
each of the subsidiaries listed on Schedule I thereto (each such
subsidiary individually, a "Guarantor" and collectively, the
"Guarantors") of Jafra Cosmetics International, S.A. de C.V., a
sociedad anonima de capital variable organized under the laws of
the United Mexican States ("JCISA"), and CREDIT SUISSE FIRST
BOSTON, a bank organized under the laws of Switzerland, acting
through its New York branch, as collateral agent (the "Collateral
Agent") for the Secured Parties (as defined in the Credit
Agreement referred to below).
A. Reference is made to the Credit Agreement dated as of April 30, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme,
CDRJ Acquisition Corporation ([to be] renamed Jafra Cosmetics International,
Inc.), a Delaware corporation ("JCI"), JCISA (together with JCI, the
"Borrowers"), the lenders from time to time party thereto (the "Lenders"), the
Issuing Bank (as defined therein) and Credit Suisse First Boston, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), as swingline lender and as Collateral Agent. Capitalized terms used
herein and not defined herein shall have the meanings assigned to such terms in
the Credit Agreement.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Guarantee Agreement and the
Credit Agreement.
C. The Guarantors have entered into the Guarantee Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Pursuant to Section 5.11 of the Credit Agreement, certain Subsidiaries
of JCISA are required to become Subsidiary Guarantors hereunder. Section 21 of
the Guarantee Agreement provides that additional Subsidiaries of JCISA may
become Guarantors under the Guarantee Agreement by execution and delivery of an
instrument in the form of this Supplement. The undersigned Subsidiary of JCISA
(the "New Guarantor") is executing this Supplement in accordance with the
requirements of the Credit Agreement to become a Guarantor under the Guarantee
Agreement in order to induce the Lenders to make additional Loans and the
Issuing Bank to issue additional Letters of Credit and as consideration for
Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Guarantor agree as follows:
SECTION 1. In accordance with Section 21 of the Guarantee Agreement, the
New Guarantor by its signature below becomes a Guarantor under the Guarantee
Agreement with the same force and effect as if originally named therein as a
Guarantor and the New Guarantor hereby (a) agrees to all the terms and
provisions of the Guarantee Agreement applicable to it as a Guarantor thereunder
and (b) represents and warrants that the representations and warranties made by
it as a Guarantor thereunder are true and correct on and as of the date hereof.
Each reference to a "Guarantor" in the Guarantee Agreement shall be deemed to
include the New Guarantor. The Guarantee Agreement is hereby incorporated
herein by reference.
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed by one or more parties to this
Supplement on any number of separate counterparts (including by facsimile
transmission), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. This
<PAGE>
2
Supplement shall become effective when the Collateral Agent shall have received
counterparts of this Supplement that, when taken together, bear the signatures
of the New Guarantor and the Collateral Agent.
SECTION 4. Except as expressly supplemented hereby, the Guarantee
Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES
WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
SECTION 6. Any provision of this Supplement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 14 of the Guarantee Agreement. All
communications and notices hereunder to the New Guarantor shall be given to it
at the address set forth under its signature below, with a copy to the
Borrowers.
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly
executed this Supplement to the Guarantee Agreement as of the day and year first
above written.
[Name Of New Guarantor],
by_________________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by_________________________________
Name:
Title:
by_________________________________
Name:
Title:
<PAGE>
EXHIBIT 4.12
CONFORMED COPY
PARENT GUARANTEE AGREEMENT dated as of April 30, 1998,
between CDRJ INVESTMENTS (LUX) S.A., a Luxembourg societe anonyme
(the "Guarantor") and CREDIT SUISSE FIRST BOSTON, a bank
organized under the laws of Switzerland, acting through its New
York branch, as collateral agent (the "Collateral Agent") for the
Secured Parties (as defined in the Credit Agreement referred to
below).
Reference is made to the Credit Agreement dated as of April 30, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Guarantor, CDRJ Acquisition Corporation (to be renamed
Jafra Cosmetics International, Inc.), a Delaware corporation ("JCI"), Jafra
Cosmetics International, S.A. de C.V., a sociedad anonima de capital variable
organized under the laws of the United Mexican States (together with JCI, the
"Borrowers"), the lenders from time to time party thereto (the "Lenders"), the
Issuing Bank (as defined therein) and Credit Suisse First Boston, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), as swingline lender and as Collateral Agent. Capitalized terms used
herein and not defined herein shall have the meanings assigned to such terms in
the Credit Agreement.
The Lenders have agreed to make Loans to the Borrowers and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrowers pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. As the indirect owner of all of the issued and outstanding capital
stock of, or other equity interests in, the Borrowers, the Guarantor
acknowledges that it will derive substantial benefit from the making of the
Loans by the Lenders and the issuance of the Letters of Credit by the Issuing
Bank. The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit are conditioned on, among other things, the execution
and delivery by the Guarantor of a Guarantee Agreement in the form hereof. As
consideration therefor and in order to induce the Lenders to make Loans and the
Issuing Bank to issue Letters of Credit, the Guarantor is willing to execute
this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. The Guarantor unconditionally guarantees, as a
primary obligor and not merely as a surety, all obligations of the Borrowers:
(a) under the Credit Agreement, including the due and punctual
payment of (i) the principal of and premium, if any, and interest
(including interest accruing at the applicable rate provided in the Credit
Agreement during the pendency of any bankruptcy, insolvency, receivership
or other similar proceeding, regardless of whether allowed or allowable in
such proceeding) on the Loans, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise, (ii)
each payment required to be made by the Borrowers under the Credit
Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements and interest thereon
and (iii) all other monetary obligations, including fees, costs, expenses
and indemnities, whether direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), of the Borrowers to the Secured
Parties under the Credit Agreement and the other Loan Documents;
(b) for the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Borrowers under or pursuant
to the Credit Agreement and the other Loan Documents; and
(c) unless otherwise agreed upon in writing by the counterparty
thereto, the due and punctual payment and performance of all obligations of
the Borrowers, monetary or
<PAGE>
2
otherwise, under each Hedging Agreement entered into with a counterparty
(whether or not a Lender or an Affiliate thereof) (all the monetary and
other obligations referred to in the preceding clauses (a) through (c)
being collectively called the "Obligations").
The Guarantor further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice to or further assent from it, and
that it will remain bound upon its guarantee notwithstanding any extension or
renewal of any Obligation.
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
applicable law, the Guarantor waives presentment to, demand of payment from and
protest to the Borrowers of any of the Obligations, and also waives notice of
acceptance of its guarantee and notice of protest for nonpayment. To the
fullest extent permitted by applicable law, the obligations of the Guarantor
hereunder shall not be affected by (a) the failure of the Collateral Agent or
any other Secured Party to assert any claim or demand or to enforce or exercise
any right or remedy against either Borrower or any other guarantor of the
Obligations under the provisions of the Credit Agreement, any other Loan
Document or otherwise, (b) any rescission, waiver, amendment or modification of,
or any release from any of the terms or provisions of this Agreement, any other
Loan Document, any Guarantee or any other agreement, including with respect to
any other guarantor of the Obligations or (c) the failure to perfect any
security interest in, or the release of, any of the security held by or on
behalf of the Collateral Agent or any other Secured Party.
SECTION 3. Security. The Guarantor authorizes the Collateral Agent, for
the ratable benefit of the Secured Parties, to (a) take and hold security
pursuant to the terms of the Credit Agreement, the Pledge Agreement and the
other Security Documents for the payment of this guarantee and the Obligations
and exchange, enforce, waive and release any such security, (b) apply such
security and direct the order or manner of sale thereof pursuant to the terms of
the Credit Agreement, the Pledge Agreement and the other Security Documents and
(c) release or substitute any one or more endorsees, other guarantors or other
obligors.
SECTION 4. Guarantee of Payment. The Guarantor further agrees that its
guarantee constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Collateral Agent or
any other Secured Party to any of the security held for payment of the
Obligations or to any balance of any deposit account or credit on the books of
the Collateral Agent or any other Secured Party in favor of either Borrower or
any other Person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of
the Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the performance or payment
in full of the Obligations, as the case may be), including any claim of waiver,
release, surrender, alteration or compromise of any of the Obligations, and
shall not be subject to any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of the Guarantor hereunder shall
not be discharged or impaired or otherwise affected by the failure of the
Collateral Agent or any other Secured Party to assert any claim or demand or to
enforce any remedy under the Credit Agreement, any other Loan Document or any
other agreement, by any waiver or modification of any provision of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
Obligations, or by any other act or omission that may or might in any manner or
to any extent vary the risk of the Guarantor or that would otherwise operate as
a discharge of the Guarantor as a matter of law or equity (other than the
performance or payment in full of all the Obligations, as the case may be).
SECTION 6. Defenses of Borrowers Waived. To the fullest extent permitted
by applicable law, the Guarantor waives any defense based on or arising out of
any defense of either Borrower or the unenforceability of the Obligations or any
part thereof from any cause, or the cessation from any cause of the liability of
either Borrower, other than the performance or payment in full of the
Obligations then due and owing. The Collateral Agent, for the ratable benefit
of the Secured Parties, may, at its election, foreclose on any security held by
one or more of them by one or more judicial or nonjudicial sales, accept an
assignment of any such security in lieu of foreclosure, compromise or
<PAGE>
3
adjust any part of the Obligations, make any other accommodation with either
Borrower or any other guarantor or exercise any other right or remedy available
to them against either Borrower or any other guarantor, without affecting or
impairing in any way the liability of the Guarantor hereunder except to the
extent the Obligations then due and owing have been fully paid.
SECTION 7. Agreement to Pay; Subrogation. In furtherance of the foregoing
and not in limitation of any other right that the Collateral Agent or any other
Secured Party has at law or in equity against the Guarantor by virtue hereof,
upon the failure of either Borrower to pay any Obligation when and as the same
shall become due, whether at maturity, by acceleration, after notice of
prepayment or otherwise, the Guarantor hereby promises to and will forthwith
pay, or cause to be paid, to the Collateral Agent in cash the amount of such
unpaid Obligations. Upon payment by the Guarantor of any sums to the Collateral
Agent as provided above, all rights of the Guarantor against the Borrowers
arising as a result thereof by way of right of subrogation, contribution,
reimbursement, indemnity or otherwise shall in all respects be subordinate and
junior in right of payment to the prior payment in full of all the Obligations.
If any amount shall erroneously be paid to the Guarantor on account of such
subrogation, contribution, reimbursement, indemnity or similar right, such
amount shall be held in trust for the benefit of the Secured Parties and shall
forthwith be paid to the Collateral Agent to be credited against the payment of
the Obligations, whether matured or unmatured, in accordance with the terms of
the Loan Documents.
SECTION 8. Information. The Guarantor assumes all responsibility for
being and keeping itself informed of the financial condition and assets of the
Borrowers, and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks that the Guarantor
assumes and incurs hereunder, and agrees that none of the Collateral Agent or
the other Secured Parties will have any duty to advise the Guarantor of
information known to it or any of them regarding such circumstances or risks.
SECTION 9. Termination. The Guarantee made hereunder (a) shall terminate
when all the Obligations have been paid in full and the Lenders have no further
commitment to lend under the Credit Agreement, the L/C Exposure has been reduced
to zero and the Issuing Bank has no further obligation to issue Letters of
Credit under the Credit Agreement and (b) shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Obligation is rescinded or must otherwise be restored by any Secured Party
or the Guarantor upon the bankruptcy or reorganization of the Borrowers, the
Guarantor or otherwise.
SECTION 10. Binding Agreement; Assignments. Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the Guarantor that are contained in this
Agreement shall bind and inure to the benefit of each party hereto and their
respective successors and assigns. This Agreement shall become effective when a
counterpart hereof executed on behalf of the Guarantor shall have been delivered
to the Collateral Agent and a counterpart hereof shall have been executed on
behalf of the Collateral Agent, and thereafter shall be binding upon the
Guarantor and the Collateral Agent and their respective successors and assigns,
and shall inure to the benefit of the Guarantor, the Collateral Agent and the
other Secured Parties, and their respective successors and assigns, except that
the Guarantor shall not have the right to assign its rights or obligations
hereunder or any interest herein except with the written consent of the
Collateral Agent (and any such attempted assignment shall be void).
SECTION 11. Waivers; Amendment. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and
of the other Secured Parties under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of this Agreement or consent to any departure by the
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance
<PAGE>
4
and for the purpose for which given. No notice or demand on the Guarantor in any
case shall entitle the Guarantor to any other or further notice or demand in
similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Guarantor and the Collateral Agent, with the prior written consent of the
Required Lenders (except as otherwise provided in the Credit Agreement).
SECTION 12. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH
PRINCIPLES OR RULES WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
SECTION 13. Notices. All communications and notices hereunder shall be in
writing (including by facsimile transmission) and given as provided in Section
9.02 of the Credit Agreement.
SECTION 14. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Guarantors herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall survive the making by the Lenders of the Loans
and the issuance of the Letters of Credit by the Issuing Bank.
SECTION 15. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 10. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 16. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
Section 17. Integration. This Agreement represents the agreement between
the parties with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by any of the parties
hereto relative to the subject matter hereof not expressly set forth or referred
to herein or in the other Loan Documents.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
CDRJ INVESTMENTS (LUX) S.A., as Guarantor,
By /s/ Ralph S. Mason
-------------------------------------
Name: Ralph S. Mason
Title: Vice Chairman and EVP
By /s/ David A. Novak
-------------------------------------
Name: David A. Novak
Title: Secretary and Director
CREDIT SUISSE FIRST BOSTON, as Collateral
Agent,
By /s/ Laurie Sivaslian
-------------------------------------
Name: Laurie Sivaslian
Title: Director
By /s/ David Kratovil
-------------------------------------
Name: David Kratovil
Title: Director
<PAGE>
EXHIBIT 4.13
CONFORMED COPY
PLEDGE AGREEMENT dated as of April 30, 1998, among CDRJ
INVESTMENTS (LUX) S.A., a Luxembourg societe anonyme ("Parent"),
CDRJ NORTH ATLANTIC (LUX) SARL, a Luxembourg societe a
responsibilite limitee ("Lux SARL"), CDRJ LATIN AMERICA HOLDING
COMPANY B.V., LATIN COSMETICS HOLDINGS B.V., REGIONAL COSMETICS
HOLDING B.V., SOUTHERN COSMETICS HOLDINGS B.V. and CDRJ MEXICO
HOLDING COMPANY B.V., each a legal entity in the form of a
"besloten vennootschap met beperkte aansprakelijkheid" organized
under the laws of The Netherlands (collectively, the "Dutch
HoldCos"), CDRJ ACQUISITION CORPORATION (to be renamed JAFRA
COSMETICS INTERNATIONAL, INC.), a Delaware corporation ("JCI"),
JAFRA COSMETICS INTERNATIONAL, S.A. DE C.V., a sociedad anonima
de capital variable organized under the laws of the United
Mexican States ("JCISA" and, together with JCI, the "Borrowers"),
upon consummation of the Transactions, each Subsidiary of the
Borrowers listed on Schedule I hereto (each such Subsidiary
individually a "Subsidiary Pledgor" and collectively, the
"Subsidiary Pledgors"; the Borrowers, Parent, Lux SARL, the Dutch
HoldCos and the Subsidiary Pledgors are referred to collectively
herein as the "Pledgors") and CREDIT SUISSE FIRST BOSTON, a bank
organized under the laws of Switzerland, acting through its New
York branch as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (as defined in the
Credit Agreement referred to below). Capitalized terms used
herein without definition shall have the respective meanings
ascribed thereto in the Credit Agreement referred to below.
Reference is made to (a) the Credit Agreement dated as of April 30, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Parent, the Borrowers, the lenders from time to time party
thereto (the "Lenders"), the Issuing Bank and Credit Suisse First Boston, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), as swingline lender and as Collateral Agent, (b) the Parent Guarantee
Agreement, (c) the JCI Guarantee Agreement, (d) the JCISA Guarantee Agreement
(together with the JCI Guarantee Agreement, the "Cross Guarantee Agreements"),
(e) the JCI Subsidiary Guarantee Agreement and (f) the JCISA Subsidiary
Guarantee Agreement (together with the JCI Subsidiary Guarantee Agreement, the
"Subsidiary Guarantee Agreements").
The Lenders have agreed to make Loans to the Borrowers and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrowers pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. As set forth in the respective Guarantee Agreements, the Guarantors
have agreed to guarantee, among other things, the obligations of the Borrowers
under the Credit Agreement. The obligations of the Lenders to make Loans and of
the Issuing Bank to issue Letters of Credit are conditioned upon, among other
things, the execution and delivery by the Pledgors of a Pledge Agreement in the
form hereof to secure:
(a) in the case of each Borrower, (i) the due and punctual payment by
it of (A) the principal of and premium, if any, and interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on its Loans, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (B) each payment required to be made by it under the Credit
Agreement in respect of any Letter of Credit issued for its benefit, when
and as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash collateral
and (C) all other monetary obligations, including fees, costs, expenses and
indemnities, whether direct, contingent, fixed or otherwise (including
monetary obligations incurred
<PAGE>
2
during the pendency of any bankruptcy, insolvency, receivership or other
similar proceeding, regardless of whether allowed or allowable in such
proceeding) if it to the Secured Parties under the Credit Agreement and the
other Loan Documents, (ii) the due and punctual performance of all
covenants, agreements, obligations and liabilities of it under or pursuant
to the Credit Agreement, its respective Cross Guarantee Agreement and the
other Loan Documents to which it is a party, (iii) unless otherwise agreed
to in writing by the counterparty thereto, the due and punctual payment and
performance of all its obligations under each Hedging Agreement entered
into with any counterparty, (whether or not a Lender or an Affiliate
thereof), and (iv) the due and punctual payment and performance of all
guarantee obligations of such Borrower referred to in Section 6.01(d)(ii)
of the Credit Agreement as to which any Lender or any Affiliate thereof is
originally a beneficiary (in the case of JCI, the "JCI Secured Obligations"
and in the case of JCISA, the "JCISA Secured Obligations"; the JCI Secured
Obligations and the JCISA Secured Obligations are referred to collectively
as the "Borrower Secured Obligations");
(b) in the case of Parent, the due and punctual payment and
performance of all the covenants, agreements, obligations and liabilities
of Parent under or pursuant to the Parent Guarantee Agreement and the other
Loan Documents (the "Parent Secured Obligations");
(c) in the case of each Subsidiary Pledgor, the due and punctual
payment and performance of all the covenants, agreements, obligations and
liabilities of such Subsidiary Pledgor under or pursuant to the applicable
Subsidiary Guarantee Agreement and the other Loan Documents to which it is
a party (in the case of each such Subsidiary Pledgor, the "Individual
Subsidiary Pledgor Secured Obligations"; all Individual Subsidiary Pledgor
Secured Obligations are referred to collectively as the "Subsidiary Pledgor
Secured Obligations");
(d) in the case of Lux SARL, the due and punctual payment and
performance by each Borrower of such Borrower's Borrower Secured
Obligations (the "SARL Secured Obligations"); and
(e) in the case of each Dutch HoldCo, the due and punctual payment
and performance by JCISA of all the JCISA Secured Obligations (in the case
of each such Dutch HoldCo, the "Individual Dutch HoldCo Secured
Obligations"; all Individual Dutch HoldCo Secured Obligations are referred
to collectively as the "Dutch HoldCo Secured Obligations"; and the Borrower
Secured Obligations, the Parent Secured Obligations, the Subsidiary Pledgor
Secured Obligations, the SARL Secured Obligations and the Dutch HoldCo
Secured Obligations are referred to collectively hereinafter as the
"Obligations", such term when used with reference to a specific Pledgor
being understood to refer to such Pledgor's respective monetary and other
obligations referred to in the preceding clauses (a) through (e)).
Accordingly, the Pledgors and the Collateral Agent, on behalf of itself and
each Secured Party (and each of their respective successors or assigns), hereby
agree as follows:
SECTION 1. Pledge. As security for the payment and performance, as the
case may be, in full of its respective Obligations, each Pledgor hereby
transfers, grants, bargains, sells, conveys, hypothecates, pledges, sets over
and delivers unto the Collateral Agent, its successors and assigns, and hereby
grants to the Collateral Agent, its successors and assigns, for the ratable
benefit of the Secured Parties, a security interest in and lien on all of the
Pledgor's right, title and interest in, to and under (a) the shares of capital
stock or other equity interests owned by it (assuming consummation of the
Transactions) and listed on Schedule II hereto and any shares of capital stock
of, or other equity interests in, the respective issuers listed on Schedule II
and, upon acquisition thereof, any other shares required to be pledged by a
Pledgor pursuant to Section 5.11 of the Credit Agreement obtained in the future
by the Pledgor and the certificates representing all such shares (the "Pledged
Stock"), provided that the Pledged Stock shall not include (i) more than 65% of
the issued and outstanding shares of stock of any Foreign Subsidiary of JCI or
of any Foreign Subsidiary of a Domestic Subsidiary of
<PAGE>
3
Parent, (ii) directors' qualifying shares or shares held by nominees, or (iii)
the capital stock of any after acquired or organized Subsidiary of a Pledgor
until such time as such stock is required to be pledged pursuant to Section 5.11
of the Credit Agreement; (b)(i) the debt securities listed opposite the name of
the Pledgor on Schedule II hereto, (ii) any debt securities in the future issued
to a Pledgor (other than intercompany debt securities) and (iii) the promissory
notes and any other instruments evidencing such debt securities (the "Pledged
Debt Securities"); (c) all other property that may be delivered to and held by
the Collateral Agent pursuant to the terms hereof; (d) subject to Section 5, all
payments of principal or interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed, in
respect of, in exchange for or upon the conversion of the securities referred to
in clauses (a) and (b) above; (e) subject to Section 5, all rights and
privileges of the Pledgor with respect to the securities and other property
referred to in clauses (a), (b), (c) and (d) above; and (f) all proceeds of any
of the foregoing (the items referred to in clauses (a) through (f) above being
collectively referred to as the "Collateral"). Upon delivery to the Collateral
Agent, (a) any Pledged Stock or Pledged Debt Securities now or hereafter
included in the Collateral (the "Pledged Securities") shall be accompanied by
stock powers duly executed in blank (or in the case of shares of Mexican
companies, the endorsement in guaranty of each share certificate in favor of the
Collateral Agent in accordance with Mexican law) or other instruments of
transfer reasonably satisfactory to the Collateral Agent and by such other
instruments and documents as the Collateral Agent may reasonably request and (b)
all other property comprising part of the Collateral shall be accompanied by
proper instruments of assignment duly executed by the applicable Pledgor and
such other instruments or documents as the Collateral Agent may reasonably
request. Each delivery of Pledged Securities shall be accompanied by a schedule
describing the securities theretofore and then being pledged hereunder, which
schedule shall be attached hereto as Schedule II and made a part hereof. Each
schedule so delivered shall supersede any prior schedules so delivered.
TO HAVE AND TO HOLD the Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto,
unto the Collateral Agent, its successors and assigns, for the ratable benefit
of the Secured Parties, forever; subject, however, to the terms, covenants and
conditions hereinafter set forth.
SECTION 2. Delivery of the Pledged Securities. (a) Each Pledgor agrees
promptly to deliver or cause to be delivered to the Collateral Agent any and all
(i) Pledged Stock that is certificated and (x) issued by an entity organized
under the laws of the United States of America or a State thereof or (y) issued
by an entity organized under the laws of a jurisdiction other than the United
States or a State or territory thereof, to the extent required to perfect the
security interest in such Pledged Stock and (ii) all Pledged Debt Securities
which are evidenced by a promissory note.
(b) Each Pledgor will cause any Indebtedness for borrowed money owed to
the Pledgor by any Person [(other than intercompany debt)] that is evidenced by
a duly executed promissory note to be pledged and delivered to the Collateral
Agent pursuant to the terms thereof.
SECTION 3. Representations, Warranties and Covenants. Each Pledgor hereby
represents, warrants and covenants, as to itself and the Collateral pledged by
it hereunder, to and with the Collateral Agent that:
(a) assuming consummation of the Transactions, on the date hereof the
Pledged Stock represents that percentage as set forth on Schedule II of the
issued and outstanding shares of each class of the capital stock of the
issuer with respect thereto;
(b) except for the security interest granted hereunder and except as
permitted under Section 6.02, 6.04 or 6.05 of the Credit Agreement, the
Pledgor (i) is and will at all times continue to be the direct owner,
beneficially and of record, of the Pledged Securities indicated on Schedule
II, (ii) holds the same free and clear of all Liens, (iii) will make no
assignment, pledge, hypothecation or transfer of, or create or permit to
exist any security interest in or other Lien on, the Pledged Securities,
other than pursuant hereto;
<PAGE>
4
(c) the Pledgor (i) has the power and authority to pledge the Pledged
Securities in the manner hereby done or contemplated and (ii) will defend
its title or interest thereto or therein against any and all Liens (other
than the Lien created by this Agreement or as otherwise permitted by the
Credit Agreement), however arising, of all Persons whomsoever;
(d) on the date hereof when the Pledged Stock which is certificated
and governed by the law of a State of the United States of America,
together with stock powers, and the Pledged Debt Securities evidenced by
notes, together with bond powers, are delivered to the Collateral Agent
(assuming the continued possession of such Pledged Stock and Pledged Debt
Securities by the Collateral Agent), the Collateral Agent will obtain a
valid and perfected first lien upon and security interest in the Pledged
Stock and Pledged Debt Securities;
(e) all of the Pledged Stock has been duly authorized and validly
issued and is fully paid and nonassessable;
(f) all information set forth herein relating to the Pledged Stock is
accurate and complete in all material respects as of the date hereof;
(g) upon the acquisition of any stock of a Subsidiary acquired after
the Closing Date that is required to be pledged pursuant to Section 5.11 of
the Credit Agreement, the respective Pledgor shall deliver a schedule of
such additional stock to the Collateral Agent and such information shall be
made a part of Schedule II hereof and such stock shall be deemed Pledged
Stock; and
(h) on the date hereof, the Collateral Agent will have a perfected
pledge in the shares of any Mexican companies whose shares have been
pledged, as applicable, when the share certificates of such Mexican
companies are (i) in the possession of the Collateral Agent, (ii) duly
endorsed in guaranty in its favor and (iii) the pledge of shares of any
Mexican companies hereunder has been duly registered in the Shareholders
Registry Book of the relevant company or, in the case of Jafra Cosmetics,
S. de R.L., the security interests will be perfected by means of (i)
corporate approval of pledge, (ii) the delivery of certificates evidencing
ownership of interests therein to the Collateral Agent and (iii) notations
thereof in the corporate records.
SECTION 4. Registration in Nominee Name; Denominations. If an Event of
Default shall occur and be continuing and the Collateral Agent shall give notice
of its intent to exercise the rights specified herein to the relevant Pledgor or
Pledgors, the Collateral Agent, on behalf of the Secured Parties, shall have the
right (in its sole and absolute discretion) to hold the Pledged Securities in
its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or
the name of the Pledgors, endorsed or assigned in blank or in favor of the
Collateral Agent.
SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless and
until an Event of Default shall have occurred and be continuing and the
Collateral Agent has given notice as specified in clause (b) or (c) below:
(i) Each Pledgor shall be entitled to exercise any and all voting
and/or other consensual rights and powers inuring to an owner of Pledged
Securities or any part thereof for any purpose; provided, however, that
such Pledgor will not be entitled to exercise any such right (other than in
connection with a transaction permitted by the Credit Agreement) which
would result in any violation of any provision of the Credit Agreement,
this Agreement or any other Loan Document.
(ii) The Collateral Agent shall promptly execute and deliver to each
Pledgor, or cause to be promptly executed and delivered to each Pledgor,
all such proxies, powers of attorney and other instruments as such Pledgor
may reasonably request for the purpose of enabling
<PAGE>
5
such Pledgor to exercise the voting and/or consensual rights and powers it
is entitled to exercise pursuant to subparagraph (i) above and to receive
the cash dividends it is entitled to receive pursuant to subparagraph (iii)
below.
(iii) Each Pledgor shall be entitled to receive and retain any and
all cash dividends, interest and principal paid on the Pledged Securities
to the extent such cash dividends, interest and principal are permitted by
the Credit Agreement. All noncash dividends, interest and principal, and
all dividends, interest and principal paid or payable in cash or otherwise
in connection with a partial or total liquidation or dissolution, return of
capital, capital surplus or paid-in surplus, and all other distributions
(other than distributions referred to in the preceding sentence) made on or
in respect of the Pledged Securities, whether paid or payable in cash or
otherwise, whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of the issuer of any
Pledged Securities or received in exchange for Pledged Securities or any
part thereof, or in redemption thereof, or as a result of any merger,
consolidation, acquisition or other exchange of assets to which such issuer
may be a party or otherwise, shall be and become part of the Collateral,
and, if received by any Pledgor, shall not be commingled by such Pledgor
with any of its other funds or property but shall be held separate and
apart therefrom, shall be held in trust for the benefit of the Collateral
Agent and shall be forthwith delivered to the Collateral Agent in the same
form as so received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event of Default
and subsequent notice by the Collateral Agent to the relevant Pledgor or
Pledgors of its intent to exercise such rights, all rights of any Pledgor to
dividends, interest or principal that such Pledgor is authorized to receive
pursuant to paragraph (a)(iii) above shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, which shall have the sole and
exclusive right and authority to receive and retain such dividends, interest or
principal. All dividends, interest or principal received by any Pledgor
contrary to the provisions of this Section 5 shall be held in trust for the
benefit of the Collateral Agent, shall be segregated from other property or
funds of such Pledgor and shall be forthwith delivered to the Collateral Agent
upon demand in the same form as so received (with any necessary endorsement).
Any and all money and other property paid over to or received by the Collateral
Agent pursuant to the provisions of this paragraph (b) shall be retained by the
Collateral Agent in an account to be established by the Collateral Agent upon
receipt of such money or other property and shall be applied in accordance with
the provisions of Section 7. After all Events of Default have been cured or
waived, the Collateral Agent shall, within five Business Days after all such
Events of Default have been cured or waived, repay to each Pledgor all cash
dividends, interest or principal (without interest), that such Pledgor would
otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii)
above and which remain in such account.
(c) Upon the occurrence and during the continuance of an Event of Default
and subsequent notice by the Collateral Agent to the relevant Pledgor or
Pledgors of its intent to exercise such rights, all rights of any Pledgor to
exercise the voting and consensual rights and powers it is entitled to exercise
pursuant to paragraph (a)(i) of this Section 5, and the obligations of the
Collateral Agent under paragraph (a)(ii) of this Section 5, shall cease, and all
such rights shall thereupon become vested in the Collateral Agent, which shall
have the sole and exclusive right and authority to exercise such voting and
consensual rights and powers, provided that, unless otherwise directed by the
Required Lenders, the Collateral Agent shall have the right from time to time
following and during the continuance of an Event of Default to permit the
Pledgors to exercise such rights. After all Events of Default have been cured
or waived, such Pledgor will have the right to exercise the voting and
consensual rights and powers that it would otherwise be entitled to exercise
pursuant to the terms of paragraph (a)(i) above.
SECTION 6. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, subject to applicable regulatory and legal
requirements, the Collateral Agent may sell the Collateral, or any part thereof,
at public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery as the Collateral Agent
shall deem
<PAGE>
6
appropriate. The Collateral Agent shall be authorized at any such sale (if it
deems it advisable to do so) to restrict the prospective bidders or purchasers
to Persons who will represent and agree that they are purchasing the Collateral
for their own account for investment and not with a view to the distribution or
sale thereof, and upon consummation of any such sale the Collateral Agent shall
have the right to assign, transfer and deliver to the purchaser or purchasers
thereof the Collateral so sold. Each such purchaser at any such sale shall hold
the property sold absolutely free from any claim or right on the part of any
Pledgor, and, to the extent permitted by applicable law, the Pledgors hereby
waive all rights of redemption, stay, valuation and appraisal any Pledgor now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted.
The Collateral Agent shall give a Pledgor at least 10 days' prior written
notice (which each Pledgor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions) of the Collateral Agent's
intention to make any sale of such Pledgor's Collateral. Such notice, in the
case of a public sale, shall state the time and place for such sale and, in the
case of a sale at a broker's board or on a securities exchange, shall state the
board or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Collateral Agent may
fix and state in the notice of such sale. At any such sale, the Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the sale price is paid in
full by the purchaser or purchasers thereof, but the Collateral Agent shall not
incur any liability in case any such purchaser or purchasers shall fail to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. At any public (or, to the extent
permitted by applicable law, private) sale made pursuant to this Section 6, any
Secured Party may bid for or purchase, free from any right of redemption, stay
or appraisal on the part of any Pledgor (all said rights being also hereby
waived and released), the Collateral or any part thereof offered for sale and
may make payment on account thereof by using any claim then due and payable to
it from such Pledgor as a credit against the purchase price, and it may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to such Pledgor therefor. For purposes hereof,
(a) a written agreement to purchase the Collateral entered into with a Person
(other than a Lender or an affiliate thereof) or any portion thereof shall be
treated as a sale thereof, (b) the Collateral Agent shall be free to carry out
such sale pursuant to such agreement and (c) such Pledgor shall not be entitled
to the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Collateral Agent shall have entered into
such an agreement all Events of Default shall have been remedied and the
Obligations paid in full. As an alternative to exercising the power of sale
herein conferred upon it, the Collateral Agent may proceed by a suit or suits at
law or in equity to foreclose upon the Collateral and to sell the Collateral or
any portion thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver. Any sale pursuant to the provisions of this Section 6 shall be deemed
to conform to the commercially reasonable standards as provided in Section 9-
504(3) of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions.
Certain rights and remedies of the Collateral Agent hereunder, may with
respect to Collateral issued by a Person not organized under the laws of a
jurisdiction of the United States of America, be limited. The Collateral Agent,
with respect to such Collateral, acknowledges such limitations and agrees to
comply with applicable laws with respect thereto.
<PAGE>
7
SECTION 7. Application of Proceeds of Sale. The proceeds of any sale of
Collateral pursuant to Section 6, as well as any Collateral consisting of cash,
may, in the sole discretion of the Collateral Agent, be applied by the
Collateral Agent against the respective Obligations of the relevant Pledgor then
due and owing in the following order of priority:
FIRST, to the payment of all reasonable costs and expenses incurred by
the Collateral Agent in connection with such sale or otherwise in
connection with this Agreement, any other Loan Document or any of the
Obligations of the relevant Pledgor, including all court costs and the
reasonable fees and expenses of the Collateral Agent's agents and legal
counsel, the repayment of all advances made by the Collateral Agent
hereunder or under any other Loan Document on behalf of such Pledgor and
any other reasonable costs or expenses incurred in connection with the
exercise of any right or remedy hereunder or under any other Loan Document;
SECOND, to the payment in full of the Obligations of the relevant
Pledgor (the amounts so applied to be distributed among the Secured Parties
pro rata in accordance with the amounts of such Obligations owed to them on
the date of any such distribution); and
THIRD, to the relevant Pledgor, its successors or assigns or to
whomsoever may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the purchase money by the Collateral Agent or of the officer
making the sale shall be a sufficient discharge to the purchaser or purchasers
of the Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over
to the Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
SECTION 8. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor
hereby appoints the Collateral Agent the attorney-in-fact of such Pledgor for
the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument that the Collateral Agent may reasonably
deem necessary or advisable to accomplish the purposes hereof, which appointment
is irrevocable and coupled with an interest; provided that the Collateral Agent
agrees not exercise such power except upon the occurrence and during the
continuance of an Event of Default. Without limiting the generality of the
foregoing, the Collateral Agent shall have the right, upon the occurrence and
during the continuance of an Event of Default, with full power of substitution
either in the Collateral Agent's name or in the name of such Pledgor, to ask
for, demand, sue for, collect, receive and give acquittance for any and all
moneys due or to become due under and by virtue of any applicable Collateral, to
endorse checks, drafts, orders and other instruments for the payment of money
payable to the Pledgor representing any interest or dividend or other
distribution payable in respect of the Collateral or any part thereof or on
account thereof and to give full discharge for the same, to settle, compromise,
prosecute or defend any action, claim or proceeding with respect thereto, and to
sell, assign, endorse, pledge, transfer and to make any agreement respecting, or
otherwise deal with, the same; provided, however, that nothing herein contained
shall be construed as requiring or obligating the Collateral Agent to make any
commitment or to make any inquiry as to the nature or sufficiency of any payment
received by the Collateral Agent, or to present or file any claim or notice, or,
except as otherwise provided herein, to take any action with respect to the
Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby. The Collateral Agent and the other
Secured Parties shall be accountable only for amounts actually received as a
result of the exercise of the powers granted to them herein, and neither they
nor their officers, directors, employees or agents shall be responsible to any
Pledgor for any act or failure to act hereunder, except for their own gross
negligence or wilful misconduct.
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8
SECTION 9. Waivers; Amendment. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and
of the other Secured Parties under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provisions of this Agreement or consent to any departure by any
Pledgor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on any Pledgor in any case shall entitle such Pledgor to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Collateral Agent and the Pledgor or Pledgors with respect to which such waiver,
amendment or modification is to apply, subject to any consent required in
accordance with Section 9.01 of the Credit Agreement.
SECTION 10. Securities Act, etc. In view of the position of the Pledgors
in relation to the Pledged Securities, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time in
effect being called the "Federal Securities Laws") with respect to any
disposition of the Pledged Securities permitted hereunder. Each Pledgor
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Collateral Agent if the Collateral Agent were
to attempt to dispose of all or any part of the Pledged Securities, and might
also limit the extent to which or the manner in which any subsequent transferee
of any Pledged Securities could dispose of the same. Similarly, there may be
other legal restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Securities under applicable
Blue Sky or other state securities laws or similar laws analogous in purpose or
effect. Each Pledgor recognizes that in light of such restrictions and
limitations the Collateral Agent may, with respect to any sale of the Pledged
Securities, limit the purchasers to those who will agree, among other things, to
acquire such Pledged Securities for their own account, for investment, and not
with a view to the distribution or resale thereof. Each Pledgor acknowledges
and agrees that in light of such restrictions and limitations, the Collateral
Agent, in its sole and absolute reasonable discretion, (a) may proceed to make
such a sale whether or not a registration statement for the purpose of
registering such Pledged Securities or part thereof shall have been filed under
the Federal Securities Laws and (b) may approach and negotiate with a single
potential purchaser to effect such sale. Each Pledgor acknowledges and agrees
that any such sale might result in prices and other terms less favorable to the
seller than if such sale were a public sale without such restrictions. In the
event of any such sale, the Collateral Agent shall incur no responsibility or
liability for selling all or any part of the Pledged Securities at a price that
the Collateral Agent, in its reasonable discretion, may in good faith deem
reasonable under the circumstances, notwithstanding the possibility that a
substantially higher price might have been realized if the sale were deferred
until after registration as aforesaid or if more than a single purchaser were
approached. The provisions of this Section 10 will apply notwithstanding the
existence of a public or private market upon which the quotations or sales
prices may exceed substantially the price at which the Collateral Agent sells.
SECTION 11. Registration, etc. Each Pledgor agrees that, upon the
occurrence and during the continuance of an Event of Default hereunder, if for
any reason the Collateral Agent shall determine to sell any of the Pledged Stock
of the respective Pledgor at a public sale, it will, at any time and from time
to time, upon the written request of the Collateral Agent, use its reasonable
best efforts to take or to cause the issuer of such Pledged Stock to (a) execute
and deliver, and use its best efforts to cause the directors and officers of
such issuer to execute and deliver, all such instruments and documents, and do
or cause to be done all such other acts as may be, in the reasonable opinion of
the Collateral Agent, necessary or advisable to register such Pledged Stock, or
that portion thereof to be sold, under the provisions of the Federal Securities
Laws, (b) use its best efforts to cause the
<PAGE>
9
registration statement relating thereto to become effective and to remain
effective for a period of not more than one year from the date of the first
public offering of such Pledged Stock, or that portion thereof to be sold and
(c) make all amendments thereto and/or to the related prospectus which, in the
reasonable opinion of the Collateral Agent, are necessary or advisable, all in
conformity with the requirements of the Federal Securities Laws and the rules
and regulations of the Securities and Exchange Commission applicable thereto.
The respective Pledgor further agrees, upon such written request referred to
above, to use its reasonable best efforts to qualify, file or register, or cause
the issuer of such Pledged Stock to qualify, file or register, any of the
Pledged Stock under the Blue Sky or other securities laws of such states of the
United States as may be reasonably requested by the Collateral Agent and keep
effective, or cause to be kept effective, all such qualifications, filings or
registrations. Each Pledgor will bear all costs and expenses of carrying out its
obligations under this Section 11. Each Pledgor acknowledges that there is no
adequate remedy at law for failure by it to comply with the provisions of this
Section 11 and that such failure would not be adequately compensable in damages,
and therefore agrees that its agreements contained in this Section 11 may be
specifically enforced.
SECTION 12. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the grant of a security interest in the Collateral and all
obligations of each Pledgor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Credit Agreement, any other Loan
Document or any other agreement or instrument relating to any of the foregoing,
(c) any exchange, release or nonperfection of any other collateral, or any
release or amendment or waiver of or consent to or departure from any guaranty,
for all or any of the Obligations or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, any Pledgor in
respect of its Obligations or in respect of this Agreement (other than the
performance or payment in full of all the Obligations, as the case may be).
SECTION 13. Termination or Release. (a) This Agreement and the security
interests granted hereby shall terminate when all the Obligations have been paid
in full and the Lenders have no further commitment to lend under the Credit
Agreement, the L/C Exposure has been reduced to zero and the Issuing Bank has no
further obligation to issue Letters of Credit under the Credit Agreement.
(b) Upon any sale or other transfer by any Pledgor of any Collateral that
is permitted under the Credit Agreement to any Person (unless sold or
transferred to a Person that is required to pledge such Collateral to the
Collateral Agent pursuant to Section 5.11 of the Credit Agreement), or, upon the
effectiveness of any written consent to the release of the security interest
granted hereby in any Collateral pursuant to Section 9.01(d) of the Credit
Agreement, the security interest in such Collateral shall be automatically
released.
(c) If all of the capital stock of a Pledgor is sold, transferred or
otherwise disposed of to a Person that is not an Affiliate of the Borrowers
pursuant to a transaction permitted by Section 6.05 of the Credit Agreement,
such Pledgor shall be released from its obligations under this Agreement without
further action and the security interest in the Collateral of such Pledgor shall
be automatically released.
(d) In connection with any termination or release pursuant to paragraph
(a), (b) or (c), the Collateral Agent shall execute and deliver to any Pledgor,
at such Pledgor's expense, all documents that such Pledgor shall reasonably
request to evidence such termination or release and shall deliver to such
Pledgor all related Collateral of such Pledgor held by the Collateral Agent.
Any execution and delivery of documents pursuant to this Section 13 shall be
without recourse to or warranty by the Collateral Agent.
<PAGE>
10
SECTION 14. Notices. All communications and notices hereunder shall be in
writing and given as provided in Section 9.02 of the Credit Agreement. All
communications and notices hereunder to any Subsidiary Pledgor shall be given to
it in care of the applicable Borrower.
SECTION 15. Further Assurances. Each Pledgor agrees to do such further
reasonable acts and things, and to execute and deliver such additional
conveyances, assignments, agreements and instruments, as the Collateral Agent
may at any time reasonably request in connection with the administration and
enforcement of this Agreement or with respect to the Collateral or any part
thereof or in order better to assure and confirm unto the Collateral Agent its
rights and remedies hereunder.
SECTION 16. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of any Pledgor that are contained in
this Agreement shall bind and inure to the benefit of its successors and
assigns. This Agreement shall become effective as to any Pledgor when a
counterpart hereof executed on behalf of such Pledgor shall have been delivered
to the Collateral Agent and a counterpart hereof shall have been executed on
behalf of the Collateral Agent, and thereafter shall be binding upon such
Pledgor and the Collateral Agent and their respective successors and assigns,
and shall inure to the benefit of such Pledgor, the Collateral Agent and the
other Secured Parties, and their respective successors and assigns, except that
no Pledgor shall have the right to assign its rights hereunder or any interest
herein or in the Collateral (and any such attempted assignment shall be void),
except with the consent of the Collateral Agent or as expressly contemplated by
this Agreement or the other Loan Documents. This Agreement shall be construed
as a separate agreement with respect to each Pledgor and may be amended,
modified, supplemented, waived or released with respect to any Pledgor without
the approval of any other Pledgor and without affecting the obligations of any
other Pledgor hereunder
SECTION 17. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by each Pledgor herein shall
survive the making by the Lenders of the Loans and the issuance of the Letters
of Credit by the Issuing Bank.
(b) Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 18. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH
PRINCIPLES OR RULES WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
SECTION 19. Counterparts. This Agreement may be executed by one or more
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument, and shall become effective as
provided in Section 16. Delivery of an executed counterpart of a signature page
to this Agreement by facsimile transmission shall be as effective as delivery of
a manually executed counterpart of this Agreement.
SECTION 20. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement. Section headings used herein are for convenience of reference only,
are not part of this Agreement and are not to affect the construction of, or to
be taken into consideration in interpreting this Agreement.
<PAGE>
11
SECTION 21. Jurisdiction; Consent to Service of Process. Each party
hereto hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or proceeding
relating to this Agreement, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts of any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient forum and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to the applicable party at
its address set forth in Section 14 or at such other address of which the
parties hereto shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
Section 21 any punitive damages.
SECTION 22. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 23. Additional Pledgors. Pursuant to Section 5.11 of the Credit
Agreement, the stock (or a portion thereof) of certain Subsidiaries that were
not Subsidiaries on the Closing Date must be pledged to the Collateral Agent for
the benefit of the Secured Parties. Upon execution and delivery by the
Collateral Agent and such holder of stock of an instrument in the form of Annex
1, such holder shall become a Pledgor and, if applicable, a Subsidiary Pledgor
hereunder with the same force and effect as if originally named as a Pledgor
and, if applicable, a Subsidiary Pledgor herein. The execution and delivery of
such instrument shall not require the consent of any Pledgor hereunder. The
rights and obligations of each Pledgor hereunder shall remain in full force and
effect notwithstanding the addition of any new Pledgor and, if applicable, a
Subsidiary Pledgor as a party to this Agreement.
SECTION 24. Execution of Financing Statements. Pursuant to Section 9-402
of the Uniform Commercial Code as in effect in the State of New York or its
equivalent in other jurisdictions, each Pledgor authorizes the Collateral Agent
to file financing statements with respect to the Collateral owned by it without
the signature of such Pledgor in such form and in such filing offices as the
Collateral Agent reasonably determines appropriate to perfect the security
interests of the Collateral Agent under this Agreement. A carbon, photographic
or other reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction. Promptly upon any such filing, the
Collateral Agent shall deliver a copy of such filing to the respective Pledgor.
SECTION 25. Integration. This Agreement represent the agreement among the
parties with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by any of the parties hereto
relative to the subject matter hereof not expressly set forth or referred to
herein.
<PAGE>
12
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
CDRJ INVESTMENTS (LUX) S.A.
By /s/ Ralph S. Mason
-----------------------------------
Name: Ralph S. Mason
Title: Vice Chairman and EVP
By /s/ David A. Novak
-----------------------------------
Name: David A. Novak
Title: Secretary and Director
CDRJ NORTH ATLANTIC (LUX) S.A.R.L.
By /s/ David A. Novak
-----------------------------------
Name: David A. Novak
Title: Manager
CDRJ LATIN AMERICA HOLDING COMPANY B.V.
By: CDRJ Holding Company, its sole
managing director
By /s/ David A. Novak
-----------------------------------
Name: David A. Novak
Title: Vice President, Secretary
and Treasurer
LATIN COSMETICS HOLDINGS B.V.
By: CDRJ Holding Company, its sole
managing director
By /s/ David A. Novak
-----------------------------------
Name: David A. Novak
Title: Vice President, Secretary
and Treasurer
REGIONAL COSMETICS HOLDINGS B.V.
By: CDRJ Holding Company, its sole
managing director
By /s/ David A. Novak
-----------------------------------
Name: David A. Novak
Title: Vice President, Secretary
and Treasurer
SOUTHERN COSMETICS HOLDINGS B.V.
By: CDRJ Holding Company, its sole
managing director
By /s/ David A. Novak
-----------------------------------
Name: David A. Novak
Title: Vice President, Secretary
and Treasurer
<PAGE>
13
CDRJ MEXICO HOLDING COMPANY B.V.
By: CDRJ Holding Company, its sole
managing director
By /s/ David A. Novak
-----------------------------------
Name: David A. Novak
Title: Vice President, Secretary
and Treasurer
CDRJ ACQUISITION CORPORATION
By /s/ Ralph S. Mason
-----------------------------------
Name: Ralph S. Mason
Title: Vice Chairman and EVP
JAFRA COSMETICS INTERNATIONAL, S.A. DE
C.V.
By /s/ David A. Novak
-----------------------------------
Name: David A. Novak
Title: Vice President
CREDIT SUISSE FIRST BOSTON, as Collateral
Agent,
By /s/ Laurie Sivaslian
-----------------------------------
Name: Laurie Sivaslian
Title: Director
By /s/ David Kratovil
-----------------------------------
Name: David Kratovil
Title: Director
<PAGE>
Schedule I to the
Pledge Agreement
SUBSIDIARY PLEDGORS
None
<PAGE>
Schedule II to the
Pledge Agreement
CAPITAL STOCK
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Stock
-----
Certificate Type of % of
----------- ------- ------
Issuer Stockholder Number Stock Stock*
------ ----------- ------ ----- ------
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CDRJ North Atlantic (Lux) Sarl CDRJ Investments (Lux) S.A. N/A common 100
---------------------------------------------------------------------------------------------------------------
CDRJ Acquisition Corporation (to be CDRJ North Atlantic (Lux) Sarl 2 common 100
renamed Jafra Cosmetics International,
Inc.)
---------------------------------------------------------------------------------------------------------------
CDRJ Latin America Holding CDRJ North Atlantic (Lux) Sarl N/A common 100
Company, B.V.
---------------------------------------------------------------------------------------------------------------
Jafra Cosmetics International S.A. de Latin Cosmetics Holdings B.V. N/A common 20.53
C.V.
---------------------------------------------------------------------------------------------------------------
Jafra Cosmetics International S.A. de Regional Cosmetics Holding N/A common 19.87
C.V. B.V.
---------------------------------------------------------------------------------------------------------------
Jafra Cosmetics International S.A. de Southern Cosmetics Holding N/A common 19.20
C.V. B.V.
---------------------------------------------------------------------------------------------------------------
Jafra Cosmetics International S.A. de CDRJ Mexico Holding N/A common 17.88
C.V. Company B.V.
---------------------------------------------------------------------------------------------------------------
Jafra Cosmetics International S.A. de CDRJ Latin America Holding N/A common 22.52
C.V. Company, B.V.
---------------------------------------------------------------------------------------------------------------
CDRJ Europe Holding Company B.V. CDRJ Acquisition Corporation N/A common 100
(to be renamed Jafra Cosmetics
International, Inc.
---------------------------------------------------------------------------------------------------------------
</TABLE>
* excluding directors' qualifying shares.
DEBT SECURITIES
None
<PAGE>
Annex 1 to the
Pledge Agreement
SUPPLEMENT NO. dated as of , to the PLEDGE AGREEMENT
dated as of April 30, 1998, among CDRJ INVESTMENTS (LUX) S.A., a
Luxembourg societe anonyme ("Parent"), CDRJ NORTH ATLANTIC (LUX)
SARL, a Luxembourg societe a responsibilite limitee ("Lux SARL"),
CDRJ LATIN AMERICA HOLDING COMPANY B.V., LATIN COSMETICS HOLDINGS
B.V., REGIONAL COSMETICS HOLDING B.V., SOUTHERN COSMETICS
HOLDINGS B.V. and CDRJ MEXICO HOLDING COMPANY B.V., each a legal
entity in the form of a "besloten vennootschap met beperkte
aansprakelijkheid" organized under the laws of The Netherlands
(collectively, the "Dutch HoldCo's"), JAFRA COSMETICS
INTERNATIONAL, INC., a Delaware corporation ("JCI"), JAFRA
COSMETICS INTERNATIONAL, S.A. DE C.V., a sociedad anonima de
capital variable organized under the laws of the United Mexican
States ("JCISA" and, together with JCI, the "Borrowers"), each
subsidiary of the Borrowers listed on Schedule I hereto (each
such subsidiary individually a "Subsidiary Pledgor" and
collectively, the "Subsidiary Pledgors"; the Borrowers, Parent,
Lux SARL, the Dutch HoldCo's and the Subsidiary Pledgors are
referred to collectively herein as the "Pledgors") and CREDIT
SUISSE FIRST BOSTON, a bank organized under the laws of
Switzerland, acting through its New York branch, as collateral
agent (in such capacity, the "Collateral Agent") for the Secured
Parties (as defined in the Credit Agreement referred to below).
Capitalized terms used herein without definition shall have the
respective meanings ascribed thereto in the Credit Agreement
referred to below.
A. Reference is made to (a) the Credit Agreement dated as of April 30,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Parent, the Borrowers, the lenders from time to time
party thereto (the "Lenders"), the Issuing Bank and Credit Suisse First Boston,
as administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), as swingline lender and as Collateral Agent, (b) the Parent Guarantee
Agreement, (c) the JCI Guarantee Agreement, (d) the JCISA Guarantee Agreement
(together with the JCI Guarantee Agreement, the "Cross Guarantee Agreements"),
(e) the JCI Subsidiary Guarantee Agreement and (f) the JCISA Subsidiary
Guarantee Agreement (together with the JCI Subsidiary Guarantee Agreement, the
"Subsidiary Guarantee Agreements").
B. The Pledgors have entered into the Pledge Agreement in order to induce
the Lenders to make Loans and the Issuing Bank to issue Letters of Credit.
Pursuant to Section 5.11 of the Credit Agreement, the stock (or a portion
thereof) of certain Subsidiaries that were not Subsidiaries on the Closing Date
must be pledged to the Collateral Agent for the benefit of the Secured Parties,
and the Subsidiary which owns such stock (if not already a party) is required to
enter into the Pledge Agreement as a Pledgor, and if applicable, a Subsidiary
Pledgor. Section 23 of the Pledge Agreement provides that such Subsidiaries may
become Pledgors, and if applicable, Subsidiary Pledgors under the Pledge
Agreement by execution and delivery of an instrument in the form of this
Supplement. The undersigned Subsidiary (the "New Pledgor") is executing this
Supplement in accordance with the requirements of the Credit Agreement to become
a Subsidiary Pledgor under the Pledge Agreement in order to induce the Lenders
to make additional Loans and the Issuing Bank to issue additional Letters of
Credit and as consideration for Loans previously made and Letters of Credit
previously issued.
Accordingly, the Collateral Agent and the New Pledgor agree as follows:
SECTION 1. In accordance with Section 23 of the Pledge Agreement, the New
Pledgor by its signature below becomes a Pledgor under the Pledge Agreement with
the same force and effect as if originally named therein as a Pledgor and the
New Pledgor hereby agrees (a) to all the terms and provisions of the Pledge
Agreement applicable to it as a Pledgor thereunder and (b) represents and
<PAGE>
2
warrants that the representations and warranties made by it as a Pledgor there
under are true and correct on and as of the date hereof. In furtherance of the
foregoing, the New Pledgor, as security for the payment and performance in full
of its respective Obligations (as defined in the Pledge Agreement), does hereby
create and grant to the Collateral Agent, its successors and assigns, for the
benefit of the Secured Parties, their successors and assigns, a security
interest in and lien on all of the New Pledgor's right, title and interest in
and to the Collateral (as defined in the Pledge Agreement) of the New Pledgor.
Each reference to a "Subsidiary Pledgor" or a "Pledgor", as applicable, in the
Pledge Agreement shall be deemed to include the New Pledgor. The Pledge
Agreement is hereby incorporated herein by reference.
[If New Pledgor is not a Subsidiary Pledgor, add relevant information with
respect to its "Obligations" and incorporate such into the definition of
"Obligations" in the Pledge Agreement.]
SECTION 2. The New Pledgor represents and warrants to the Collateral Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as may
be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, or similar laws relating to or affecting creditors'
rights generally, general equitable principles (regardless of whether
enforcement is sought in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.
SECTION 3. This Supplement may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Pledgor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Pledgor hereby represents and warrants that, on the
date hereof, set forth on Schedule I attached hereto is a true and correct
schedule of all its Pledged Securities.
SECTION 5. Except as expressly supplemented hereby, the Pledge Agreement
shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES
WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Pledge Agreement shall not in any way be affected or impaired.
The parties hereto shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
<PAGE>
3
SECTION 8. All communications and notices hereunder shall be in writing
(including by facsimile transmission) and given as provided in Section 14 of the
Pledge Agreement. All communications and notices hereunder to the New Pledgor
shall be given to it in care of JCI.
IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly
executed this Supplement to the Pledge Agreement as of the day and year first
above written.
[Name of New Pledgor],
by___________________________________
Name:
Title:
Address:
CREDIT SUISSE FIRST BOSTON, as Collateral Agent,
by___________________________________
Name:
Title:
by___________________________________
Name:
Title:
<PAGE>
Schedule I to
Supplement No.
to the Pledge Agreement
Pledged Securities of the New Pledgor
-------------------------------------
CAPITAL STOCK
Number of Registered Number and Percentage of
Issuer Certificate Owner Class of Shares Shares
- -------- ----------- ---------- --------------- -------------
DEBT SECURITIES
Principal
Issuer Amount Payee Date of Note Maturity Date
- -------- ------ ----- ------------ -------------
<PAGE>
EXHIBIT 4.14
CONFORMED COPY
SECURITY AGREEMENT dated as of April 30, 1998, among CDRJ
ACQUISITION CORPORATION (to be renamed JAFRA COSMETICS
INTERNATIONAL, INC.), a Delaware corporation ("JCI" or the
"Grantor"), each subsidiary of JCI listed on Schedule I hereto
(each such subsidiary individually a "Subsidiary Grantor" and
collectively, the "Subsidiary Grantors"; the Subsidiary Grantors
and JCI are referred to collectively herein as the "Grantors")
and CREDIT SUISSE FIRST BOSTON, a bank organized under the laws
of Switzerland, acting through its New York branch, as collateral
agent (in such capacity, the "Collateral Agent") for the Secured
Parties (as defined herein).
Reference is made to (a) the Credit Agreement dated as of April 30, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme
("Parent"), JCI, Jafra Cosmetics International, S.A. de C.V., a sociedad anonima
de capital variable organized under the laws of Mexico ("JCISA" and, together
with JCI, the "Borrowers"), the lenders from time to time party thereto (the
"Lenders"), the Issuing Bank (as defined therein) and Credit Suisse First
Boston, as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"), as swingline lender and as Collateral Agent and (b) the
JCI Guarantee Agreement.
The Lenders have agreed to make Loans to the Borrowers and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrowers pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. JCI has agreed to guarantee, among other things, all the obligations
of JCISA under the Credit Agreement. The JCI Subsidiary Grantors will agree to
guarantee, among other things, all the obligations of JCI under the Credit
Agreement and the JCI Guarantee Agreement. The obligations of the Lenders to
make Loans and of the Issuing Bank to issue Letters of Credit are conditioned
upon, among other things, the execution and delivery by the Grantors of an
agreement in the form hereof to secure their respective obligations under the
Credit Agreement, the JCI Subsidiary Guarantee Agreement and the other Loan
Documents, including (a) in the case of JCI, (i) the due and punctual payment by
JCI of (A) the principal of and premium, if any, and interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Loans of JCI, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (B) each payment required to be made by JCI under the Credit
Agreement in respect of any Letter of Credit issued for its benefit, when and as
due, including payments in respect of reimbursement of disbursements, interest
thereon and obligations to provide cash collateral and (C) all other monetary
obligations, including fees, costs, expenses and indemnities, whether direct,
contingent, fixed or otherwise (including monetary obligations incurred during
the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), of
JCI to the Secured Parties under the Credit Agreement, the JCI Guarantee
Agreement and the other Loan Documents, (ii) the due and punctual performance of
all covenants, agreements, obligations and liabilities of JCI under or pursuant
to the Credit Agreement, the JCI Guarantee Agreement and the other Loan
Documents, (iii) unless otherwise agreed to in writing by the applicable
counterparty thereto, the due and punctual payment and performance of all
obligations of JCI under each Hedging Agreement entered into with any
counterparty (whether or not a Lender or an Affiliate thereof) and (iv) the due
and punctual payment and performance of all guarantee obligations of JCI
referred to in Section 6.01(d)(ii) of the Credit Agreement as to which any
Lender or any Affiliate thereof is originally a beneficiary (all the monetary
and other obligations described in the preceding clauses (i) through (iv) being
collectively called the "JCI Obligations") and (b) in the case of any Subsidiary
Grantor, its respective obligations under the JCI Subsidiary Guarantee Agreement
and the other Loan Documents to which such Subsidiary Grantor is a party (the
"Subsidiary Grantor Obligations" and, together with the JCI Obligations, the
"Obligations").
<PAGE>
2
Accordingly, each Grantor and the Collateral Agent, on behalf of itself and
each Secured Party (and each of their respective successors or assigns), hereby
agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. Unless the context otherwise
requires, all capitalized terms used but not defined herein shall have the
meanings set forth in the Credit Agreement and all references to the Uniform
Commercial Code shall mean the Uniform Commercial Code in effect in the State of
New York as of the date hereof.
SECTION 1.02. Definition of Certain Terms Used Herein. As used herein, the
following terms shall have the following meanings:
"Account Debtor" shall mean any Person who is or who may become obligated
to any Grantor under, with respect to or on account of an Account.
"Accounts" shall have the meaning set forth in the Uniform Commercial Code.
"Chattel Paper" shall have the meaning set forth in the Uniform Commercial
Code.
"Collateral" shall mean, with respect to each Grantor, all (a) Accounts,
(b) Contracts, (c) Documents, (d) Equipment, (e) General Intangibles, (f)
Inventory, (g) cash and cash accounts, (h) Intellectual Property, (i) Investment
Property, (j) Instruments, (k) Chattel Paper and (l) Proceeds of the foregoing,
excluding the Pledged Securities (as defined in the Pledge Agreement), and all
properties and assets excluded from the definition of Pledged Securities in the
Pledge Agreement (including, without limitation, any Capital Stock of any
Foreign Subsidiary in excess of 65% of any series of such stock and intercompany
indebtedness).
"Contracts" shall mean, with respect to any Grantor, all contracts,
agreements, instruments and indentures in any form, and portions thereof, to
which such Grantor is a party or under which such Grantor has any right, title
or interest or to which such Grantor or any property of such Grantor is subject,
as the same may from time to time be amended, supplemented or otherwise
modified, including, without limitation, (a) all rights of such Grantor to
receive moneys due and to become due to it thereunder or in connection
therewith, (b) all rights of such Grantor to damages arising thereunder and (c)
all rights of such Grantor to perform and to exercise all remedies thereunder.
"Copyright Licenses" shall mean, with respect to any Grantor, all United
States written license agreements of such Grantor with any Person who is not an
Affiliate or a Subsidiary providing for the grant by such Grantor of any right
to use any Copyright of such Grantor, subject, in each case, to the terms of
such license agreements, and the right to prepare for sale, sell and advertise
for sale, all Inventory now or hereafter covered by such licenses.
"Copyrights" shall mean, with respect to any Grantor, all of such Grantor's
right, title and interest in and to all United States copyrights, whether or not
the underlying works of authorship have been published or registered, United
States copyright registrations and copyright applications and (a) all renewals
thereof, (b) all income, royalties, damages and payments now and hereafter due
and/or payable with respect thereto, including payments under all licenses
entered into in connection therewith, and damages and payments for past, present
or future infringements thereof and (c) the right to sue or otherwise recover
for past, present and future infringements thereof.
"Credit Agreement" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
<PAGE>
3
"Documents" shall have the meaning set forth in the Uniform Commercial
Code.
"Equipment" shall have the meaning set forth in the Uniform Commercial Code
(other than all cars, trucks, trailers, construction and earth moving equipment
and other vehicles covered by a certificate of title law of any state and all
liens and other appurtenances to any of the foregoing).
"General Intangibles" shall have the meaning specified in the Uniform
Commercial Code, excluding the Pledged Securities (as defined in the Pledge
Agreement) all properties and assets excluded from the definition of Pledged
Securities in the Pledge Agreement.
"Instruments" shall have the meaning specified in the Uniform Commercial
Code, excluding the Pledged Securities (as defined in the Pledge Agreement) and
all properties and assets excluded from the definition of Pledged Securities in
the Pledge Agreement.
"Intellectual Property" shall mean, with respect to any Grantor, the
collective reference to such Grantor's Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trade Secrets, Trademarks and Trademark Licenses.
"Inventory" shall mean, with respect to any Grantor, all inventory (as
defined in the Uniform Commercial Code) of such Grantor.
"Investment Property" shall have the meaning specified in the Uniform
Commercial Code, excluding the Pledged Securities (as defined in the Pledge
Agreement) and all the properties and assets excluded from the definition of
Pledged Securities in the Pledge Agreement.
"IP Collateral" shall mean, with respect to any Grantor, the collective
reference to such Grantor's Patents, Patent Licenses, Trademarks, Trademark
Licenses, General Intangibles connected with the use of or symbolized by the
Trademarks and Patents and, to the extent not otherwise included, all Proceeds
and products of any and all of the foregoing and all collateral security and
guarantees given by any Person with respect to any of the foregoing.
"License" shall mean any Patent License, Trademark License or Copyright
License to which any Grantor is a party, including those listed on Schedule II.
"Obligations" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Patent Licenses" shall mean with respect to any Grantor, all United States
written license agreements of such Grantor with any Person who is not an
Affiliate or a Subsidiary in connection with any of the Patents of such Grantor
or such other Person's patents, whether such Grantor is a licensor or a licensee
under any such agreement, subject, in each case, to the terms of such license
agreements, and the right to prepare for sale, sell and advertise for sale, all
Inventory now or hereafter covered by such licenses.
"Patents" shall mean with respect to any Grantor, all of such Grantor's
right, title and interest in and to all United States patents, patent
applications and patentable inventions, including all patents and patent
applications identified in Schedule III and including (a) all inventions and
improvements described and claimed therein, (b) the right to sue or otherwise
recover for any and all past, present and future infringements thereof, (c) all
income, royalties, damages and other payments now and hereafter due and/or
payable with respect thereto (including payments under all licenses entered into
in connection therewith, and damages and payments for past, present or future
infringements thereof) and (d) all other rights corresponding thereto in the
United States and all reissues, divisions, continuations, continuations-in-part,
substitutes, renewals, and extensions thereof, all improvements thereon and all
other rights of any kind whatsoever of such Grantor accruing thereunder or
pertaining thereto.
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"Perfection Certificate" shall mean a certificate substantially in the form
of Annex 2 hereto, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by a Financial Officer and the chief
legal officer of JCI.
"Proceeds" shall have the meaning set forth in the Uniform Commercial Code.
"Secured Parties" shall mean (a) the Lenders, (b) the Administrative Agent,
(c) the Collateral Agent, (d) the Issuing Bank, (e) unless otherwise agreed to
in writing by the applicable counterparty thereto, each counterparty to a
Hedging Agreement entered into with JCI (whether or not a Lender or an Affiliate
of a Lender) at the time the Hedging Agreement was entered into, (f) the
beneficiaries of each indemnification obligation undertaken by any Grantor under
any Loan Document and (g) the successors and assigns of each of the foregoing.
"Security Interest" shall have the meaning assigned to such term in Section
2.01.
"Trade Secrets" shall mean, with respect to any Grantor, all of such
Grantor's right, title and interest in and to all United States trade secrets,
including know-how, processes, formulae, compositions, designs and confidential
business and technical information, and all rights of any kind whatsoever
accruing thereunder or pertaining thereto, including (a) all income, royalties,
damages and payments now and hereafter due and/or payable with respect thereto,
including payments under all licenses, non-disclosure agreements and memoranda
of understanding entered into in connection therewith and damages and payments
for past or future misappropriations thereof and (b) the right to sue or
otherwise recover for past, present or future misappropriations thereof.
"Trademark Licenses" shall mean, with respect to any Grantor, all United
States written license agreements of such Grantor with any Person who is not an
Affiliate or a Subsidiary in connection with any of the Trademarks of such
Grantor or such other Person's names or trademarks, whether such Grantor is a
licensor or a licensee under any such agreement, subject, in each case, to the
terms of such license agreements, and the right to prepare for sale, sell and
advertise for sale, all Inventory now or hereafter covered by such licenses.
"Trademarks" shall mean with respect to any Grantor, all of such Grantor's
right, title and interest in and to all United States trademarks, service marks,
trade names, trade dress or other indicia of trade origin or business
identifiers, trademark and service mark registrations, and applications for
trademark or service mark registrations (except for "intent to use" applications
for trademark or service mark registrations filed pursuant to Section 1(b) of
the Lanham Act, 15 U.S.C. (S) 1051, unless and until an Amendment to Allege Use
or a Statement of Use under Sections 1(c) and 1(d) of said Act has been filed),
and any renewals thereof, including each registration and application identified
in Schedule IV, and including (a) the right to sue or otherwise recover for any
and all past, present and future infringements or dilutions thereof, (b) all
income, royalties, damages and other payments now and hereafter due and/or
payable with respect thereto (including payments under all licenses entered into
in connection therewith, and damages and payments for past, present or future
infringements thereof) and (c) all other rights corresponding thereto in the
United States and all other rights of any kind whatsoever of such Grantor
accruing thereunder or pertaining thereto in the United States, together in each
case with the goodwill of the business connected with the use of, and symbolized
by, each such trademark, service mark, trade name, trade dress or other indicia
of trade origin or business identifiers.
SECTION 1.03. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
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ARTICLE II
Security Interest
SECTION 2.01. Security Interest. Subject to Section 2.03, each Grantor,
as security for the payment or performance, as the case may be, in full of the
Obligations, hereby grants to the Collateral Agent, its successors and assigns,
for the ratable benefit of the Secured Parties, a security interest in, all of
such Grantor's right, title and interest in, to and under its respective
Collateral (the "Security Interest"). Without limiting the foregoing, the
Collateral Agent is hereby authorized to file one or more financing statements,
continuation statements, filings with the United States Patent and Trademark
Office or United States Copyright Office (or any successor office) or other
documents for the purpose of perfecting, confirming, continuing, enforcing or
protecting the Security Interest granted by each Grantor, without the signature
of such Grantor, and naming such Grantor as debtor and the Collateral Agent as
secured party (in each case, to the extent permitted by applicable law). The
Collateral Agent shall provide copies of each such filing to the Grantors
promptly upon the filing or recordation of any such filing.
SECTION 2.02. No Assumption of Liability. The Security Interest is
granted as security only and shall not subject the Collateral Agent or any other
Secured Party to, or in any way alter or modify, any obligation or liability of
any Grantor with respect to or arising out of the Collateral.
SECTION 2.03. Certain Exceptions. No Security Interest is or will be
granted pursuant hereto in (and the term "Collateral" shall not include) the
right, title and interest of any Grantor under or in:
(a) any Instruments, Contracts, Chattel Paper, Documents, General
Intangibles, Licenses or other contracts or agreements with or issued by Persons
other than Parent, the Subsidiaries or the Borrowers (collectively, "Excluded
Agreements") that would otherwise be included in the Collateral (and such
Excluded Agreements shall not be deemed to constitute a part of the Collateral)
for so long as, and to the extent that, the granting of such a Security Interest
pursuant hereto would result in a breach, default or termination of such
Excluded Agreements;
(b) any Equipment that would otherwise be included in the Collateral
(and such Equipment shall not be deemed to constitute a part of the Collateral)
if such Equipment is subject to a Lien permitted by Section 6.02(g) of the
Credit Agreement; or
(c) any Pledged Securities (as such term is defined in the Pledge
Agreements), and all properties and assets excluded from the definition of
Pledged Securities in the Pledge Agreement (including, without limitation, any
Capital Stock of any Foreign Subsidiary in excess of 65% of any series of such
stock and intercompany indebtedness).
ARTICLE III
Representations and Warranties
Each Grantor represents and warrants to the Collateral Agent and the
Secured Parties that:
SECTION 3.01. Title and Authority. Such Grantor has good and valid rights
in and title to its Collateral with respect to which it has purported to grant a
Security Interest hereunder and has full power and authority to grant to the
Collateral Agent the Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other Person other than
any consent or approval which has been obtained.
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SECTION 3.02. Perfected Liens. (a) This Agreement is effective to create,
as collateral security for the Obligations of such Grantor, valid and
enforceable Liens on such Grantor's Collateral in favor of the Collateral Agent,
for the benefit of the Secured Parties, except as enforceability may be affected
by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
(b) Except with regard to Liens (if any) on Specified Assets, upon
the completion of the Filings, and the delivery to and continuing possession by
the Collateral Agent of all Instruments, Chattel Paper and Documents, a security
interest in which is perfected by possession, the Liens created pursuant to this
Agreement will constitute valid Liens on and (to the extent provided herein) a
perfected Security Interest in such Grantor's Collateral in favor of the
Collateral Agent for the benefit of the Secured Parties, and will be prior to
all other Liens of all other Persons other than Permitted Liens, and which Liens
are enforceable as such as against all other Persons other than Ordinary Course
Buyers, except to the extent that the recording of an assignment or other
transfer of title to the Collateral Agent or the recording of other applicable
documents in the United States Patent and Trademark Office, the United States
Copyright Office or the Commonwealth of Puerto Rico may be necessary for
perfection or enforceability, and except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law) or by an implied covenant of good faith and fair dealing. As used in
this Section 3.02, the following terms shall have the following meanings:
(i) "Filings" shall mean the filing or recording of the Financing
Statements, the Mortgages, and this Agreement as set forth in Section 3.20
of the Credit Agreement, and any filings after the Closing Date in any
other jurisdiction as may be necessary under any Requirement of Law.
(ii) "Financing Statements" shall mean the financing statements
delivered to the Collateral Agent by each Grantor on the Closing Date for
filing in the jurisdictions listed on Schedule 3.20 to the Credit Agreement
(which Financing Statements are in proper form for filing in such
jurisdictions).
(iii) "Ordinary Course Buyers" shall mean, with respect to goods
only, buyers in the ordinary course of business to the extent provided in
Section 9-307(1) of the Uniform Commercial Code as in effect from time to
time in the applicable jurisdiction.
(iv) "Permitted Liens" shall mean Liens permitted pursuant to the
Loan Documents, including those permitted to exist pursuant to Section 6.02
of the Credit Agreement.
(v) "Specified Assets" shall mean the following property and assets
of each Grantor:
(A) Equipment constituting Fixtures;
(B) Patents, Patent Licenses, Trademarks and Trademark Licenses to
the extent that (1) Liens thereon cannot be perfected by the filing of
financing statements under the Uniform Commercial Code or by the filing and
acceptance thereof in the United States Patent and Trademark Office or (2)
such Patents, Patent Licenses, Trademarks and Trademarks Licenses as are
not, individually or in the aggregate, material to the business of the
Parent, the Borrowers and the Subsidiaries taken as a whole;
(C) Copyrights and Copyright Licenses and Accounts or receivables
arising therefrom only to the extent that the Uniform Commercial Code as in
effect from time to time in the relevant jurisdiction is not applicable to
the creation or perfection of Liens thereon;
(D) uncertificated securities;
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(E) Collateral for which the perfection of Liens thereon requires
filings in or other actions under the laws of jurisdictions outside the
United States of America, any State, territory or dependency thereof or the
District of Columbia;
(F) Contracts, Accounts or receivables on which the United States of
America or any department, agency or instrumentality thereof is the
obligor, and property or assets subject to any rights reserved in favor of
the United States government as required under law;
(G) goods included in Collateral received by any Person for "sale or
return" within the meaning of Section 2-326 of the Uniform Commercial Code
of the applicable jurisdiction, to the extent of claims of creditors of
such Person; and
(H) Proceeds of Accounts or Inventory until transferred to the
Collateral Agent.
SECTION 3.03. IP Collateral. Schedules II, III and IV together list all
material Trademarks and Patents in each case registered in the United States
Patent and Trademark Office and owned by such Grantor in its own name as of the
date hereof, and all material Trademark Licenses and Patent Licenses (including
material Trademark Licenses for registered Trademarks and Patent Licenses for
registered Patents) owned by such Grantor in its own name as of the date hereof.
SECTION 3.04. Farm Products. None of such Grantor's Collateral
constitutes, or is the Proceeds of, Farm Products.
SECTION 3.05. Accounts. The amount represented by such Grantor to the
Collateral Agent or the other Secured Parties from time to time as owing by each
account debtor or by all account debtors in respect of such Grantor's Accounts
will at such time be the correct amount, in all material respects, actually
owing by such account debtor or debtors thereunder, except to the extent that
appropriate reserves therefor have been established on the books of such Grantor
in accordance with GAAP. Unless otherwise indicated in writing to the
Collateral Agent, each Account of such Grantor arises out of a bona fide sale
and delivery of goods or rendition of services by such Grantor. Such Grantor
has not given any account debtor any deduction in respect of the amount due
under any such Account, except in the ordinary course of business or as such
Grantor may otherwise advise the Collateral Agent in writing.
ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records; Place of
Business. (a) Each Grantor agrees promptly to notify the Collateral Agent in
writing of any change (i) in its corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its properties
to the extent that any financing statement filed in connection with this
Agreement would become seriously misleading, (ii) in the location of its chief
executive office, its principal place of business, any office in which it
maintains books or records relating to Collateral owned by it or any office or
facility at which Collateral owned by it is located (including the establishment
of any such new office or facility), (iii) in its identity or corporate
structure to the extent that any financing statement filed in connection with
this Agreement would become seriously misleading or (iv) in its Federal Taxpayer
Identification Number. Each Grantor agrees to make all filings (other than in
the Commonwealth of Puerto Rico) under the Uniform Commercial Code or otherwise
that are required in order for the Collateral Agent to continue at all times
following such change to have a perfected security interest in all the
Collateral (other than Specified Assets).
(b) Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in
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8
accordance with such prudent and standard practices used in industries that are
the same as or similar to those in which such Grantor is engaged.
SECTION 4.02. Protection of Security. Each Grantor shall, at its own cost
and expense, take any and all reasonable actions necessary to defend title to
the Collateral against all Persons and to defend the Security Interest of the
Collateral Agent in the Collateral as a perfected security interest having at
least the priority described in Section 3.02 against any Lien not permitted
pursuant to Section 6.02 of the Credit Agreement.
SECTION 4.03. Further Assurances. Each Grantor agrees, at its own
expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the Collateral
Agent may from time to time reasonably request to better assure, preserve,
protect and perfect the Security Interest and the rights and remedies created
hereby, including the payment of any fees and taxes required in connection with
the execution and delivery of this Agreement, the granting of the Security
Interest and the filing of any financing statements (including fixture filings)
or other documents in connection herewith or therewith. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any promissory note or other instrument, such note or instrument shall be
immediately pledged and delivered to the Collateral Agent, duly endorsed in a
manner satisfactory to the Collateral Agent.
SECTION 4.04. Inspection and Verification. At any time during the
occurrence and continuance of an Event of Default, the Collateral Agent and such
Persons as the Collateral Agent may reasonably designate shall have the right,
at each Grantor's own cost and expense, to inspect such Grantor's Collateral,
all records related thereto (and to make extracts and copies from such records)
and the premises upon which any of such Grantor's Collateral is located, to
discuss such Grantor's affairs with the officers of such Grantor and its
independent accountants and to verify under reasonable procedures the validity,
amount, quality, quantity, value, condition and status of, or any other matter
relating to, such Grantor's Collateral, excluding, however, in the case of
Accounts or Collateral in the possession of any third Person, by contacting
Account Debtors or the third Person possessing such Collateral for the purpose
of making such a verification. The Collateral Agent shall have the absolute
right to share any information it gains from such inspection or verification
with any Lender (it being understood that any such information shall be deemed
to be "Confidential Information" subject to the provisions of Section 9.17 of
the Credit Agreement).
SECTION 4.05. Taxes; Encumbrances. At its option, the Collateral Agent
may discharge past due taxes, assessments, charges, fees, Liens, security
interests or other encumbrances at any time levied or placed on the Collateral
that are not permitted pursuant to the Credit Agreement, and may pay for the
maintenance and preservation of any Grantor's Collateral to the extent such
Grantor fails to do so as required by the Credit Agreement or this Agreement,
and each Grantor severally agrees to reimburse the Collateral Agent on demand
for any reasonable payment made or any reasonable expense incurred by the
Collateral Agent pursuant to the foregoing authorization on such Grantor's
behalf; provided, however, that nothing in this Section 4.05 shall be
interpreted as excusing any Grantor from the performance of, or imposing any
obligation on the Collateral Agent or any Secured Party to cure or perform, any
covenants or other promises of any Grantor with respect to taxes, assessments,
charges, fees, liens, security interests or other encumbrances and maintenance
as set forth herein or in the other Loan Documents.
SECTION 4.06. Continuing Obligations of the Grantors. Each Grantor shall
remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each contract, agreement or instrument
relating to the Collateral.
SECTION 4.07. Use and Disposition of Collateral. None of the Grantors
shall grant any Lien in respect of the Collateral, except as permitted by the
Credit Agreement. Each Grantor agrees that if any Inventory is in the
possession or control of any warehouseman, bailee, agent or processor and the
Collateral Agent reasonably requests, such Grantor shall inform such
warehouseman, bailee, agent or processor of the Security Interest and shall use
good faith efforts to obtain from such
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9
warehouseman, bailee, agent or processor its agreement to hold the Inventory
subject to the Security Interest and to waive and release any Lien held by it
with respect to such Inventory (unless such Lien is permitted by the Credit
Agreement or other Loan Document), whether arising by operation of law or
otherwise.
SECTION 4.08. Limitation on Modification of Accounts. None of the
Grantors will, without the Collateral Agent's prior written consent, grant any
extension of the time of payment of any of the Accounts compromise, compound or
settle the same for less than the full amount thereof, release, wholly or
partly, any Person liable for the payment thereof or allow any credit or
discount whatsoever thereon, other than extensions, credits, releases,
discounts, compromises or settlements granted that would not reasonably be
expected to materially adversely affect the value of the Accounts constituting
Collateral taken as a whole.
SECTION 4.09. Insurance. The Grantors, at their own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage in
accordance with Section 5.06 of the Credit Agreement. Each Grantor irrevocably
makes, constitutes and appoints the Collateral Agent (and all officers,
employees or agents designated by the Collateral Agent) as such Grantor's true
and lawful agent (and attorney-in-fact) for the purpose, during the continuance
of an Event of Default specified in Section 7.01(a) or 7.02(a), of making,
settling and adjusting claims in respect of such Grantor's Collateral under
policies of insurance, endorsing the name of such Grantor on any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect thereto.
In the event that any Grantor at any time or times shall fail to obtain or
maintain any of the policies of insurance required hereby or to pay any premium
in whole or part relating thereto, the Collateral Agent may, without waiving or
releasing any obligation or liability of such Grantor hereunder, in its sole
discretion, obtain and maintain such policies of insurance and pay such premium
and take any other actions with respect thereto as the Collateral Agent
reasonably deems advisable. All sums disbursed by the Collateral Agent in
connection with this Section 4.09, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto, shall be payable, upon
demand, by the respective Grantor to the Collateral Agent and shall be
additional Obligations secured hereby.
SECTION 4.10. Covenants Regarding Copyrights, Patents, and Trademarks.
(a) Within 90 days after the end of each calendar year, such Grantor will notify
the Collateral Agent of any acquisition by such Grantor of any registration of
any material Copyright, Patent or Trademark or any exclusive right under a
material License, in each case constituting Collateral and shall take such
actions as may be reasonably requested by the Collateral Agent (but only to the
extent such actions are within such Grantor's control) to perfect the Security
Interest granted to the Collateral Agent and the other Secured Parties therein
to the extent provided in respect of Copyrights, Patents or Trademarks
constituting Collateral on the date hereof (including without limitation by (x)
the execution and delivery of a Security Agreement (or amendments to any such
agreement previously executed or delivered by such Grantor) and/or (y) the
making of appropriate filings in the United States Patent and Trademark Office
or the United States Copyright Office and/or appropriate Uniform Commercial Code
filings).
(b) Except as permitted in the Loan Documents, such Grantor agrees to take
all reasonably necessary steps, including in the United States Patent and
Trademark Office or in any court, to (i) maintain each trademark registration
and each Trademark License identified on Schedule II or IV hereto, as the case
may be, and (ii) pursue each trademark application now or hereafter identified
in Schedule V hereto, including, without limitation, the filing of responses to
office actions issued by the United States Patent and Trademark Office, the
filing of applications for renewal, the filing of affidavits under Sections 8
and 15 of the United States Trademark Act, and the participation in opposition,
cancelation, infringement and dilution proceedings, except, in each case in
which such Grantor has reasonably determined that any of the foregoing is not of
material economic value to it. Such Grantor agrees to take corresponding steps
with respect to each new or acquired trademark or service mark registration, or
application for trademark or service mark registration, or any rights obtained
under any Trademark License, in each case, to which it is now or later becomes
entitled,
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10
except in each case in which such Grantor has reasonably determined that any of
the foregoing is not of material economic value to it. Any expenses incurred in
connection with such activities shall be borne by such Grantor.
(c) Except as permitted in the Loan Documents, such Grantor agrees to take
all necessary steps, including in the United States Patent and Trademark Office
or in any court, to (i) maintain each patent and each Patent License identified
on Schedule II or III, as applicable, and (ii) pursue each patent application,
now or hereafter identified in Schedule III including the filing of divisional,
continuation, continuation-in-part and substitute applications, the filing of
applications for reissue, renewal or extensions, the payment of maintenance
fees, and the participation in interference, reexamination, opposition or
infringement and misappropriation proceedings, except, in each case in which
such Grantor has reasonably determined that any of the foregoing is not of
material economic value to it. Such Grantor agrees to take corresponding steps
with respect to each new or acquired patent, patent application, or any rights
obtained under any Patent License, in each case, which it is now or later
becomes entitled, except in each case in which such Grantor has reasonably
determined that any of the foregoing is not of material economic value to it.
Any expenses incurred in connection with such activities shall be borne by such
Grantor.
(d) Except as provided in subsection (f) hereof, such Grantor shall take
all additional steps not set forth in subsections (b) and (c) hereof which it or
the Collateral Agent deems reasonably appropriate under the circumstances to
preserve and protect its material Copyrights, Copyright Licenses, Trademarks,
Trademark Licenses, Patents and Patent Licenses.
(e) Such Grantor shall not abandon any trademark registration, patent or
any pending trademark or patent application, in each case listed on Schedule III
or IV, without the written consent of the Collateral Agent, unless such Grantor
shall have previously determined that such use or the pursuit or maintenance of
such trademark registration, patent or pending trademark or patent application
is not of material economic value to it, in which case, such Grantor will, at
least annually, give notice of any such abandonment to the Collateral Agent in
writing, in reasonable detail, at its address set forth in the Credit Agreement.
(f) In the event that any Grantor becomes aware that any of such Grantor's
IP Collateral which such Grantor has reasonably determined to be material to its
business is infringed or misappropriated by a third party, which infringement or
misappropriation would reasonably be expected to have a Material Adverse Effect,
such Grantor shall notify the Collateral Agent promptly and in writing, in
reasonable detail, at its address set forth in the Credit Agreement, and shall
take such actions as such Grantor or the Collateral Agent deems reasonably
appropriate under the circumstances to protect such IP Collateral including
suing for damages and/or for an injunction against such infringement or
misappropriation. Any expense incurred in connection with such activities shall
be borne by such Grantor. Such Grantor will advise the Collateral Agent
promptly and in writing, in reasonable detail, at its address set forth in the
Credit Agreement, of any adverse determination or the institution of any
proceeding (including, without limitation, the institution of any proceeding in
the United States Patent and Trademark Office or any court) regarding any item
of such Grantor's IP Collateral which could reasonably result in a Material
Adverse Effect.
(g) Such Grantor shall mark its products with the trademark registration
symbol (R), the numbers of all appropriate patents, the common law trademark
symbol , or the designation "patent pending", as the case may be, to the extent
that it is reasonably and commercially practicable.
(h) Such Grantor will not create, incur or permit to exist, will defend
such Grantor's IP Collateral against, and will take such other action as is
reasonably necessary to remove, any material Lien or material adverse claim on
or to any of such Grantor's IP Collateral other than Liens created hereby and
other than as permitted pursuant to the Loan Documents (including any Liens
permitted to exist on such Grantor's IP Collateral pursuant to Section 6.02 of
the Credit Agreement), and will defend the right, title and interest of the
Collateral Agent and the other Secured Parties in and to any
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of the IP Collateral against the claims and demands of all Persons whomsoever,
except where failure to defend would not have a Material Adverse Effect.
(i) Without the prior written consent of the Collateral Agent, such Grantor
will not sell, assign, transfer, exchange or otherwise dispose of, or grant any
option with respect to, such Grantor's IP Collateral, or attempt, offer or
contract to do so, except with respect to licenses in the ordinary course of
business or as permitted by this Agreement or the Loan Documents.
(j) Such Grantor will advise the Collateral Agent promptly and in writing,
in reasonable detail, at its address set forth in the Credit Agreement, (i) of
any Lien (other than Liens created hereby or permitted under the Loan Documents,
including, without limitation, any Liens permitted to exist on such Grantor's
Patents or Trademarks pursuant to Section 6.02 of the Credit Agreement) on any
of such Grantor's IP Collateral and (ii) of the occurrence of any other event
which would reasonably be expected in the aggregate to have a material adverse
effect on the aggregate value of the IP Collateral as a whole or the Liens
created hereunder.
Section 4.13. o Protection of Trade Secrets. Such Grantor shall take all
steps which it deems commercially reasonable to preserve and protect the secrecy
of all material Trade Secrets of such Grantor.
ARTICLE V
Collections
SECTION 5.01. Power of Attorney. Each Grantor irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers and employees of
the Collateral Agent designated by the Collateral Agent) as such Grantor's true
and lawful agent and attorney-in-fact, and in such capacity the Collateral Agent
shall have the right, with power of substitution for each Grantor and in each
Grantor's name or otherwise, for the use and benefit of the Collateral Agent and
the Secured Parties, but only upon the occurrence and during the continuance of
an Event of Default (a) to receive, endorse, assign and/or deliver any and all
notes, acceptances, checks, drafts, money orders or other evidences of payment
relating to such Grantor's Collateral or any part thereof; (b) to demand,
collect, receive payment of, give receipt for and give discharges and releases
of all or any of such Grantor's Collateral; (c) to sign the name of such Grantor
on any invoice or bill of lading relating to any of such Grantor's Collateral;
(d) to send verifications of such Grantor's Accounts to any Account Debtor; (e)
to commence and prosecute any and all suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect or otherwise realize on
all or any of such Grantor's Collateral or to enforce any rights in respect of
any such Collateral; (f) to settle, compromise, compound, adjust or defend any
actions, suits or proceedings relating to all or any of such Grantor's
Collateral; (g) to notify, or to require such Grantor to notify, Account Debtors
to make payment directly to the Collateral Agent; and (h) subject to any
existing reserved rights or licenses, to use, sell, assign, transfer, pledge,
make any agreement with respect to or otherwise deal with all or any of such
Grantor's Collateral, and to do all other acts and things necessary to carry out
the purposes of this Agreement, as fully and completely as though the Collateral
Agent were the absolute owner of such Grantor's Collateral for all purposes;
provided, however, that nothing herein contained shall be construed as requiring
or obligating the Collateral Agent to make any commitment or to make any inquiry
as to the nature or sufficiency of any payment received by the Collateral Agent,
or to present or file any claim or notice, or, except as otherwise provided
herein, to take any action with respect to the Collateral or any part thereof or
the moneys due or to become due in respect thereof or any property covered
thereby, and no action taken or omitted to be taken by the Collateral Agent with
respect to the Collateral or any part thereof shall give rise to any defense,
counterclaim or offset in favor of any Grantor or to any claim or action against
the Collateral Agent. It is understood and agreed that the appointment of the
Collateral Agent as the agent and attorney-in-fact of each Grantor for the
purposes set forth above is coupled with an interest and is irrevocable. The
provisions of this Section shall in no event relieve any Grantor of any of its
obligations hereunder or under any other Loan Document
<PAGE>
12
with respect to the such Grantor's Collateral or any part thereof or, such
Grantor's impose any obligation on the Collateral Agent or any Secured Party to
proceed in any particular manner with respect to the Collateral or any part
thereof, or, except as otherwise provided herein, in any way limit the exercise
by the Collateral Agent or any Secured Party of any other or further right which
it may have on the date of this Agreement or hereafter, whether hereunder, under
any other Loan Document, by law or otherwise. Anything in this Section 5.01 to
the contrary notwithstanding, the Collateral Agent agrees that it will not
exercise any rights under the power of attorney provided for in this Section
5.01 unless an Event of Default shall have occurred and be continuing.
ARTICLE VI
Remedies
SECTION 6.01. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees that the Collateral
Agent shall have the right to take any of or all the following actions at the
same or different times: (a) in the case of any Copyright, Patent or Trademark
constituting Collateral of such Grantor, execute and deliver any and all
agreements, instruments, documents and papers as the Collateral Agent may
reasonably request to evidence the Collateral Agent's and the other Secured
Parties' security interest in such Copyright, Patent or Trademark and the
goodwill and general intangibles of such Grantor relating thereto or represented
thereby and, subject to any existing reserved rights or licenses, assign any
Copyright, Patent or Trademark constituting Collateral of such Grantor (along
with the goodwill of the business to which any such Copyright, Patent or
Trademark pertains), for such term or terms, on such conditions, and in such
manner, as the Collateral Agent shall in its sole discretion determine, and (b)
with or without legal process and with or without prior notice or demand for
performance, to take possession of such Grantor's Collateral and without
liability for trespass to enter any premises where such Grantor's Collateral may
be located for the purpose of taking possession of or removing such Grantor's
Collateral and, generally, to exercise any and all rights afforded to a secured
party under the Uniform Commercial Code or other applicable law. Without
limiting the generality of the foregoing, each Grantor agrees that the
Collateral Agent shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of such
Grantor's Collateral, at public or private sale or at any broker's board or on
any securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall reasonably deem appropriate. The Collateral Agent shall
be authorized at any such sale of any Grantor's Collateral subject to
restrictions on sales under the Securities Act of 1933, as amended (if it
reasonably deems it advisable to do so), to restrict the prospective bidders
or purchasers to Persons who will represent and agree that they are purchasing
such Collateral for their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale the
Collateral Agent shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Collateral so sold. Each such purchaser at
any such sale shall hold the property sold absolutely, free from any claim or
right on the part of any Grantor, and each Grantor hereby waives (to the extent
permitted by law) all rights of redemption, stay and appraisal which such
Grantor now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantors at least 10 days' written
notice (which each Grantor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions) of the Collateral Agent's
intention to make any sale of such Grantor's Collateral. Such notice, in the
case of a public sale, shall state the time and place for such sale and, in the
case of a sale at a broker's board or on a securities exchange, shall state the
board or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Collateral Agent may
fix and state in the notice (if any) of such sale. At any such sale, the
Collateral, or portion thereof, to be sold may be sold in one lot as an entirety
or in separate parcels, as the Collateral Agent may in its sole and absolute
discretion determine. The
<PAGE>
13
Collateral Agent shall not be obligated to make any sale of any Collateral if it
shall reasonably determine not to do so, regardless of the fact that notice of
sale of such Collateral shall have been given. The Collateral Agent may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of the
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by the Collateral Agent until the sale price is paid by the
purchaser or purchasers thereof, but the Collateral Agent shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
be sold again upon like notice. At any public (or, to the extent permitted by
law, private) sale made pursuant to this Section, any Secured Party may bid for
or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of any Grantor (all said
rights being also hereby waived and released to the extent permitted by law),
such Grantor's Collateral or any part thereof offered for sale and may make
payment on account thereof by using any claim then due and payable to such
Secured Party from such Grantor as a credit against the purchase price, and such
Secured Party may, upon compliance with the terms of sale, hold, retain and
dispose of such property without further accountability to such Grantor
therefor. For purposes hereof, a written agreement with any Person (other than a
Secured Party or affiliate thereof) to purchase the Collateral or any portion
thereof shall be treated as a sale thereof; the Collateral Agent shall be free
to carry out such sale pursuant to such agreement and no Grantor shall be
entitled to the return of such Grantor's Collateral or any portion thereof
subject thereto, notwithstanding the fact that after the Collateral Agent shall
have entered into such an agreement all Events of Default shall have been
remedied and the Obligations paid in full. As an alternative to exercising the
power of sale herein conferred upon it, the Collateral Agent may proceed by a
suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a court-
appointed receiver.
SECTION 6.02. Application of Proceeds. The Collateral Agent may, in the
sole discretion of the Collateral Agent, apply the proceeds of any collection or
sale of the Collateral, as well as any Collateral consisting of cash against the
respective Obligations of the relevant Grantor then due and owing in the
following order of priority:
FIRST, to the payment of all reasonable costs and reasonable expenses
incurred by the Collateral Agent hereunder in connection with such
collection or sale or otherwise in connection with this Agreement or any of
the Obligations of the relevant Grantor then due and owing, including all
court costs and the reasonable fees and expenses of its agents and legal
counsel, the repayment of all reasonable advances made by the Collateral
Agent hereunder on behalf of such Grantor and any other reasonable costs or
expenses incurred in connection with the exercise of any right or remedy
hereunder;
SECOND, to the payment in full of the Obligations of the relevant
Grantor then due and owing (the amounts so applied to be distributed among
the Secured Parties pro rata in accordance with the amounts of such
Obligations then due and owing to them on the date of any such
distribution); and
THIRD, to the relevant Grantor, its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers
<PAGE>
14
shall not be obligated to see to the application of any part of the purchase
money paid over to the Collateral Agent or such officer or be answerable in any
way for the misapplication thereof.
ARTICLE VII
Miscellaneous
SECTION 7.01. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 9.02 of the Credit Agreement. All communications and
notices hereunder to any Subsidiary Grantor shall be given to it in care of JCI.
SECTION 7.02. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the Security Interest and all obligations of the Grantors
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Credit Agreement, any other Loan Document, any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Credit Agreement, any other Loan Document or any other agreement or instrument,
(c) any exchange, release or non-perfection of any Lien on other collateral, or
any release or amendment or waiver of or consent under or departure from any
guarantee, securing or guaranteeing all or any of the Obligations, or (d) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Obligations or this Agreement.
SECTION 7.03. Survival of Agreement. All covenants and agreements, made
by any Grantor herein shall survive the making by the Lenders of the Loans, and
the execution and delivery to the Lenders of any notes evidencing such Loans.
SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall
become effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Grantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Grantor, the Collateral Agent and the other Secured Parties and their respective
successors and assigns, except that no Grantor shall have the right to assign or
transfer its rights or obligations hereunder or any interest herein except with
the consent of the Collateral Agent or as contemplated by this Agreement or the
Credit Agreement. This Agreement shall be construed as a separate agreement
with respect to each Grantor and may be amended, modified, supplemented, waived
or released with respect to any Grantor without the approval of any other
Grantor and without affecting the obligations of any other Grantor hereunder.
SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
SECTION 7.06. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO
THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.
<PAGE>
15
SECTION 7.07. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provisions of this Agreement or consent to any
departure by any Grantor therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Grantor in any case shall entitle such
Grantor or any other Grantor to any other or further notice or demand in similar
or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Collateral Agent and the Grantor or Grantors with respect to which
such waiver, amendment or modification is to apply, subject to any consent
required in accordance with Section 9.01 of the Credit Agreement.
SECTION 7.08. Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.
SECTION 7.09. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 7.10 Counterparts. This Agreement may be executed by one or more
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument and shall become effective as
provided in Section 7.04. Delivery of an executed signature page to this
Agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof.
SECTION 7.11. Headings. Article and Section headings used herein are for
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 7.12. Jurisdiction; Consent to Service of Process. Each party
hereto hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement, or for recognition and enforcement
of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the courts of the State of New York, the courts of the
United States of America for the Southern District of New York, and
appellate courts of any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient forum and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form
<PAGE>
16
of mail), postage prepaid, to applicable party at the address specified in
Section 7.01 or at such other address of which the parties hereto shall
have been notified pursuant thereto.
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section 7.12 any punitive damages.
SECTION 7.13. Termination. This Agreement shall terminate and the
Security Interest shall be automatically released, all without delivery of any
instrument or performance of any act by any party, (a) when all the Obligations
have been paid in full, the Lenders have no further commitment to lend, the L/C
Exposure has been reduced to zero and the Issuing Bank has no further commitment
to issue Letters of Credit under the Credit Agreement, at which time the
Collateral Agent shall execute and deliver to the Grantors, at the Grantors'
expense, all Uniform Commercial Code termination statements and similar
documents which the Grantors shall reasonably request to evidence such
termination. Any execution and delivery of termination statements or documents
pursuant to this Section 7.14 shall be without recourse to or warranty by the
Collateral Agent, (b) upon any sale or other transfer by any Grantor of any
Collateral that is permitted under the Credit Agreement to any Person (unless
such sold Collateral is to a Person that is required to pledge such Collateral
to the Collateral Agent pursuant to Section 5.11 of the Credit Agreement) or (c)
upon the effectiveness of any written consent to the release of the security
interest granted hereby in any Collateral pursuant to Section 9.01(d) of the
Credit Agreement. A Subsidiary Grantor shall automatically be released from its
obligations hereunder and the Security Interest in the Collateral of such
Subsidiary Grantor shall be automatically released in the event that all the
capital stock of such Subsidiary Grantor shall be sold, transferred or otherwise
disposed of to a Person that is not an Affiliate of JCI in accordance with the
terms of the Credit Agreement.
SECTION 7.14. Additional Grantors. Pursuant to Section 5.11 of the Credit
Agreement, certain Domestic Subsidiaries of JCI are required to become
Subsidiary Grantors hereunder. Upon execution and delivery by the Collateral
Agent and such Domestic Subsidiary of an instrument in the form of Annex 2
hereto, such Domestic Subsidiary shall become a Subsidiary Grantor hereunder
with the same force and effect as if originally named as a Subsidiary Grantor
herein. The execution and delivery of any such instrument shall not require the
consent of any Grantor hereunder. The rights and obligations of each Grantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Subsidiary Grantor as a party to this Agreement.
<PAGE>
17
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
CDRJ ACQUISITION CORPORATION,
By /s/ Ralph S. Mason
----------------------------------------
Name: Ralph S. Mason
Title: Vice Chairman and EVP
CREDIT SUISSE FIRST BOSTON,
as Collateral Agent,
By /s/ Laurie Sivaslian
----------------------------------------
Name: Laurie Sivaslian
Title: Director
By /s/ David Kratovil
----------------------------------------
Name: David Kratovil
Title: Director
<PAGE>
SCHEDULE I
SUBSIDIARY GRANTORS
None
<PAGE>
Schedule II
LICENSES
NONE
<PAGE>
Schedule III
<TABLE>
<CAPTION>
PATENTS
Patent
------
App. No. Patent No. Title File/Issue
-------- ---------- ----- ----------
<S> <C> <C> <C>
07/891,293 5,234,132 Cosmetic Dispenser 5/29/1992
8/10/1993
07/889,745 D 347,165 Design: Cosmetic Dispenser 5/28/1992
(Royal Jelly Milk Balm) 5/24/1994
07/891,348 5,238,131 Two-Part Plastic Cap for 5/29/1992
Container 8/24/1993
07/894,798 D 351,560 Design: Design for a Skin 5/29/1992
Programmer 10/18/1994
29/019,925 D 358,332 Design: Triangular-Shaped 3/15/1994
Cologne Bottle 5/16/1995
29/019,957 D 361,270 Design for V-Shaped Cosmetic 3/15/1994
Bottle 8/15/1995
29/050,058 D 379,766 Formal Title: Perfume Bottle 2/06/1996
6/10/1997
29/068,510 D 390,783 Formal Title: Perfume Bottles 3/25/1997
2/17/1998
</TABLE>
<PAGE>
Schedule IV
<TABLE>
<CAPTION>
US TRADEMARK REGISTRATIONS
U.S. Registration Registration
Trademark No. Date
- ------------------- -------------- --------------
<S> <C> <C>
ADORISSE 2021127 03-DEC-96
BELLE CLASSIQUE 1760542 23-MAR-93
BIOLOGICALLY
EFFECTIVE SKINCARE 1597042 22-MAY-90
EAU D'AROMES 1975243 21-MAY-96
FLEURS CLASSIQUE 1760541 23-MAR-93
JAFRA 1269604 13-MAR-84
JAFRA 677471 21-APR-59
JAFRA COSMETICS
INTERNATIONAL 2046002 18-MAR-97
JAFRA INTIMA 1924696 03-OCT-95
JF9 2095901 09-SEP-97
OPTIMEYES 2111401 04-NOV-97
ORIENTAL CLASSIQUE 1790911 31-AUG-93
PRECIOUS PROTEIN 1632839 29-JAN-91
REDISCOVER 1918674 12-SEPT-95
RISQUE (STYLIZED) 1721032 29-SEPT-92
SOOTHING RETREAT 2111326 04-NOV-97
TIME PROTECTOR 1709095 18-AUG-92
TRANQUIL SEAS 2111327 04-NOV-97
WHITE SOUFFLE 1445817 07-JUL-87
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
US TRADEMARK APPLICATIONS
U.S. Application Application
Trademark No. Date
- --------------------- ------------ -------------
<S> <C> <C>
ALWAYS COLOR 75/341106 14-AUG-97
CHOSEN 75/353720 14-AUG-97
CHOSEN 75/341107 14-AUG-97
EPIC 75/394175 21-NOV-97
FM (STYLIZED) FORCE
MAGNETIQUE 74/340837 14-AUG-97
FOR ALL THE WOMEN
YOU ARE 74/570240 06-SEP-94
FRESH AWAKENINGS 75/091861 22-APR-96
JOIE DE VIVRE 75/394165 21-NOV-97
LE MOIRE 75/259957 19-MAR-97
LE MOIRE 75/260053 19-MAR-97
TIME CORRECTOR 75/351422 14-AUG-97
</TABLE>
<TABLE>
<CAPTION>
STATE TRADEMARK REGISTRATIONS
<S> <C> <C> <C>
State Trademark Registration No. Registration Date
- ----- --------- ---------------- -----------------
California JAFRA 38,890 11-OCT-57
</TABLE>
2
<PAGE>
Annex 1
to the Security Agreement
[Form Of]
PERFECTION CERTIFICATE
Reference is made to (a) the Credit Agreement dated as of April 30, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme
("Parent"), CDRJ Acquisition Corporation (to be renamed Jafra Cosmetics
International, Inc.), a Delaware corporation ("JCI"), Jafra Cosmetics
International, S.A. de C.V., a sociedad anonima de capital variable organized
under the laws of the United Mexican States ("JCISA" and together with JCI, the
"Borrowers"), the lenders from time to time party thereto (the "Lenders"), the
Issuing Bank (as defined therein), Credit Suisse First Boston, as administrative
agent for the Lenders (in such capacity, the "Administrative Agent"), as
swingline lender and as Collateral Agent, and (b) the JCI Guarantee Agreement
dated as of April 30, 1998 (as amended, supplemented or otherwise modified from
time to time, the "JCI Guarantee Agreement") between JCI and the Collateral
Agent.
Capitalized terms used herein without definition shall have the respective
meanings ascribed thereto in the Security Agreement, dated as of April 30, 1998,
as amended, modified or supplemented from time to time, among JCI, the
Subsidiary Grantors and the Collateral Agent.
The undersigned, an Officer of JCI, hereby certifies (as of the
consummation of the Transactions and thereafter) to the Collateral Agent as
follows:
1. Names. (a) The exact corporate name of JCI, as such name appears in
its certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name JCI has had in the past
five years, together with the date of the relevant change:
(c) Except as set forth in Schedule 1 hereto, JCI has not changed its
identity or corporate structure in any material way within the past year.
Changes in identity or corporate structure would include mergers, consolidations
and acquisitions, as well as any change in the form, nature or jurisdiction of
corporate organization. If any such change has occurred, include in Schedule 1
the information required by Sections 1 and 2 of this certificate as to each
acquiree or constituent party to a merger or consolidation.
(d) The following is a list of all other names (including trade names or
similar appellations) used by JCI or any of its divisions or other business
units in connection with the conduct of its business or the ownership of its
properties at any time during the past year:
<PAGE>
2
(e) Set forth below is the Federal Taxpayer Identification Number of JCI:
2. Current Locations. (a) The chief executive office of JCI is located at
the address set forth opposite its name below:
Grantor Mailing Address County State
- ------- --------------- ------ -----
(b) Set forth below opposite the name of JCI are all locations where JCI
maintains any books or records relating to any Accounts:
Grantor Mailing Address County State
- ------- --------------- ------ -----
(c) Set forth below opposite the name of JCI are all the places of
business of JCI not identified in paragraph (a) or (b) above:
Grantor Mailing Address County State
- ------- --------------- ------ -----
(d) Set forth below opposite the name of JCI are all the locations where
JCI maintains any Collateral not identified above:
Grantor Mailing Address County State
- ------- --------------- ------ -----
(e) Set forth below opposite the name of JCI are the names and addresses
of all Persons other than JCI that have possession of any of the Collateral of
JCI:
Grantor Mailing Address County State
- ------- --------------- ------ -----
3. Unusual Transactions. All Accounts have been originated by the Grantor
and all Inventory has been acquired by the Grantor in the ordinary course of
business.
4. UCC Filings. Duly signed financing statements on Form UCC-1 in
substantially the form of Schedule 5 hereto have been prepared for filing in the
Uniform Commercial Code filing office in each jurisdiction where the Grantor has
Collateral as identified in Section 2 hereof.
5. Schedule of Filings. Attached hereto as Schedule 6 is a schedule
setting forth, with respect to the filings pursuant to the Uniform Commercial
Code, each filing and the filing office in which such filing is to be made.
6. Stock Ownership. Attached hereto as Schedule 6 is a true and correct
list of all the duly authorized issued and outstanding stock of each Subsidiary
and the record and beneficial owners of such stock. Also set forth on Schedule
6 is each equity Investment of Parent and each Subsidiary that represents 50% or
less of the equity of the entity in which such investment was made.
<PAGE>
3
IN WITNESS WHEREOF, the undersigned have duly executed this certificate on
this 30th day of April, 1998.
JAFRA COSMETICS INTERNATIONAL, INC.,
by ______________________________
Name:
Title:
<PAGE>
Annex 2
to the Security Agreement
SUPPLEMENT NO. __ dated as of , to the Security Agreement
dated as of April 30, 1998, among JAFRA COSMETICS INTERNATIONAL,
INC. (formerly named CDRJ Acquisition Corporation), a Delaware
corporation ("JCI"), each subsidiary of JCI listed on Schedule I
thereto (each such subsidiary individually a "Subsidiary Grantor"
and collectively, the "Subsidiary Grantors"; the Subsidiary
Grantors and JCI are referred to collectively herein as the
"Grantors"), and CREDIT SUISSE FIRST BOSTON, a bank organized
under the laws of Switzerland, acting through its New York
branch, as collateral agent (in such capacity, the "Collateral
Agent") for the Secured Parties (as defined herein).
A. Reference is made to (a) the Credit Agreement dated as of April 30,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe
anonyme ("Parent"), JCI, Jafra Cosmetics International, S.A. de C.V., a
sociedad anonima de capital variable organized under the laws of the United
Mexican States ("JCISA" and, together with JCI, the "Borrowers"), the lenders
from time to time party thereto (the "Lenders"), the Issuing Bank (as defined
therein) and Credit Suisse First Boston, as administrative agent for the Lenders
(in such capacity, the "Administrative Agent"), as swingline lender and as
Collateral Agent and (b) the JCI Guarantee Agreement dated as of April 30, 1998
(as amended, supplemented or otherwise modified from time to time, the "JCI
Guarantee Agreement"), between JCI and the Collateral Agent.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Security Agreement and the
Credit Agreement.
C. The Grantors have entered into the Security Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Section 7.15 of the Security Agreement provides that additional Domestic
Subsidiaries of JCI may become Grantors under the Security Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned Domestic Subsidiary (the "New Grantor") is executing this Supplement
in accordance with the requirements of the Credit Agreement to become a Grantor
under the Security Agreement in order to induce the Lenders to make additional
Loans and the Issuing Bank to issue additional Letters of Credit and as
consideration for Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Grantor agree as follows:
SECTION 1. In accordance with Section 7.15 of the Security Agreement, the
New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of
the Security Agreement applicable to it as a Grantor thereunder and (b)
represents and warrants that the representations and warranties made by it as a
Grantor thereunder are true and correct on and as of the date hereof. In
furtherance of the foregoing, the New Grantor, as security for the payment and
performance in full of its respective Obligations (as defined in the Security
Agreement), does hereby grant to the Collateral Agent, its successors and
assigns, for the benefit of the Secured Parties, their successors and assigns, a
security interest in all of the New Grantor's right, title and interest in and
to the Collateral (as defined in the Security Agreement) of the New Grantor.
Each reference to a "Grantor" in the Security Agreement shall be deemed to
include the New Grantor. The Security Agreement is hereby incorporated herein by
reference.
SECTION 2. The New Grantor represents and warrants to the Collateral Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally,
<PAGE>
2
general equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Grantor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Grantor hereby represents and warrants that (a) set
forth on Schedule I attached hereto is a true and correct schedule of the
location of any and all Collateral of the New Grantor and (b) set forth under
its signature hereto, is the true and correct location of the chief executive
office of the New Grantor. Such information, to the extent applicable, shall be
added to the Schedules to the Security Agreement.
SECTION 5. Except as expressly supplemented hereby, the Security Agreement
shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES
WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
SECTION 7. Any provision of this Supplement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 8. All communications and notices hereunder shall be in writing and
given as provided in Section 7.01 of the Security Agreement. All communications
and notices hereunder to the New Grantor shall be given to it care of JCI.
<PAGE>
3
IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly
executed this Supplement to the Security Agreement as of the day and year first
above written.
[Name Of New Grantor],
by _____________________________
Name:
Title:
Address:
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by _____________________________
Name:
Title:
by _____________________________
Name:
Title:
<PAGE>
SCHEDULE I
to Supplement No.___
to the Security Agreement
LOCATION OF COLLATERAL
----------------------
Description Location
- ----------- --------
<PAGE>
EXHIBIT 4.15
EXECUTION COPY
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attn: Janet Lewis, Esq.
- --------------------------------------------------------------------------------
DEED OF TRUST, WITH ASSIGNMENT OF LEASES AND RENTS,
FIXTURE FILING AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, FIXTURE FILING AND SECURITY
AGREEMENT
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, FIXTURE
FILING AND SECURITY AGREEMENT dated as of April 30, 1998 (this "Deed
----
of Trust"), by Jafra Cosmetics International, Inc., a Delaware
--------
corporation, having an office at 2451 Townsgate Road, Westlake
Village, California 91361 (the "Grantor"), to TitleServ Agency of New
-------
York City, Inc., as trustee ("Trustee") for the benefit of Credit
-------
Suisse First Boston, a bank organized under the laws of Switzerland,
acting through its New York branch (the "Beneficiary"), having an
-----------
office at 11 Madison Avenue New York, New York 10010, as
<PAGE>
Collateral Agent under the Credit Agreement (as defined).
W I T N E S S E T H T H A T :
A. Reference is made to the Credit Agreement dated as of April 30, 1998,
(and as the same may be amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg
----------------
societe anonyme (the "Parent"), Grantor, Jafra Cosmetics International, S.A. de
------
C.V., a company organized under the laws of the United Mexican States (the
"Other Borrower"), Beneficiary and such other respective entities that from time
to time become parties thereto pursuant to which Grantor has requested that
Beneficiary make term loans and revolving credit loans in an aggregate principal
amount of $90,000,000 (the "Loans") to Grantor and the Other Borrower for the
-----
purpose of (a) financing the Acquisition, (b) providing funds for the payment of
certain fees and expenses incurred in connection therewith and (c) general
corporate expenses. Each term used herein and not otherwise defined herein
shall have the meaning given to it in the Credit Agreement.
B. The obligations of the Beneficiary to make the Loans under the Credit
Agreement are conditioned upon, among other things, the execution and delivery
by the Grantor of this Deed of Trust in the form hereof, to secure (a) the due
and punctual payment of (i) the principal of and premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, to the extent permitted under
Applicable Law) on the Loans to Grantor when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise, and (ii)
all other monetary obligations, including fees, costs, expenses and indemnities,
whether primary, secondary, direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, to the extent permitted under
Applicable
2
<PAGE>
Law), of the Grantor under the Credit Agreement, this Deed of Trust and the
other Loan Documents to which the Grantor is or is to be a party, (b) the due
and punctual performance of all covenants, agreements, obligations and
liabilities of the Grantor under or pursuant to the Credit Agreement, this Deed
of Trust and the other Loan Documents, and (c) the payment of such additional
sums and the performance of all other obligations now or hereafter owing from
Grantor to Beneficiary, whether otherwise secured or not, payable to or
otherwise acquired by Beneficiary, when the document evidencing such obligation
specifically recites the recording information appearing on this Deed of Trust
and that it is intended to be secured hereby (all the obligations referred to in
this paragraph B being referred to collectively, as the "Obligations").
-----------
C. This Deed of Trust secures not only existing indebtedness, but also
future or additional advances made pursuant hereto or to the Credit Agreement,
whether such advances are obligatory or optional and whether such advances are
readvances after payments permitted under the Credit Agreement.
D. Pursuant to the requirements of the Credit Agreement, the Grantor is
entering into this Deed of Trust to create a security interest in the Trust
Property (as defined herein) to secure the performance and payment by the
Grantor of the Obligations. The Credit Agreement also requires the granting by
Borrowers (other than Grantor) of deeds of trust creating security interests in
certain property (other than the Trust Property) to secure the performance of
the Obligations.
3
<PAGE>
Granting Clauses
----------------
NOW THEREFORE, IN CONSIDERATION OF the foregoing and in order to secure (A)
the due and punctual payment and performance of the Obligations, (B) the due and
punctual payment by the Grantor of all real estate taxes and insurance premiums
relating to the Trust Property and (C) all disbursements made by Beneficiary for
the payment of real estate taxes, common area charges or insurance premiums, all
fees, expenses or advances in connection with or relating to the Trust Property
pursuant to the Credit Agreement and the other Loan Documents, and interest on
such disbursements and other amounts not timely paid in accordance with the
terms of the Credit Agreement, this Deed of Trust and the other Loan Documents,
(D) the due and punctual payment and performance of the Grantor's obligations
under the Fee and Guarantee Agreement, dated as of the date hereof, among The
Chase Manhattan Bank, the Grantor and related entities and (E) unless otherwise
agreed to in writing by the applicable counterparty thereto, the due and
punctual payment and performance of all obligations of the Grantor under each
Hedging Agreement entered into with any counterparty (whether or not a Lender or
an Affiliate thereof) (the obligations specified in clauses (a) through (E),
collectively, the "Mortgaged Obligations"), Grantor hereby grants, conveys,
---------------------
mortgages, assigns and pledges to the Trustee, IN TRUST FOREVER, with power of
sale, for the benefit of Beneficiary, a security interest in, all the following
described property, excluding any and all property and assets excluded from the
definition of "Collateral" (and each defined term used in the definition of such
----------
term) in the Security Agreement (the "Trust Property") whether now owned or held
--------------
or hereafter acquired:
(1) all Grantor's right, title and interest in all the fee estate in
the land more particularly described on Exhibit A hereto (the "Land"),
----
together with all rights appurtenant thereto, including the easements over
certain other adjoining land granted by any easement agreements,
4
<PAGE>
covenant or restrictive agreements, if any, and all air rights, mineral
rights, water rights, oil and gas rights and development rights, if any, of
every kind and description relating thereto, including, without limitation,
any water rights, and also together with all of the other easements,
rights, privileges, interests, hereditaments and appurtenances thereunto
belonging or in anyway appertaining and all of the estate, right, title,
interest, claim or demand whatsoever of Grantor therein and in the streets
and ways adjacent thereto, either in law or in equity, in possession or
expectancy, now or hereafter acquired (the "Premises");
--------
(2) all Grantor's right, title and interest in all buildings,
improvements, structures, paving, parking areas, roads, utilities,
walkways, landscaping and other infrastructure and betterments now or
hereafter erected or located upon the Land, and all fixtures of every kind
and type affixed to the Premises or attached to or forming part of any
structures, buildings or improvements and replacements thereof now or
hereafter erected or located upon the Land (the "Improvements");
------------
(3) all Grantor's right, title and interest in all apparatus, movable
appliances, building materials, equipment, fittings, furnishings,
furniture, machinery and other articles of tangible personal property of
every kind and nature, and replacements thereof, now or at any time
hereafter placed upon or used in any way in connection with the use,
enjoyment, occupancy or operation of the Improvements or the Premises,
including all of Grantor's books and records relating thereto and including
all pumps, tanks, goods, machinery, tools, equipment, lifts (including fire
sprinklers and alarm systems, fire prevention or control systems, cleaning
rigs, air conditioning, heating, boilers, refrigerating, electronic
monitoring, water, loading, unloading,
5
<PAGE>
lighting, power, sanitation, waste removal, entertainment, communications,
computers, recreational, window or structural, maintenance, truck or car
repair and all other equipment of every kind), restaurant, bar and all
other indoor or outdoor furniture (including tables, chairs, booths,
serving stands, planters, desks, sofas, racks, shelves, lockers and
cabinets), bar equipment, glasses, cutlery, uniforms, linens, memorabilia
and other decorative items, furnishings, appliances, supplies, inventory,
rugs, carpets and other floor coverings, draperies, drapery rods and
brackets, awnings, venetian blinds, partitions, chandeliers and other
lighting fixtures, freezers, refrigerators, walk-in coolers, signs (indoor
and outdoor), computer systems, cash registers and inventory control
systems, and all other apparatus, equipment, furniture, furnishings, and
articles used in connection with the use or operation of the Improvements
or the Premises, excluding any and all property and assets excluded from
the definition of "Collateral" (and each defined term used in the
----------
definition of such term) in the Security Agreement, it being understood
that the enumeration of any specific articles of property shall in no way
result in or be held to exclude any items of property not specifically
mentioned (the property referred to in this subparagraph (3), the "Personal
--------
Property");
--------
(4) all Grantor's right, title and interest in all general intangibles
relating to design, development, operation, management and use of the
Premises or the Improvements, all certificates of occupancy, entitlements,
tract maps, zoning variances, building, use or other permits, approvals,
authorizations and consents obtained from and all materials prepared for
filing or filed with any Governmental Authority in connection with the
development, use, operation or management of the Premises and Improvements,
all construction, service, engineering, consulting,
6
<PAGE>
leasing, architectural and other similar contracts concerning the design,
construction, management, operation, occupancy and/or use of the Premises
and Improvements, all architectural drawings, plans, specifications, soil
tests, feasibility studies, appraisals, environmental studies, engineering
reports and similar materials relating to any portion of or all of the
Premises and Improvements, all payment and performance bonds or warranties
or guarantees relating to the Premises or the Improvements, all to the
extent assignable (the "Permits, Plans and Warranties");
-----------------------------
(5) Grantor's interest in and rights under any and all now or
hereafter existing leases or licenses (under which Grantor is landlord or
licensor) and subleases (under which Grantor is sublandlord), concession,
management, mineral or other agreements of a similar kind that permit the
use or occupancy of the Premises or the Improvements for any purpose in
return for any payment, or the extraction or taking of any gas, oil, water
or other minerals from the Premises in return for payment of any fee, rent
or royalty, including the leases described in Schedule A to this Deed of
Trust (collectively, "Leases"), and all agreements or contracts for the
------
sale or other disposition of all or any part of the Premises or the
Improvements, now or hereafter entered into by Grantor, together with all
charges, fees, income, issues, profits, receipts, rents, revenues or
royalties payable thereunder ("Rents");
-----
(6) all Grantor's right, title and interest in and to all real estate
tax refunds and all proceeds of the conversion, voluntary or involuntary,
of any of the Trust Property into cash or liquidated claims ("Proceeds"),
--------
including Proceeds of insurance maintained by the Grantor and condemnation
awards, any awards that may become due by reason of the taking by eminent
domain or any transfer in lieu thereof of the whole or any part of the
Premises or Improvements
7
<PAGE>
or any rights appurtenant thereto, and any awards for change of grade of
streets, together with any and all moneys now or hereafter on deposit for
the payment of real estate taxes, assessments or common area charges levied
against the Trust Property, unearned premiums on policies of fire and other
insurance maintained by the Grantor covering any interest in the Trust
Property or required by the Credit Agreement;
(7) all choses in action and causes of action and other intangible
personal property of the Grantor, of every kind and nature, including
corporate or other business records, indemnification claims, contract
rights, goodwill, registrations, franchises and any letter of credit,
guarantee, claim, security interest or other security held by or granted to
the Grantor to secure payment by any Person of any of the accounts
receivable or the performance by any purchaser or tenant under any lease of
Trust Property or any contract or other agreement for the sale of Trust
Property; and
(8) all Grantor's right, title and interest in and to all extensions,
improvements, betterments, renewals, substitutes and replacements of and
all additions and appurtenances to, the Land, the Premises, the
Improvements, the Personal Property, the Permits, Plans and Warranties, the
Leases, and any of the other tangible or intangible property described
above, whether now owned or hereinafter acquired by or released to the
Grantor or constructed, assembled or placed by the Grantor on the Land, the
Premises or the Improvements, and all conversions of the security
constituted thereby, immediately upon such acquisition, release,
construction, assembling, placement or conversion, as the case may be, and
in each such case, without any further mortgage, deed of trust, conveyance,
assignment or other act by the Grantor, all of which shall become subject
to the lien of this
8
<PAGE>
Deed of Trust as fully and completely, and with the same effect, as though
now owned by the Grantor and specifically described herein.
TO HAVE AND TO HOLD the Trust Property unto the Trustee, its successors and
assigns, for the benefit of Beneficiary, forever, subject only to the liens set
forth in Schedule 6.02(a) of the Credit Agreement (the "Permitted Encumbrances")
----------------------
and to satisfaction and cancelation as provided in Section 3.04. IN TRUST
NEVERTHELESS, upon the terms and trust herein set forth for the benefit and
security of the Beneficiary.
ARTICLE I
Representations, Warranties and Covenants of Grantor
----------------------------------------------------
Grantor agrees, covenants, represents and/or warrants as follows:
SECTION 1.01. Title. (a) Grantor has insurable title to an indefeasible
------
fee estate in the Land and Improvements subject to no lien, charge or
encumbrance other than the Permitted Encumbrances, and this Deed of Trust is and
will remain a valid and enforceable first and prior lien on the Premises,
Improvements and the Rents subject only to, in each case, the Permitted
Encumbrances. The Permitted Encumbrances do not materially interfere with the
current use, enjoyment or operation of the Trust Property.
(b) Except as set forth on Schedule A hereto, there are no leases affecting
Trust Property. Each Lease is in full force and effect, and, except as set
forth on Schedule A hereto or in any Tenant Estoppel Certificate, Grantor has
not given, nor to Grantor's knowledge has it received, any uncured or unwaived
notice of default with respect to any material obligation under any Lease. Each
Lease is subject to no lien, charge or encumbrance other than this Deed of Trust
and the Permitted Encumbrances. Grantor has not
9
<PAGE>
received any written notice of any pending condemnation proceeding affecting the
Trust Property or any sale or disposition thereof in lieu of condemnation except
as would not reasonably be expected to have a material adverse effect on the
Trust Property. Grantor is not obligated under any right of first refusal,
option or other contractual right to sell, assign or otherwise dispose of any
Trust Property or any interest therein.
(c) All easement agreements, covenant or restrictive agreements,
supplemental agreements and any other instruments hereinabove referred to and
mortgaged hereby (collectively, the "Agreements") are and will remain valid,
----------
subsisting and in full force and effect, unless the failure to remain valid,
subsisting and in full force and effect, individually or in the aggregate, would
not reasonably be expected to have a material adverse effect on the Trust
Property, and Grantor is not in default thereunder and has fully performed the
material terms thereof required to be performed through the date hereof, and has
no knowledge of any default thereunder or failure to fully perform the terms
thereof by any other party, nor of the occurrence of any event that after notice
or the passage of time or both will constitute a default thereunder. Except as
otherwise permitted by the Credit Agreement, Grantor is in compliance, and shall
comply, with all Agreements and requirements of law (including land use and
zoning ordinances, regulations and restrictions) affecting the Trust Property,
except where the absence of such compliance could not reasonably be expected to
have a material adverse effect on the Trust Property.
(d) Grantor has good and lawful right and full power and authority to
mortgage the Trust Property and will forever warrant and defend its title to the
Trust Property, the rights of Beneficiary therein under this Deed of Trust and
the validity and priority of the lien of this Deed of Trust thereon against the
claims of all persons and parties except those permitted under the Credit
Agreement.
10
<PAGE>
(e) This Deed of Trust, when duly recorded in the appropriate public
records and when financing statements are duly filed in the appropriate public
records, will create a valid, perfected and enforceable lien upon and security
interest in all the Trust Property and there are not as of the date hereof,
defenses or offsets to this Deed of Trust that will be asserted by Grantor or
its Affiliates (or any third party defense or offset now known to Grantor or its
Affiliates).
SECTION 1.02. Credit Agreement; Certain Amounts. (a) This Deed of Trust is
----------------------------------
given pursuant to the Credit Agreement. Each and every term and provision of
the Credit Agreement including the rights, remedies, obligations, covenants,
conditions, agreements, indemnities, representations and warranties of the
parties thereto shall be considered as if a part of this Deed of Trust and are
incorporated herein by this reference and to the extent there is a specific
conflict between the terms hereof and the terms of the Credit Agreement, the
terms of the Credit Agreement shall control.
(b) If any remedy or right of Trustee or Beneficiary pursuant hereto is
acted upon by Trustee or Beneficiary or if any actions or proceedings (including
any bankruptcy, insolvency or reorganization proceedings) are commenced in which
Trustee or Beneficiary is made a party and is obliged to defend or uphold or
enforce this Deed of Trust or the rights of Trustee or Beneficiary hereunder or
the terms of any Lease, or if a condemnation proceeding is instituted affecting
the Trust Property, Grantor will pay all reasonable sums, including reasonable
attorneys' fees and disbursements, incurred by Trustee or Beneficiary related to
the exercise of any remedy or right of Trustee or Beneficiary pursuant hereto or
for the reasonable expense of any such action or proceeding together with all
statutory or other costs, disbursements and allowances, interest thereon from
the date of demand for payment thereof at the applicable rate specified in
Section 2.07 of the Credit Agreement
11
<PAGE>
(the "Default Interest Rate"), and such sums and the interest thereon shall, to
---------------------
the extent permissible by law, be a lien on the Trust Property prior to any
right, title to, interest in or claim upon the Trust Property attaching or
accruing subsequent to the recording of this Deed of Trust and shall be secured
by this Deed of Trust to the extent permitted by law. Any payment of amounts due
under this Deed of Trust not made on or before the due date for such payments
shall accrue interest daily without notice from the due date until paid at the
Default Interest Rate, and such interest at the Default Interest Rate shall be
immediately due upon demand by Trustee or Beneficiary.
SECTION 1.03. Payment of Taxes, Liens and Charges. (a) Except as may be
-------------------------------------
permitted by the Credit Agreement, Grantor will pay and discharge from time to
time prior to the time when the same shall become delinquent, and before any
interest or penalty accrues thereon or attaches thereto, all taxes of every kind
and nature, all general and special assessments, levies, permits, inspection and
license fees, all water and sewer rents, all vault charges, and all other public
charges, and all service charges, common area charges, private maintenance
charges, utility charges and all other private charges, whether of a like or
different nature, in all cases, if imposed upon or assessed against the Trust
Property or any part thereof or upon the Rents from the Trust Property or
arising in respect of the occupancy, use or possession thereof.
(b) In the event of the passage of any state, Federal, municipal or other
governmental law, order, rule or regulation subsequent to the date hereof (i)
deducting from the value of real property for the purpose of taxation any lien
or encumbrance thereon or in any manner changing or modifying the laws now in
force governing the taxation of this Deed of Trust or debts secured by mortgages
or deeds of trust (other than laws governing income, franchise and similar taxes
generally) or the manner of collecting taxes thereon and (ii) imposing a tax to
be paid by Beneficiary, either directly or indirectly, on this Deed of Trust or
12
<PAGE>
any payments due hereunder or to require an amount of taxes to be withheld or
deducted herefrom, Grantor will promptly notify Beneficiary of such event. In
such event Grantor shall (i) agree to enter into such further instruments as may
be reasonably necessary or desirable to obligate Grantor to make any applicable
additional payments and (ii) Grantor shall make such additional payments.
(c) At any time that an Event of Default shall occur hereunder and be
continuing, or if required by any law applicable to Grantor or to Beneficiary,
Beneficiary shall have the right to direct Grantor to make an initial deposit on
account of real estate taxes and assessments, insurance premiums and common area
charges, levied against or payable in respect of the Trust Property in advance
and thereafter semi-annually, each such deposit to be equal to one-half of any
such annual charges estimated in a reasonable manner by Beneficiary in order to
accumulate with Beneficiary sufficient funds to pay such taxes, assessments,
insurance premiums and charges.
SECTION 1.04. Payment of Closing Costs. Except as otherwise set forth in
-------------------------
the Credit Agreement, Grantor shall pay all costs in connection with, relating
to or arising out of the preparation, execution and recording of this Deed of
Trust, including title company premiums and charges, inspection costs, survey
costs, recording fees and taxes, reasonable attorneys', engineers', and
consultants' fees and disbursements and all other similar reasonable expenses of
every kind.
SECTION 1.05. Alterations and Waste; Plans. (a) Grantor will not,
-----------------------------
without the written consent of Beneficiary (i) alter or demolish or remove in
whole or in part any Improvements or (ii) erect any additions to the existing
Improvements, except where such alterations, removals, or additions, as the case
may be, would not reasonably be expected to have a material adverse effect on
the Trust Property. Grantor will not commit any waste on the Trust Property or
make any alteration to, or change in the use of, the Trust
13
<PAGE>
Property except as may be permitted under the Credit Agreement and where such
waste, alteration or change would not reasonably be expected to have a material
adverse effect on the Trust Property. Grantor will maintain and operate the
Improvements and Personal Property in good repair, working order and condition,
reasonable wear and tear excepted.
(b) To the extent the same exist on the date hereof or are obtained in
connection with Improvements permitted by the Credit Agreement, Grantor shall
maintain a complete set of final plans, specifications, blueprints and drawings
for the Trust Property either at the Trust Property or in a particular office at
the headquarters of Grantor within the continental United States.
SECTION 1.06. Insurance. Grantor will keep or cause to be kept the Trust
----------
Property insured against such risks, and in the manner, required by Section 5.06
of the Credit Agreement.
SECTION 1.07. Casualty and Condemnation. (a) Except as provided in
--------------------------
clause (b) below and subject to the following sentence, in connection with any
casualty or condemnation of any Trust Property, the Grantor shall have all
rights to negotiate and settle, and receive the proceeds of, any claim or award
in connection therewith. Notwithstanding the foregoing sentence, the Grantor
agrees to comply with the provisions of Section 2.13 of the Credit Agreement in
connection with any mandatory prepayment of the Loans.
(b) Upon the happening and during the continuance of an Event of
Default, the Beneficiary shall have the right (i) to negotiate and settle any
claim or award in connection with any casualty or condemnation of the Trust
Property and (ii) to receive the proceeds of any claim or award in connection
with a casualty or condemnation of the Trust Property. After the occurrence and
during the continuance of an Event of Default, if the Grantor shall receive any
award or claim in connection with a condemnation or taking of
14
<PAGE>
the Trust Property, the Grantor shall hold such funds in trust for the benefit
of the Beneficiary and shall promptly turn such proceeds over to the Beneficiary
in the form received. The Beneficiary shall apply such proceeds to the payment
in full of the Mortgaged Obligations.
SECTION 1.08. Assignment of Leases and Rents. (a) Grantor hereby
-------------------------------
irrevocably and absolutely grants, transfers and assigns to the Trustee for the
benefit of Beneficiary all of its right title and interest in all Leases,
together with any and all extensions and renewals thereof for purposes of
securing and discharging the performance by Grantor of the Mortgaged
Obligations. Grantor has not assigned or executed any assignment of, and will
not assign or execute any assignment of, any Lease or the Rents payable
thereunder to anyone other than to the Trustee for the benefit of Beneficiary.
(b) Without Beneficiary's prior written consent, not to be unreasonably
withheld, conditioned or delayed, unless otherwise permitted under the Credit
Agreement, Grantor will not (i) enter into any Lease, (ii) modify, amend,
terminate or consent to the cancelation or surrender of any Lease or (iii)
consent to an assignment of any tenant's interest in any Lease or to a
subletting thereof.
(c) Subject to Section 1.08(d), Grantor hereby assigns and transfers to the
Trustee for the benefit of Beneficiary all of Grantor's right, title and
interest in and to the Rents now or hereafter arising from each Lease heretofore
or hereafter made or agreed to by Grantor, it being intended that this
assignment establish, subject to Section 1.08(d), an absolute transfer and
assignment of all Rents and all Leases to Beneficiary and not merely to grant a
security interest therein. Subject to Section 1.08(d), Beneficiary may in
Grantor's name and stead (with or without first taking possession of any of the
Trust Property personally or by receiver as provided herein) operate the Trust
Property and rent, lease or let all or any
15
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portion of any of the Trust Property to any party or parties at such rental and
upon such terms as Beneficiary shall, in its sole discretion, determine, and may
collect and have the benefit of all of said Rents arising from or accruing at
any time thereafter or that may thereafter become due under any Lease.
(d) So long as an Event of Default shall not have occurred and be
continuing, Beneficiary will not exercise any of its rights under Section
1.08(c), and Grantor is hereby granted a revocable license to receive and
collect the Rents accruing under any Lease; but after the happening and during
the continuance of any Event of Default, Beneficiary may, at its option, revoke
such license and receive and collect all Rents to be held as additional
collateral and applied as set forth in Section 2.08. Grantor hereby irrevocably
authorizes and directs each tenant, if any, and each successor, if any, to the
interest of any tenant under any Lease, respectively, to rely upon any notice of
a claimed Event of Default sent by Beneficiary to any such tenant or any of such
tenant's successors in interest, and thereafter to pay Rents to Beneficiary
without any obligation or right to inquire as to whether an Event of Default
actually exists and even if some notice to the contrary is received from the
Grantor, who shall have no right or claim against any such tenant or successor
in interest for any such Rents so paid to Beneficiary. Each tenant or any of
such tenant's successors in interest from whom Beneficiary or any officer,
agent, attorney or employee of Beneficiary shall have collected any Rents, shall
be authorized to pay Rents to Grantor only after such tenant or any of their
successors in interest shall have received written notice from Beneficiary that
the Event of Default is no longer continuing, unless and until a further notice
of an Event of Default is given by Beneficiary to such tenant or any of its
successors in interest.
(e) Beneficiary will not become a mortgagee in possession as a result of
its exercise of any of its rights or remedies under this Section 1.08 with
respect
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to the Leases or Rents. In addition, Beneficiary shall not be responsible or
liable for performing any of the obligations of the landlord under any Lease,
for any waste by any tenant, or others, for any dangerous or defective
conditions of any of the Trust Property, for negligence in the management,
upkeep, repair or control of any of the Trust Property or any other act or
omission by any other person.
(f) Grantor shall furnish to Beneficiary, within 30 days after a request by
Beneficiary to do so, a written statement containing the names of all tenants,
subtenants and concessionaires of the Premises or Improvements, the terms of any
Lease, the space occupied and the rentals or license fees payable thereunder.
SECTION 1.09. Restrictions on Transfers and Encumbrances. Except as
-------------------------------------------
permitted by the Credit Agreement, Grantor shall not, directly or indirectly,
sell, convey, alienate, assign, lease, sublease, license, mortgage, pledge,
encumber or otherwise transfer any interest in the Land or the Improvements or
create, consent to or suffer the creation of any lien (other than the Permitted
Encumbrances), charges or any form of encumbrance upon any interest in or any
part of the Trust Property, or be divested of its title to the Trust Property or
any interest therein in any manner or way, whether voluntarily or involuntarily
(other than resulting from a condemnation), or engage in any common,
cooperative, joint, time-sharing or other congregate ownership of all or part of
the Trust Property.
SECTION 1.10. Security Agreement. This Deed of Trust is both a mortgage
-------------------
of real property and a grant of a security interest in personal property, and
shall constitute and serve as a "Security Agreement" and a "fixture filing"
within the meaning of the uniform commercial code as adopted in the state
wherein the Premises are located ("UCC"). Grantor has hereby granted unto
---
Beneficiary a security interest in and to all the Trust Property described in
this Deed of Trust
17
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that is not real property as further security for the payment and performance of
the Mortgaged Obligations, and this Deed of Trust shall constitute a financing
statement under the UCC, with Grantor as the "debtor" and Beneficiary as the
"secured party". Simultaneously with the recording of this Deed of Trust,
Grantor has filed or will file UCC financing statements, and will file
continuation statements prior to the lapse thereof, at the appropriate offices
in the state in which the Premises are located to perfect the security interest
granted by this Deed of Trust in all the Trust Property that is not real
property. Grantor hereby appoints Beneficiary as its true and lawful
attorney-in-fact and agent, for Grantor and in its name, place and stead, in any
and all capacities, to execute any document and to file the same in the
appropriate offices to perfect the security interest contemplated by the
preceding sentence (to the extent it may lawfully do so), and to perform each
and every act and thing reasonably requisite and necessary to be done to perfect
the security interest contemplated by the preceding sentence. Prior to the
occurrence of an Event of Default, Beneficiary shall provide Grantor with the
reasonable ability to take the actions required by the previous sentence before
acting pursuant to the power of attorney granted pursuant hereto. Beneficiary
shall have all rights with respect to the part of the Trust Property that is the
subject of a security interest afforded by the UCC in addition to, but not in
limitation of, the other rights afforded Beneficiary hereunder and under the
Security Agreement.
SECTION 1.11. Filing and Recording. Grantor will cause this Deed of
---------------------
Trust, any other security instrument creating a security interest in or
evidencing the lien hereof upon the Trust Property and each instrument of
further assurance to be filed, registered or recorded in such manner and in such
places as may be required by any present or future law in order to publish
notice of and fully to protect the lien hereof upon, and the security interest
of Beneficiary in, the Trust Property. Grantor will pay all filing,
registration or recording fees, and all reasonable expenses incidental
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to the execution and acknowledgment of this Deed of Trust, any mortgage
supplemental hereto, any security instrument with respect to the Personal
Property, and any instrument of further assurance and all Federal, state, county
and municipal recording, documentary or intangible taxes and other taxes,
duties, imposts, assessments and charges arising out of or in connection with
the execution, delivery and recording of this Deed of Trust, any mortgage
supplemental hereto, any security instrument with respect to the Personal
Property or any instrument of further assurance.
SECTION 1.12. Further Assurances. Upon demand by Beneficiary, Grantor
-------------------
will, at the cost of Grantor and without expense to Trustee or Beneficiary, do,
execute, acknowledge and deliver all such further acts, deeds, conveyances,
mortgages, assignments, notices of assignment, transfers and assurances as
Beneficiary shall from time to time reasonably require for the better assuring,
conveying, assigning, transferring and confirming unto Beneficiary the property
and rights hereby conveyed or assigned or intended now or hereafter so to be, or
which Grantor may be or may hereafter become bound to convey or assign to
Beneficiary, or for carrying out the intention or facilitating the performance
of the terms of this Deed of Trust, or for filing, registering or recording this
Deed of Trust, and on demand, Grantor will also execute and deliver and hereby
appoints Beneficiary as its true and lawful attorney-in-fact and agent, for
Grantor and in its name, place and stead, in any and all capacities, to execute
and file to the extent it may lawfully do so, one or more financing statements,
chattel mortgages or comparable security instruments reasonably requested by
Beneficiary to evidence more effectively the lien hereof upon the Personal
Property and to perform each and every act and thing requisite and necessary to
be done to accomplish the same.
SECTION 1.13. Additions to Trust Property. All right, title and interest
----------------------------
of Grantor in and to all extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and
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appurtenances to, the Trust Property hereafter acquired by or released to
Grantor or constructed, assembled or placed by Grantor upon the Premises or the
Improvements, and all conversions of the security constituted thereby,
immediately upon such acquisition, release, construction, assembling, placement
or conversion, as the case may be, and in each such case without any further
mortgage, conveyance, assignment or other act by Grantor, shall become subject
to the lien and security interest of this Deed of Trust as fully and completely
and with the same effect as though now owned by Grantor and specifically
described in the grant of the Trust Property above, but at any and all times
Grantor will execute and deliver to Beneficiary any and all such further
assurances, mortgages, conveyances or assignments thereof as Beneficiary may
reasonably require for the purpose of expressly and specifically subjecting the
same to the lien and security interest of this Deed of Trust.
SECTION 1.14. No Claims Against Trustee or Beneficiary. Nothing contained
-----------------------------------------
in this Deed of Trust shall constitute any consent or request by Trustee or
Beneficiary, express or implied, for the performance of any labor or services or
the furnishing of any materials or other property in respect of the Trust
Property or any part thereof, nor as giving Grantor any right, power or
authority to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
permit the making of any claim against Trustee or Beneficiary in respect
thereof.
SECTION 1.15. Fixture Filing. Certain of the Trust Property is or will
---------------
become "fixtures" (as that term is defined in the UCC) on the Land, and this
Deed of Trust upon being filed for record in the real estate records of the
county wherein such fixtures are situated shall operate also as a financing
statement filed as a fixture filing in accordance with the applicable provisions
of said UCC upon such of the Trust Property that is or may become fixtures.
20
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ARTICLE II
Defaults and Remedies
---------------------
SECTION 2.01. Events of Default. Any Event of Default under the Credit
------------------
Agreement (as such term is defined therein) shall constitute an Event of Default
under this Deed of Trust.
SECTION 2.02. Demand for Payment. If an Event of Default shall occur and
-------------------
be continuing, then, upon written demand of Beneficiary, Grantor will pay to
Beneficiary all amounts due hereunder and such further amount as shall be
sufficient to cover the costs and expenses of collection, including reasonable
attorneys' fees, disbursements and expenses incurred by Trustee or Beneficiary
and Trustee or Beneficiary shall be entitled and empowered to institute an
action or proceedings at law or in equity for the collection of the sums so due
and unpaid, to prosecute any such action or proceedings to judgment or final
decree, to enforce any such judgment or final decree against Grantor and to
collect, in any manner provided by law, all moneys adjudged or decreed to be
payable.
SECTION 2.03. Rights To Take Possession, Operate and Apply Revenues. (a)
------------------------------------------------------
If an Event of Default shall occur and be continuing, Grantor shall, upon demand
of Beneficiary, forthwith surrender to Beneficiary actual possession of the
Trust Property and, if and to the extent not prohibited by applicable law,
Beneficiary itself, or by such officers or agents as it may appoint, may then
enter and take possession of all the Trust Property without the appointment of a
receiver or an application therefor, exclude Grantor and its agents and
employees wholly therefrom, and have access to the books, papers and accounts of
Grantor.
(b) If Grantor shall for any reason fail to surrender or deliver the Trust
Property or any part thereof after such demand by Beneficiary, Beneficiary may
to the extent not prohibited by applicable law, obtain a judgment or decree
conferring upon Beneficiary
21
<PAGE>
the right to immediate possession or requiring Grantor to deliver immediate
possession of the Trust Property to Beneficiary, to the entry of which judgment
or decree Grantor hereby specifically consents. Grantor will pay to Beneficiary,
upon demand, all reasonable expenses of obtaining such judgment or decree,
including reasonable compensation to Beneficiary's attorneys and agents with
interest thereon at the Default Interest Rate subject to Section 2.07 of the
Credit Agreement; and all such expenses and compensation shall, until paid, be
secured by this Deed of Trust.
(c) Upon every such entry or taking of possession, Beneficiary may, to the
extent not prohibited by applicable law, hold, store, use, operate, manage and
control the Trust Property, conduct the business thereof and, from time to time,
(i) make all necessary and proper maintenance, repairs, renewals, replacements,
additions, betterments and improvements thereto and thereon, (ii) purchase or
otherwise acquire additional fixtures, personalty and other property, (iii)
insure or keep the Trust Property insured, (iv) manage and operate the Trust
Property and exercise all the rights and powers of Grantor to the same extent as
Grantor could in its own name or otherwise with respect to the same, or (v)
enter into any and all agreements with respect to the exercise by others of any
of the powers herein granted Beneficiary, all as may from time to time be
directed or determined by Beneficiary to be in its best interest and Grantor
hereby appoints Beneficiary as its true and lawful attorney-in-fact and agent,
for Grantor and in its name, place and stead, in any and all capacities, to
perform any of the foregoing acts. Following and during the continuance of an
Event of Default, Beneficiary may collect and receive all the Rents, issues,
profits and revenues from the Trust Property, including those past due as well
as those accruing thereafter, and, after deducting (i) all expenses of taking,
holding, managing and operating the Trust Property (including reasonable
compensation for the services of all persons employed for such purposes),
22
<PAGE>
(ii) the reasonable costs of all such maintenance, repairs, renewals,
replacements, additions, betterments, improvements, purchases and acquisitions,
(iii) the reasonable costs of insurance, (iv) such taxes, assessments and other
similar charges as Beneficiary may at its option pay, (v) other proper charges
upon the Trust Property or any part thereof and (vi) the reasonable
compensation, expenses and disbursements of the attorneys and agents of
Beneficiary, Beneficiary shall apply the remainder of the moneys and proceeds so
received first to the payment of the Beneficiary for the satisfaction of the
Mortgaged Obligations, and second, if there is any surplus, to Grantor, subject
to the entitlement of others thereto under applicable law.
SECTION 2.04. Right To Cure Grantor's Failure to Perform. Should Grantor
-------------------------------------------
fail in the payment, performance or observance of any term, covenant or
condition required by this Deed of Trust or the Credit Agreement (with respect
to the Trust Property), subject to the terms of the Credit Agreement,
Beneficiary may pay, perform or observe the same, and all payments made or costs
or expenses incurred by Beneficiary in connection therewith shall be secured
hereby and shall be, without demand, immediately repaid by Grantor to
Beneficiary with interest thereon at the Default Interest Rate, subject to
Section 2.07 of the Credit Agreement. Beneficiary shall be the judge using
reasonable discretion of the necessity for any such actions and of the amounts
to be paid. Beneficiary is hereby empowered to enter and to authorize others to
enter upon the Premises or the Improvements or any part thereof for the purpose
of performing or observing any such defaulted term, covenant or condition
without having any obligation to so perform or observe and without thereby
becoming liable to Grantor, to any person in possession holding under Grantor or
to any other person.
SECTION 2.05. Right to a Receiver. If an Event of Default shall have
--------------------
occurred and be continuing, Beneficiary, as a matter of right and without notice
to
23
<PAGE>
Grantor or to anyone claiming under Grantor, and without regard to the then
value of the Trust Property or any other security in favor of Beneficiary or the
interest of Grantor therein, shall have the right to apply to any court having
jurisdiction to appoint a receiver or receivers of the Trust Property, or any
portion thereof, and Grantor hereby irrevocably consents to such appointment and
waives notice of any application therefor. Grantor shall pay to Beneficiary upon
demand all reasonable expenses, including receiver's fees, reasonable attorneys'
fees and disbursements, costs and agents' compensation incurred pursuant to the
provisions of this Section 2.05; and all such expenses shall be secured by this
Deed of Trust and shall be, without demand, immediately repaid by Grantor to
Beneficiary with interest thereon at the Default Interest Rate.
SECTION 2.06. Foreclosure and Sale. (a) If an Event of Default shall
---------------------
occur and be continuing, Beneficiary may commence a judicial action to foreclose
this Deed of Trust or commence procedures to foreclose this Deed of Trust non-
judicially in accordance with the procedures of the State of California.
(b) Should Beneficiary elect to foreclose by exercise of the power of
sale contained herein, Beneficiary shall notify Trustee and shall, if
required, deposit with Trustee the original or a certified copy of this
Deed of Trust, and such other documents, receipts and evidences of
expenditures made and secured hereby as Trustee may require.
(c) Upon receipt of such notice from Beneficiary, Trustee shall cause
to be recorded and delivered to Grantor such notice as may then be required
by law and by this Deed of Trust. Trustee shall, without demand on Grantor,
after lapse of such time as may then be required by law and after
recordation of such notice of default and after notice of sale has been
given as required by law, sell the Trust Property at the
24
<PAGE>
time and place of sale fixed by it in said notice of sale, either as a
whole or in separate lots or parcels or items as Trustee shall deem
expedient, and in such order as it may determine, at public auction to the
highest bidder for cash in lawful money of the United States payable at the
time of sale. Trustee shall deliver to the purchaser or purchasers at such
sale its good and sufficient deed or deeds conveying the property so sold,
but without any covenant or warranty, express or implied. The recitals in
such deed of any matters or facts shall be conclusive proof of the
truthfulness thereof. Any person, including, without limitation, Grantor,
Trustee or Beneficiary, may purchase at such sale, and Grantor hereby
covenants to warrant and defend the title of such purchaser or purchasers.
(d) Trustee may postpone the sale of all or any portion of the Trust
Property from time to time in accordance with the laws of the State of
California.
(e) To the fullest extent allowed by law, Grantor hereby expressly
waives any right which it may have to direct the order in which any of the
Trust Property shall be sold in the event of any sale or sales pursuant to
this Deed of Trust.
(f) Beneficiary may from time to time rescind any notice of default
or notice of sale before any Trustee's sale as provided above in accordance
with the laws of the State of California. The exercise by Beneficiary of
such right of rescission shall not constitute a waiver of any breach or
default then existing or subsequently occurring, or impair the right of
Beneficiary to execute and deliver to Trustee, as above provided, other
declarations or notices of default to satisfy the obligations of this Deed
of Trust or secured hereby, nor otherwise affect any provision, covenant or
condition of any other Loan Document or any of the rights, obligations or
25
<PAGE>
remedies of Trustee or Beneficiary hereunder or thereunder.
(g) Any foreclosure or other sale of less than the whole of the Trust
Property or any defective or irregular sale made hereunder shall not
exhaust the power of foreclosure or of sale provided for herein; and
subsequent sales may be made hereunder until the Mortgaged Obligations have
been satisfied, or the entirety of the Trust Property has been sold.
(h) If an Event of Default shall occur and be continuing, Trustee or
Beneficiary may instead of, or in addition to, exercising the rights
described in Section 2.06(a) above and either with or without entry or
taking possession as herein permitted, proceed by a suit or suits in law or
in equity or by any other appropriate proceeding or remedy (i) to
specifically enforce payment of some or all of the Mortgaged Obligations,
or the performance of any term, covenant, condition or agreement of this
Deed of Trust or any other Loan Document or any other right, or (ii) to
pursue any other power, right or remedy under applicable law whether or not
specifically or generally granted or described in this Deed of Trust.
Nothing contained herein shall be construed to impair or to restrict such
powers, rights and remedies or to preclude any procedures or process
otherwise available to trustees or beneficiaries under deeds of trust in
the State of California. Trustee and Beneficiary, and each of them, shall
be entitled to enforce the payment and performance of any indebtedness or
obligations secured hereby and to exercise all rights and powers under this
Deed of Trust or under any other Loan Document or other agreement or any
laws now or hereafter in force, notwithstanding the fact that some or all
of the indebtedness and obligations secured hereby may now or hereafter be
otherwise secured, whether by mortgage, deed of trust, pledge, lien,
assignment or otherwise. Neither the acceptance of this Deed
26
<PAGE>
of Trust nor its enforcement, whether by court action or pursuant to the
power of sale or other powers contained herein, shall prejudice or in any
manner affect Trustee's or Beneficiary's right to realize upon or enforce
any other rights or security now or hereafter held by Trustee or
Beneficiary. Trustee and Beneficiary, and each of them, shall be entitled
to enforce this Deed of Trust and any other rights or security now or
hereafter held by Beneficiary or Trustee in such order and manner as they
or either of them may in their absolute discretion determine.
SECTION 2.07. Other Remedies. (a) In case an Event of Default shall occur
---------------
and be continuing, Beneficiary may also exercise, to the extent not prohibited
by law, any or all of the remedies available to a secured party under the UCC.
(b) In connection with a sale of the Trust Property or any Personal
Property and the application of the proceeds of sale as provided in Section
2.08, Beneficiary shall be entitled to enforce payment of and to receive up to
the principal amount of the Mortgaged Obligations, plus all other charges,
payments and costs due under this Deed of Trust, and to recover a deficiency
judgment against Grantor only (to the extent permitted by law) for any portion
of the aggregate principal amount of the Mortgaged Obligations remaining unpaid,
with interest at the rates set forth in the Credit Agreement.
SECTION 2.08. Application of Sale Proceeds and Rents. After any
---------------------------------------
foreclosure sale of all or any of the Trust Property, Trustee or Beneficiary
shall receive the proceeds of sale, no purchaser shall be required to see to the
application of the proceeds and Trustee or Beneficiary shall apply the proceeds
of the sale together with any Rents that may have been collected
27
<PAGE>
and any other sums that then may be held by Trustee or Beneficiary under this
Deed of Trust as follows:
FIRST, to the payment of the reasonable costs and expenses of such
sale, including compensation to Trustee or to Beneficiary's attorneys and
agents, and of any judicial proceedings wherein the same may be made, and
of all expenses, liabilities and advances made or incurred by Beneficiary
under this Deed of Trust, together with interest at the Default Interest
Rate on all advances made by Beneficiary, including all taxes or
assessments (except any taxes, assessments or other charges subject to
which the Trust Property shall have been sold) and the cost of removing any
encumbrance (except any Lien permitted under the Credit Agreement);
SECOND, to the Beneficiary for the satisfaction of the Mortgaged
Obligations; and
THIRD, to the person or persons legally entitled thereto.
The Beneficiary shall have absolute discretion as to the time of application of
any such proceeds, moneys or balances in accordance with this Deed of Trust.
Upon any sale of the Trust Property by the Trustee or Beneficiary (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Trustee or Beneficiary or of the officer making the sale
shall be a sufficient discharge to the purchaser or purchasers of the Trust
Property so sold and such purchaser or purchasers shall not be obligated to see
to the application of any part of the purchase money paid over to the Trustee or
Beneficiary or such officer or be answerable in any way for the misapplication
thereof.
SECTION 2.09. Grantor as Tenant Holding Over. If after any foreclosure
-------------------------------
sale by Trustee or Beneficiary Grantor remains in possession of any of the Trust
Property, at Beneficiary's election Grantor shall be
28
<PAGE>
deemed a tenant holding over and shall forthwith surrender possession to the
purchaser or purchasers at such sale or be summarily dispossessed or evicted
according to provisions of law applicable to tenants holding over.
SECTION 2.10. Waiver of Appraisement, Valuation, Stay, Extension and
------------------------------------------------------
Redemption Laws. Grantor waives, to the extent not prohibited by law and
- ----------------
subject to the Credit Agreement, (i) the benefit of all laws now existing or
that hereafter may be enacted providing for any appraisement of any portion of
the Trust Property, (ii) the benefit of all laws now existing or that may be
hereafter enacted in any way extending the time for the enforcement or the
collection of amounts due under any of the Mortgaged Obligations or creating or
extending a period of redemption from any sale made in collecting said debt or
any other amounts due Beneficiary, (iii) any right to at any time insist upon,
plead, claim or take the benefit or advantage of any law now or hereafter in
force providing for any appraisement, homestead exemption, valuation, stay,
statute of limitations, extension or redemption, or sale of the Trust Property
as separate tracts, units or estates or as a single parcel in the event of
foreclosure or notice of deficiency, and (iv) all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of or each of the Mortgaged Obligations and marshalling in
the event of foreclosure of this Deed of Trust.
SECTION 2.11. Discontinuance of Proceedings. In case Trustee or
------------------------------
Beneficiary shall proceed to enforce any right, power or remedy under this Deed
of Trust by foreclosure, entry or otherwise, and such proceedings shall be
discontinued or abandoned for any reason, or shall be determined adversely to
Trustee or Beneficiary, then and in every such case Grantor, Trustee and
Beneficiary shall be restored to their former positions and rights hereunder,
and all rights, powers and remedies of Trustee or Beneficiary shall continue as
if no such proceeding had been taken.
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SECTION 2.12. Suits To Protect the Trust Property. Trustee and/or
------------------------------------
Beneficiary shall have power (a) to institute and maintain suits and proceedings
to prevent any impairment of the Trust Property by any acts that may be unlawful
or in violation of this Deed of Trust, (b) to preserve or protect its interest
in the Trust Property and in the Rents arising therefrom and (c) to restrain the
enforcement of or compliance with any legislation or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid if
the enforcement of or compliance with such enactment, rule or order would impair
the security or be prejudicial to the interest of Trustee or Beneficiary
hereunder.
SECTION 2.13. Filing Proofs of Claim. In case of any receivership,
-----------------------
insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or
other proceedings affecting Grantor, Beneficiary shall, to the extent permitted
by law, be entitled to file such proofs of claim and other documents as may be
necessary or advisable in order to have the claims of Beneficiary allowed in
such proceedings for the Mortgaged Obligations secured by this Deed of Trust at
the date of the institution of such proceedings and for any interest accrued,
late charges and additional interest or other amounts due or that may become due
and payable hereunder after such date.
SECTION 2.14. Possession by Beneficiary. Notwithstanding the appointment
--------------------------
of any receiver, liquidator or trustee of Grantor, any of its property or the
Trust Property, Beneficiary shall be entitled, to the extent not prohibited by
law, to remain in possession and control of all parts of the Trust Property now
or hereafter granted under this Deed of Trust to Beneficiary in accordance with
the terms hereof and applicable law.
SECTION 2.15. Waiver. (a) No delay or failure by Trustee or Beneficiary
-------
to exercise any right, power or remedy accruing upon any breach or Event of
Default shall exhaust or impair any such right, power or remedy
30
<PAGE>
or be construed to be a waiver of any such breach or Event of Default or
acquiescence therein; and every right, power and remedy given by this Deed of
Trust to Trustee or Beneficiary may be exercised from time to time and as often
as may be deemed expedient by Trustee or Beneficiary. No consent or waiver by
Beneficiary to or of any breach or default by Grantor in the performance of the
Mortgaged Obligations shall be deemed or construed to be a consent or waiver to
or of any other breach or Event of Default in the performance of the same or any
other Mortgaged Obligations by Grantor hereunder. No failure on the part of
Beneficiary to complain of any act or failure to act or to declare an Event of
Default, irrespective of how long such failure continues, shall constitute a
waiver by Beneficiary of its rights hereunder or impair any rights, powers or
remedies consequent on any future Event of Default by Grantor.
(b) Even if Beneficiary (i) grants some forbearance or an extension of time
for the payment of any sums secured hereby, (ii) takes other or additional
security for the payment of any sums secured hereby, (iii) waives or does not
exercise some right granted herein or under the Loan Documents, (iv) releases a
part of the Trust Property from this Deed of Trust, (v) agrees to change some of
the terms, covenants, conditions or agreements of any of the Loan Documents,
(vi) consents to the filing of a map, plat or replat affecting the Premises,
(vii) consents to the granting of an easement or other right affecting the
Premises or (viii) makes or consents to an agreement subordinating Beneficiary's
lien on the Trust Property hereunder; no such act or omission shall preclude
Beneficiary from exercising any other right, power or privilege herein granted
or intended to be granted in the event of any breach or Event of Default then
made or of any subsequent default; nor, except as otherwise expressly provided
in an instrument executed by Trustee and Beneficiary, shall this Deed of Trust
be altered thereby. In the event of the sale or transfer by operation of law or
otherwise of all or part of the Trust Property, Beneficiary is hereby authorized
and
31
<PAGE>
empowered to deal with any vendee or transferee with reference to the Trust
Property secured hereby, or with reference to any of the terms, covenants,
conditions or agreements hereof, as fully and to the same extent as it might
deal with the original parties hereto and without in any way releasing or
discharging any liabilities, obligations or undertakings.
SECTION 2.16. Remedies Cumulative. No right, power or remedy conferred
--------------------
upon or reserved to Trustee or Beneficiary by this Deed of Trust is intended to
be exclusive of any other right, power or remedy, and each and every such right,
power and remedy shall be cumulative and concurrent and in addition to any other
right, power and remedy given hereunder or now or hereafter existing at law or
in equity or by statute.
SECTION 2.17 Substitution of Trustee. Beneficiary may, from time to time
------------------------
by written instrument executed and acknowledged by Beneficiary and recorded in
the county or counties where the Property is located, and by otherwise complying
with the provisions of any applicable statutes, substitute a successor or
successors for the Trustee named herein or acting hereunder.
SECTION 2.18 Trust Irrevocable; No Offset. The Trust created hereby is
----------------------------
irrevocable by Grantor. No offset or claim that Grantor now has or may in the
future have against Beneficiary shall relieve Grantor from paying the amounts or
performing the obligations contained herein or secured hereby.
ARTICLE III
Miscellaneous
-------------
SECTION 3.01. Partial Invalidity. In the event any one or more of the
-------------------
provisions contained in this Deed of Trust shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such validity, illegality or
unenforceability shall, at the
32
<PAGE>
option of Beneficiary, not affect any other provision of this Deed of Trust, and
this Deed of Trust shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein or therein.
SECTION 3.02. Notices. All notices and communications hereunder shall be
--------
in writing and given to Grantor, Beneficiary and Trustee in accordance with the
terms of applicable law and the Credit Agreement at the address set forth on the
first page of this Deed of Trust or as otherwise set forth in this Credit
Agreement.
SECTION 3.03. Successors and Assigns. All of the grants, covenants,
-----------------------
terms, provisions and conditions herein shall run with the Premises and the
Improvements and shall apply to, bind and inure to, the benefit of the permitted
successors and assigns of Grantor and the successors and assigns of Beneficiary.
SECTION 3.04. Satisfaction and Cancelation. (a) The conveyance to Trustee
-----------------------------
of the Trust Property as security, created and consummated by this Deed of Trust
shall be null and void when all the Mortgaged Obligations have been indefeasibly
paid in full in accordance with the terms of the Loan Documents and Beneficiary
has no further commitment to make Loans under the Credit Agreement.
(b) In connection with any termination or release pursuant to paragraph
(a), this Deed of Trust shall be marked "satisfied" by the Beneficiary and/or
Trustee, and this Deed of Trust shall be canceled of record at the request and
at the expense of the Grantor. Beneficiary and Trustee shall execute any
documents reasonably requested by Grantor to accomplish the foregoing or to
accomplish any release contemplated by paragraph (b) and Grantor will pay all
costs and expenses, including reasonable attorneys' fees, disbursements and
other charges, incurred by Beneficiary and Trustee in connection with the
preparation and execution of such documents.
33
<PAGE>
SECTION 3.05. Definitions. As used in this Deed of Trust, the singular
------------
shall include the plural as the context requires and the following words and
phrases shall have the following meanings: (a) "including" shall mean "including
---------
but not limited to"; (b) "provisions" shall mean "provisions, terms, covenants
----------
and/or conditions"; (c) "lien" shall mean "lien, charge, encumbrance, security
----
interest, mortgage or deed of trust"; (d) "obligation" shall mean "obligation,
----------
duty, covenant and/or condition"; and (e) "any of the Trust Property" shall mean
"the Trust Property or any part thereof or interest therein". Any act that
Trustee or Beneficiary is permitted to perform hereunder may be performed at any
time and from time to time by Trustee or Beneficiary or any person or entity
designated by Trustee or Beneficiary. Any act that is prohibited to Grantor
hereunder is also prohibited to all lessees of any of the Trust Property. Each
appointment of Trustee or Beneficiary as attorney-in-fact for Grantor under
the Deed of Trust is irrevocable, with power of substitution and coupled with an
interest. Subject to the applicable provisions hereof, Beneficiary has the
right to refuse to grant its consent, approval or acceptance or to indicate its
satisfaction, in its sole discretion, whenever such consent, approval,
acceptance or satisfaction is required hereunder.
SECTION 3.06. Governing Law. This Deed of Trust shall be governed by and
--------------
construed in accordance with the internal law of the State of California.
SECTION 3.07. Full Reconveyance. Upon written request of Beneficiary
-----------------
stating that all sums secured hereby have been paid, upon surrender to Trustee
of the original or a certified copy of this Deed of Trust for cancelation and
retention, and upon payment of its fees, Trustee shall fully reconvey, without
warranty, the entire remaining Property then held hereunder. The recitals in
such reconveyance of any matters of facts shall be conclusive proof of the
truthfulness thereof. The grantee in such reconveyance may be described as "the
person or persons legally entitled thereto".
34
<PAGE>
SECTION 3.08. Sale of Loans. Subject to the terms of the Credit
-------------
Agreement, Beneficiary, at any time and without the consent of Borrower, may
grant participations in or sell, transfer, assign and convey all or any portion
of its right, title and interest in and to the Loans, this Deed of Trust and the
other Loan Documents, guaranties given in connection with the Loans and any
collateral given to secure the Loans.
SECTION 3.09. Trustee's Powers and Liabilities. (a) Trustee, by acceptance
---------------------------------
hereof, covenants faithfully to perform and fulfill the trusts herein created,
being liable, however, only for gross negligence, bad faith or wilful
misconduct, and hereby waives any statutory fee and agrees to accept reasonable
compensation, in lieu thereof, for any services rendered by it in accordance
with the terms hereof. All authorities, powers and discretions given in this
Deed of Trust to Trustee and/or Beneficiary may be exercised by either, without
the other, with the same effect as if exercised jointly.
(b) Trustee may resign at any time upon giving 30 days' notice in writing
to Grantor and to Beneficiary.
(c) Beneficiary may remove Trustee at any time or from time to time and
select a successor trustee. In the event of the death, removal, resignation,
refusal to act, inability to act or absence of Trustee from the state in which
the premises are located, or in its sole discretion for any reason whatsoever,
Beneficiary may, upon notice to the Grantor and without specifying the reason
therefor and without applying to any court, select and appoint a successor
trustee, and all powers, rights, duties and authority of the former Trustee, as
aforesaid, shall thereupon become vested in such successor. Such substitute
trustee shall not be required to give bond for the faithful performance of his
duties unless required by Beneficiary. Such substitute trustee shall be
appointed by written instrument duly recorded in the county where the Land is
located. Grantor hereby ratifies and confirms any and all acts that the herein
named Trustee, or his
35
<PAGE>
successor or successors in this trust, shall do lawfully by virtue hereof.
Grantor hereby agrees, on behalf of itself and its heirs, executors,
administrators and assigns, that the recitals contained in any deed or deeds
executed in due form by any Trustee or substitute trustee, acting under the
provisions of this instrument, shall be prima facie evidence of the facts
recited, and that it shall not be necessary to prove in any court, otherwise
than by such recitals, the existence of the facts essential to authorize the
execution and delivery of such deed or deeds and the passing of title thereby.
(d) Trustee shall not be required to see that this Deed of Trust is
recorded, nor liable for its validity or its priority as a first deed of trust,
or otherwise, nor shall Trustee be answerable or responsible for performance or
observance of the covenants and agreements imposed upon Grantor or Beneficiary
by this Deed of Trust or any other agreement. Trustee, as well as Beneficiary,
shall have authority in their respective discretion to employ agents and
attorneys in the execution of this trust and to protect the interest of the
Beneficiary hereunder, and to the extent permitted by law they shall be
compensated and all reasonable expenses relating to the employment of such
agents and/or attorneys, including expenses of litigations, shall be paid out of
the proceeds of the sale of the Trust Property conveyed hereby should a sale be
had, but if no such sale be had, all sums so paid out shall be recoverable to
the extent permitted by law by all remedies at law or in equity.
(e) At any time, or from time to time, without liability therefor and with
10 days' prior written notice to Grantor, upon written request of Beneficiary
and without affecting the effect of this Deed of Trust upon the remainder of the
Trust Property, Trustee may (i) reconvey any part of the Trust Property, (ii)
consent in writing to the making of any map or plat thereof, so long as Grantor
has consented thereto, (iii) join in granting any easement thereon, so long as
Grantor has consented thereto, or (iv) join in any
36
<PAGE>
extension agreement or any agreement subordinating the lien or charge hereof.
SECTION 3.10. Limitation on Beneficiary's or Trustee's Responsibility. No
--------------------------------------------------------
provision of this Deed of Trust shall operate to place any obligation or
liability for the control, care, management or repair of the Trust Property upon
Beneficiary or Trustee, nor shall it operate to make Beneficiary or Trustee
responsible or liable for any waste committed on the Trust Property by the
tenants or any other parties, or for any dangerous or defective condition of the
Trust Property, or for any negligence in the management, upkeep, repair or
control of the Trust Property resulting in loss or injury or death to any
tenant, licensee, employee or stranger. Nothing herein contained shall be
construed as constituting Beneficiary a "mortgagee in possession" absent the
actual taking of possession of the Trust Property by Beneficiary.
SECTION 3.11. Hold Harmless. Neither Beneficiary or Trustee shall be
--------------
obligated to perform or discharge, and do not undertake hereby to perform nor to
discharge, any obligation, duty or liability with respect to the Trust Property
or the Leases solely by reason of this Deed of Trust, and Trustor shall and does
hereby agree to defend, indemnify, hold harmless and protect Beneficiary or
Trustee from and against any and all claims, losses, expenses, damage and
liabilities (including, without limitation, reasonable attorneys' fees) which
may arise or be incurred or accrue in connection therewith, except, in each
case, to the extent incurred as a result of the negligence or misconduct of
Beneficiary or Trustee, as the case may be, or the failure of Beneficiary or
Trustee, as the case may be, to comply in all material respects with Applicable
Laws. Should Beneficiary or Trustee incur any such liability, loss or damage,
the amount thereof, including all reasonable attorneys' fees and reasonable
costs and expenses associated with actions taken by Beneficiary, as the case may
be, in defense thereof, or otherwise in protecting its interests hereunder,
shall be part of the Mortgaged Obligations and shall be secured hereby, and
Trustor covenants and agrees to reimburse Beneficiary therefor promptly
following demand. Should Trustee incur any such liability, loss or damage, the
amount thereof including all reasonable attorneys' fees and reasonable costs and
expenses
37
<PAGE>
associated with actions taken by Trustee in defense thereof, shall be reimbursed
by Trustor promptly after demand therefor.
SECTION 3.12. Marshalling; Payments Set Aside. Beneficiary and Trustee
--------------------------------
shall not be under any obligation to marshall any assets in favor of Trustor or
any other party or against or in payment of any or all of the Mortgaged
Obligations hereby secured. To the extent that Trustor makes a payment or
payments to Beneficiary or Trustee, or Beneficiary or Trustee enforces its lien
or exercises any rights or setoff, and such payment or payments or the proceeds
of such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law,
state or Federal law, common law or equitable cause, then to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all such liens and rights and remedies therefor, shall be revived and
continue in full force and effect as if such payment had not been made or such
enforcement or setoff has not occurred.
SECTION 3.13. Waiver of Jury Trial; Consent to Jurisdiction. (a) TO THE
----------------------------------------------
EXTENT PERMITTED UNDER APPLICABLE LEGAL REQUIREMENTS, GRANTOR AND BENEFICIARY
EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY AGREE TO WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS DEED OF TRUST, OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS DEED OF TRUST. THE SCOPE OF THIS WAIVER IS INTENDED TO
ENCOMPASS ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO
THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. GRANTOR AND BENEFICIARY EACH ACKNOWLEDGE THAT THIS WAIVER IS
A MATERIAL INDUCEMENT TO ENTER INTO THIS DEED OF TRUST, AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALING. GRANTOR AND
BENEFICIARY EACH FURTHER WARRANT AND REPRESENT THAT EACH OF THEM HAS REVIEWED
THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT EACH OF THEM KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY
38
<PAGE>
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
DEED OF TRUST OR ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION.
IN THE EVENT OF LITIGATION, THIS DEED OF TRUST MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.
(b) GRANTOR AND BENEFICIARY HERETO CONSENT FOR THEMSELVES AND IN
RESPECT OF THEIR PROPERTIES, GENERALLY, UNCONDITIONALLY AND IRREVOCABLY, TO THE
NONEXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS IN THE STATE OF
CALIFORNIA WITH RESPECT TO ANY PROCEEDING TO FORECLOSE THE LIEN OF THIS DEED OF
TRUST OR TO ENFORCE BENEFICIARY'S REMEDIES HEREUNDER. GRANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS, GENERALLY, UNCONDITIONALLY AND
IRREVOCABLY, AT THE ADDRESS SET FORTH IN THE CREDIT AGREEMENT IN CONNECTION WITH
ANY OF THE AFORESAID PROCEEDINGS IN ACCORDANCE WITH THE RULES APPLICABLE TO SUCH
PROCEEDINGS. GRANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW
HAVE OR HAVE IN THE FUTURE TO THE LAYING OF VENUE IN RESPECT OF ANY OF THE
AFORESAID PROCEEDINGS BROUGHT IN THE COURTS REFERRED TO ABOVE AND AGREES NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF BENEFICIARY TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW
OR TO COMMENCE PROCEEDINGS OR OTHERWISE PROCEED AGAINST GRANTOR IN ANY
JURISDICTION.
SECTION 3.14. Lien Absolute, Multisite Real Estate and Multiple Collateral
------------------------------------------------------------
Transaction. Grantor acknowledges that this Deed of Trust and other Security
- ------------
Documents together secure the Mortgaged Obligations. Grantor agrees that the
lien of this Deed of Trust and all obligations of Grantor hereunder shall be
absolute and unconditional and shall not in any manner be affected or impaired
by:
(a) any lack of validity or enforceability of any other Security
Documents, any agreement with respect to any of the Mortgaged Obligations
or any other agreement or instrument relating to any of the foregoing;
(b) any acceptance by Beneficiary or Trustee of any security for or
guarantees of any of the Mortgaged Obligations hereby secured, including
but not limited to any of the Security Documents;
39
<PAGE>
(c) any failure, neglect or omission on the part of Beneficiary or
Trustee to realize or protect any of the Mortgaged Obligations hereby
secured or any collateral security therefor, or due to any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, Trustor in respect of the Mortgaged Obligations of this Deed
of Trust;
(d) any extension, renewal, compromise of, or change in the time,
manner or place of payment or, or in any other term of, all or any of the
Mortgaged Obligations;
(e) any release (except as to the property released), sale, pledge,
surrender, compromise, settlement, nonperfection, renewal, extension,
indulgence, alteration, exchange, modification or disposition of any of the
Mortgaged Obligations hereby secured or of any of the collateral security
therefor;
(f) any amendment or waiver of or any consent to any departure from
this Deed of Trust, or any other Security Document, and Trustee or
Beneficiary may in its discretion foreclose, exercise any power of sale, or
exercise any other remedy available to it under any of the other Loan
Documents without first exercising or enforcing any of its rights and
remedies hereunder; and
(g) any exercise of the rights or remedies of Beneficiary or Trustee
hereunder or under any or all of the other Loan Documents.
40
<PAGE>
IN WITNESS WHEREOF, this Deed of Trust has been duly executed and
delivered to Trustee and Beneficiary by Grantor on the date of the
acknowledgment attached hereto.
JAFRA COSMETICS INTERNATIONAL, INC., a Delaware
corporation,
/s/ Ralph S. Mason, III
by: _______________________________
Name: Ralph S. Mason, III
Title: Executive Vice President
41
<PAGE>
New York
STATE OF _______________ )
) ss:
New York
COUNTY OF ______________ )
APRIL 30, 1998
On _________________, before me,
FRANCIS OH
________________,
RALPH S. MASON, III
a Notary Public, personally appeared ______________________
_______________________________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Francis Oh
_______________________________________
Francis Oh
Print Name ___________________
My Commission Expires
June 16, 1999
_________________________
[Seal] FRANCIS OH
Notary Public, State of New York
No. 41-5080638
Qualified in Queens County
Certificate filed in New York County
Commission Expires June 16, 1999
42
<PAGE>
Exhibit A
to Deed of Trust
Legal Description
-----------------
<PAGE>
FILE NO. 65889-RD
THE LAND REFERRED TO IN THIS REPORT IS SITUATED IN THE STATE OF CALIFORNIA,
COUNTY OF VENTURA, AND IS DESCRIBED AS FOLLOWS:
PARCEL A:
- ---------
Parcels 1 and 2 of LD-613, in the City of Thousand Oaks, County of Ventura,
State of California, as shown on a parcel map filed in Book 52, Pages 43 and 44
of Parcel Maps, in the office of the County Recorder of said county.
EXCEPT all oil, gas, hydrocarbon substances lying within and under that portion
of said land lying below a depth of 500 feet, measured vertically from the
surface of said land, without, however, any right to enter upon the surface of
said land, nor into that portion of the subsurface thereof lying above a depth
of 500 feet, measured vertically from said surface.
PARCEL B:
- ---------
Lot 5 of Tract 1921-2, in the City of Thousand Oaks, as per map recorded in Book
51, pages 85 to 88 inclusive of maps, in the office of the County Recorder of
said county.
EXCEPT all oil, gas, hydrocarbon substances lying within and under that portion
of said land lying below a depth of 500 feet measured vertically from the
surface of said land, without, however, any right to enter upon the surface of
said land nor into that portion of the subsurface thereof, lying above a depth
of 500 feet measured vertically from said surface.
RD/jd
<PAGE>
Schedule A
to Deed of Trust
Leases of Trust Property
------------------------
NONE
<PAGE>
EXHIBIT 4.16
Lic. Jose Visoso del Valle
Notario No. 92 [SEAL]
del Distrito Federal
- ------------------------------------67,934--------------------------------------
LIBRO NUMERO SETECIENTOS CUARENTA Y SEIS._______________________________________
ESCRITURA NUMERO SESENTA Y SIETE MIL NOVECIENTOS TREINTA Y CUATRO.______________
EN LA CIUDAD DE MEXICO, A TREINTA DE ABRIL DE MIL NOVECIENTOS NOVENTA Y OCHO.___
JOSE VISOSO DEL VALLE, NOTARIO NUMERO NOVENTA Y DOS DEL DISTRITO FEDERAL, HAGO
CONSTAR:________________________________________________________________________
EL RECONOCIEMIENTO DE ADEUDO E HIPOTECA (LA "HIPOTECA") QUE OTORGA REDAY,
--------
SOCIEDAD ANONIMA DE CAPITAL VARIABLE (EN LO SUCESIVO EL "GARANTE HIPOTECARIO")
-------------------
REPRESENTADA EN ESTE ACTO POR EL SENOR JAMES ENRIQUE RITCH GRANDE AMPUDIA, EN
FAVOR DE CREDIT SUISSE FORST BOSTON, ACTUANDO A TRAVES DE SU SUCURSAL EN NUEVA
YORK, EN SU CAPACIDAD DE AGENTE PARA LAS GARANTIAS (EN LO SUCESIVO EL"AGENTE
------
PARA LAS GARANTIAS") PARA BENEFICIO DE LOS ACREEDORES MENCIONADOS EN EL CONTRATO
- ------------------
DE CREDITO (REFERIDO MAS ADELANTE), al tenor de las siguientes, declaraciones y
clausulas:______________________________________________________________________
- ---------------------------------DECLARACIONES----------------------------------
1.- El Garante Hipotecario, a traves de su representante, en este acto declara
que:____________________________________________________________________________
uno. Es una sociedad debidamente constituida y validamente existente de acuerdo
con las leyes de los Estados Unidos Mexicanos ("Mexico"), segun consta en la
------
escritura publica numero veintiseis mil seiscientos seis, de fecha dos de enero
de mil novecientos noventa y uno, otorgada ante el Licenciado Roberto Nunez y
Bandera, Notario Publico numero Uno del Distrito Federal, y cuyo primer
testimonio quedo inscrito en el Registro Publico de Comercio de la Ciudad de
Mexico, Distrito Federal, bajo el folio mercantil ciento cincuenta mil
trescientos trece, de fecha veinticuatro de octubere de mil novecientos noventa
y uno;__________________________________________________________________________
dos. El Garante Hipotecario tiene su domicilio social en la Ciudad de Mexico,
Distrito Federal, Mexico;
tres. El objeto social del Garante Hipotecario incluye, entre otras cosas, el
otorgamiento de garantias;______________________________________________________
cuatro. A la fecha de suscripcion del presente instrumento, es el legitimo y
unico propietario de los predios descritos en los siguientes instrumentos (en lo
sucesivo los "Bienes Hipotecados"):_____________________________________________
------------------
(i) Con la escritura publica numero veintitres mil doscientos veintiocho de
fecha veintiocho de septiembre de mil novecientos noventa y cinco, otorgada ante
el Licenciado Carlos Alejandro Duran Loera, Notario Publico numero once del
Distrito Federal, y cuyo primer testimonio quedo inscrito en el Registro Publico
de la Propiedad de la Ciudad de Mexico, Distrito Federal, bajo el folio real
nueve millones trescientos cuarenta y siete mil novecientos veinticuatro, con
fecha catorce de diciembre de mil novecientos noventa y cinco, "REDAY", SOCIEDAD
ANONIMA DE CAPITAL VARIABLE, adquirio en precio de DOS MILLONES SETECIENTOS
VEINTIDOS MIL SEISCIENTOS SETENTA Y UN NUEVOS PESOS, NOVENTA Y NUEVE CENTAVOS,
MONEDA NACIONAL, el lote de terreno numero uno de la manzana quinientos ochenta
y cinco de la quincuagesima cuarta region catastral, con frente a la Avenida de
las Flores, antes Calzada de Flor de Maria de esta Ciudad, marcado con el numero
oficial trescientos noventa de la calle Las Flores, en la Colonia Tlacopac,
Delegacion Villa Alvaro Obregon,
Pagina - 1
<PAGE>
Lic. Jose Visoso del Valle
Notario No. 92
del Distrito Federal
Distrito Federal, con la superficie, medidas y colindancias que en el titulo que
se relaciona se describieron como sigue:________________________________________
"....SUPERFICIE: MIL DOSCIENTOS CINCUENTA Y UN METROS SETENTA Y TRES CENTESIMOS
CUADRADOS.______________________________________________________________________
MEDIDAS Y COLINDANCIAS:_________________________________________________________
AL NOROESTE, en dos tramos de diecinueve metros ochenta centimetros y diecinueve
metros, con la Antigua Calzada de Flor de Maria, hoy Avenida de las Flores._____
AL ESTE, en cuarenta y nueve metros cuarenta centimetros, con propiedades que
fueron del propio licenciado Angel Martin Perez, ahora predio catastral numero
diecinueve de la manzana quinientos ochenta y cinco de la quincuagesima cuarta
region;_________________________________________________________________________
AL SURESTE, en dieciseis metros sesenta centimetros, con fraccion vendida a dona
Ana Martinez Ibarrola de Del Toro, ahora predio catastral numero sesenta y uno
de las referidas manzana y region catastral;____________________________________
AL SUR, en treinta metros sesenta centimetros, con propiedades que fueron del
senor Torres, ahora predios catastrales numeros cincuenta y nueve y sesenta de
la referida manzana y region....."______________________________________________
(ii) Con la escritura publica numero veintitres mil doscientos veinticuatro de
fecha veintiocho de septiembre de mil novecientos noventa y cinco, otorgada ante
el Licenciado Carlos Alejandro Duran Loera, Notario Publico numero once del
Distrito Fderal, y cuyo primer testimonio quedo inscrito en el Registo Publico
de la Propiedad de la Ciudad de Mexico, Distrito Federal, bajo el folio real
seiscientos cincuenta mil seiscientos sesenta y dos, con fecha treinta de
noviembre de mil novecientos noventa y cinco, "REDAY", SOCIEDAD ANONIMA DE
CAPITAL VARIABLE, adquirio en precio de SESENTA Y SIETE MILLONES OCHOCIENTOS
SETENTA Y OCHO MIL DOSCIENTOS TREINTA Y UN NUEVOS PESOS, NOVENTA Y NUEVE
CENTAVOS, MONEDA NACIONAL, el inmueble marcado con el numero oficial quinientos
quince de Boulevard Adolfo Lopez Mateos, en la Colonia Tlacopac, Delegacion
Villa Alvaro Obregon, Distrito Federal, con la superficie, medidas y
colindancias que en el titulo que se relaciona se describieron como sigue:______
"....SUPERFICIE: NUEVE MIL OCHOCIENTOS NUEVE METROS SESENTA Y OCHO CENTESIMOS
CUADRADOS.______________________________________________________________________
MEDIDAS Y COLINDANCIAS._________________________________________________________
AL ORIENTE, en doscientos doce metros setenta y cinco centesimos, con Boulevard
Adolfo Lopez Mateos, Anillo Periferico, Sur;____________________________________
AL SUR, (Vertice del terreno) en cuatro metros cincuenta centimetros, con
Pancoupe que forman el referido Bolulevard Adolfo Lopez Mateos Anillo Periferico
Sur y la calle Barranca de Pilares;_____________________________________________
AL SUROESTE, en ciento cuarenta y ocho metros, veinte centimetros, con calle
Barranca de Pilares;____________________________________________________________
AL NOROESTE, en veinticuatro metros, con propiedades que son o que fueron de don
Octavio Reyna Ruiz y don Pedro Tellez;__________________________________________
AL NORESTE, en veinte metros, con propiedades que son o fueron de don Aurelio
Diaz Noriega;___________________________________________________________________
AL NORTE O NOROESTE, en cuarenta y cuatro metros, diez centimetros, con
propiedades que son o fueron de don Alejandro Moncada Angeles y Don Emilio
Rivera;_________________________________________________________________________
<PAGE>
Lic. Jose Visoso del Valle
Notario No. 92 [SEAL]
del Distrito Federal
AL NORESTE, en veintinueve metros setenta centimetros, con propiedades que son o
fueron de don Emilio Rivera;____________________________________________________
AL NOROESTE, en ciento cuatro metros treinta centimetros, con propiedades que
son o fueron de don Emilio Rivera; y____________________________________________
AL NORESTE, con lo que se cierra el poligono, en dos metros setenta y cinco
centimetros, con propiedad que es o fue de dona Guadalupe Saavedra de Ayala,
ahora con frente al Boulevard Adolfo Lopez Mateos Anillo Periferico Sur...."____
(iii) Con la escritura publica numero veintitres mil doscientos veinticinco de
fecha veintiocho de septiembre de mil novecientos noventa y cinco, otorgada ante
el Licenciado Carlos Alejandro Duran Loera, Notario Publico numero once del
Distrito Federal, y cuyo primer testimonio quedo inscrito en el Registro Publico
de la Propiedad del Distrito Federal, en el folio real seiscientos ochenta y
tres mil quinientos diecisiete, con fecha catorce de diciembre de mil
novecientos noventa y cinco, "REDAY", SOCIDAD ANONIMA DE CAPITAL VARIABLE, en
precio de DOS MILLONES CIENTO SETENTA Y CINCO MIL SETECIENTOS TREINTA NUEVOS
PESOS, NOVENTA Y DOS CENTAVOS, MONEDA NANCIONAL, el lote de terreno numero
dieciocho de la manzana quinientos ochenta y dos de la quincuagesima cuarta
region catastral, marcado con el numero oficial quinientos setenta y cuatro de
la calle ROMULO O'FARRIL, en la Colonia Tlacopac, Distrito Federal, Mexico, con
la superficie, medidas y colindancias que en el titulo que se relaciona se
describieron como sigue:________________________________________________________
"....SUPERFICIE OCHOCIENTOS NOVENTA Y UN METROS SETENTA Y NUEVE CENTIMETROS
CUADRADOS.______________________________________________________________________
MEDIDAS Y COLINDANCIAS:_________________________________________________________
AL NORTE, en veinte metros, con via del ferrocarril Mexico-Cuernavaca;__________
AL ORIENTE, en sesenta y un metros cincuenta centimetros, con porcion resultado
de la subdivision de la agrupacion referida, hoy predio catastral numero trece
de la misma manzana y region;___________________________________________________
AL SUR, en diez metros, con predio enajenado al senor Carlos Lopez, hoy predio
catastral numero trece de la misma manzana y region;____________________________
AL PONIENTE, en sesenta y cuatro metros cuatro centesimos, con propiedades que
son o fueron de la senora Kawage, ahora predios catastrales treinta y cinco,
treinta y tres y diecisiete de la referida manzana y region...."________________
(iv) Con la escritura publica numero veintres mil doscientos veintiseis de
fecha veintiocho de septiembre de mil novecientos noventa y cinco, otorgada ante
el Licenciado Carlos Alejandro Duran Loera, Notario Publico numero once del
Distrito Federal, y cuyo primer tesimonio quedo inscrito en el Registro Publico
de la Propiedad de la Ciudad de Mexico, Distrito Federal, bajo el folio real
seiscientos ochenta y tres mil quinientos dieciocho, con fecha catorce de
diciembre de mil novecientos noventa y cinco, "REDAY", SOCIEDAD ANONIMA DE
CAPTIAL VARIABLE, adquirio en precio de TRES MILLONES DOSCIENTOS CATORCE MIL
CIENTO TREINTA NUEVOS PESOS, OCHENTA CENTAVOS, MONEDA NACIONAL, el lote de
terreno numero diecinueve de la manzana quinientos ochenta y dos, de la
quincuagesima cuarta region catastral, con frente a la calle Ferrocarril de
Cuernavaca, marcado con el numero oficial quinientos setenta y ocho de la calle
Romulo O'Farril, en
Pagina - 3
<PAGE>
Lic. Jose Visoso del Valle
Notario No. 92
del Distrito Federal
la Colonia Tlacopac, Delagacion Villa Alvaro Obregon, Distrito Federal, con la
superficie, medidas y colindancias que en el titulo que se relaciona se
describieron como sigue:________________________________________________________
"....SUPERFICIE: MIL TRESCIENTOS DIECISIETE METROS CUARENTA Y UN CENTIMETROS
CUADRADOS.______________________________________________________________________
MEDIDAS Y COLINDANCIAS:_________________________________________________________
AL NORTE, en dos tramos de dieciseis metros trece centimetros y once metros
setenta y dos centimetros, con derecho de via de ferrocarril de Cuernavaca,
ahora calle Ferrocarril de Cuernavaca;__________________________________________
AL ORIENTE, en cincuenta y sies metros dos centimetros, con predio catastral
numero veinte de la misma manzana y region, resultado de la agrupacion y
subdivision referidas;__________________________________________________________
AL SUR, en veinte metros, con predio catastral mumero doce de la misma manzana y
region, antes propiedades que fueron de la senora Viuda de Pena;________________
AL PONIENTE, en sesenta y un metros cincuenta centimetros, con predio catastral
numero dieciocho, resultado de la agrupacion y subdivision referidas....."______
(v) Con la escritura publica numero veintitres mil doscientos veintisiete de
fecha veintiocho de septiembre de mil novecientos noventa y cinco, otorgada ante
el Licenciado Carlos Alejandro Duran Loera, Notario Publico numero once del
Distrito Federal, y cuyo primer testimonio quedo inscrito en el Registro Publico
de la Propiedad de la Ciudad de Mexico, Distrito Federal bajo el folio real
seiscientos ochenta y tres mil quinientos diecineuve, con fecha treinta de enero
de mil novecientos noventa y seis, "REDAY", SOCIEDAD ANONIMA DE CAPITAL
VARIABLE, adquirio en precio de UN MILLION NOVECIENTOS CUARENTA MIL TRESCIENTOS
NOVENTA Y CUATRO NUEVOS PESOS, TREINTA CENTAOS, MONEDA NACIONAL, el lote de
terreno numero veinte de la manzana quinientos ochenta y dos, de la
quincuagesima cuarta region catastral, con frente a la calle Ferrocarril de
Cuernavaca, marcado con el numero oficial quinientos setenta de la calle Romulo
O'Farril en la Colonia Tlacopac, Delagacion Villa Alvaro Obregon, en esta Ciudad
de Mexico, Distrito Federal, con la superficie, medidas y colindancias que en el
titulo que se relaciona se describieron como sigue:_____________________________
"....SUPERFICIE: SETECIENTOS NOVENTA Y CINCO METROS TREINTA Y TRES CENTIMETROS
CUADRADOS.______________________________________________________________________
MEDIDAS Y COLINDANCIAS:_________________________________________________________
AL NORTE, en veinte metros, con derecho de via del ferrocarril de Cuernavaca,
ahora calle Ferrocarril de Cuernavaca;__________________________________________
AL ORIENTE, en cincuenta y dos metros noventa y dos centimetros, con propiedades
que fueron de la senora Micaela Arias, hoy predio catastral numero veintiuno de
la misma manzana y region;______________________________________________________
AL SUR, en once metros cincuenta centimetros, con propiedades que fueron de la
senora Viuda de Pena, hoy predio catastral numero diez de la misma mnzana y
region;_________________________________________________________________________
AL PONIENTE, en cincuenta y seis metros dos centimetros, con predio resultado de
la referida agrupacion y subdivision, ahora predio catastral numero diecinueve
de las referidas manzana y region...."__________________________________________
(vi) Con la escritura numero cincuenta y tres mil doscientos treinta y nueve,
de fecha veinte de abril de mil novecientos noventa y ocho, otorgada ante el
licenciado MIGUEL ALESSIO ROBELS, Notario
<PAGE>
Lic. Jose Visoso del Valle
Notario No. 92 [SEAL]
del Distrito Federal
Numero Diecinueve del Distrito Federal, pendiente de inscripcion en el Registro
Publico de Propiedae de Tlalnepantla, Estado de Mexico, por lo reciente de su
otorgamiento "REDAY, SOCIEDAD ANONIMA DE CAPITAL VARIABLE, adquirio, en precio
de UN MILLON CUATROCIENTOS MIL DOLARES, Moneda de los Estados Unidos de America,
el edificio marcado con el numero veinticinco de las calles de Victoria y
terreno sobre el cual esta construido, que es la fraccion norte del lote de
terreno numero siete de la manzana diez, del superfrancccionamiento industrial
denominado "ALCE BLANCO" ubicado en San Bartolo Naucalpan, en terminos del
Distrito de Tlalnepantla, Estado de Mexico, con la superficie, medidas y
colindancias que en el titulo que se relaciona se describieron como sigue:______
"....SUPERFICIE DE: CUATRO MIL CIENTO SETENTA Y TRES METROS CUADRADOS CATORCE
DECIMETROS y los siguientes linderos:___________________________________________
AL NORTE, en sesenta y cinco metros veintiun centimetros, con la calle de la
Victoria;_______________________________________________________________________
AL SUR, en sesenta y siete metros cuarenta y cinco centimetros, con la fraccion
sur de lote siete;______________________________________________________________
AL ORIENTE, en cincuenta y un metros setenta centimetros, con el lote uno de la
manzana diez;___________________________________________________________________
AL PONIENTE, en sesenta y tres metros setenta centimetros, con la calle cuatro,
y.______________________________________________________________________________
AL NORTE, en nueve metros cinco centimetros, con la interseccion de la calle
cuatro y la calle Victoria...."_________________________________________________
Es de advertir que dicho inmueble se encuentra inscrito en el Registro Publico
de la Propiedad de Tlalnepantla, Estado de Mexico, en la seccion primera, libro
primera, volumen seiscientos sesenta y uno y bajo la partida numero doscientos
noventa y cuatro, a nombre de Guillette de Mexico y Compania Sociedad Anonima de
Capital variable._______________________________________________________________
cinco. Declara EL GARANTE HIPOTECARIO que los Bienes Hipotecados se encuentran
libres de todo gravemen y limitacion de dominio de cualquier naturaleza, como se
demuestra con los certificados de libertad de gravamenes de fecha veinteinueve
de abril de mil novecientos noventa y ocho, expedidos por el Registro Publico de
la Propiedad de Tlalnepantla, Estado de Mexico, copia de los cules se anexa al
Apendice de esta escritura publica, con la letra "A", y con los certificados de
libertad de gravemenes que expedira el REgistro Publico de la Propiedad de la
Ciudad de Mexico, Distrito Federal, mismos que agregare al apendice de esta
escritura, formando parte integral de la misma y otras copias seran anexadas al
primer testimonio de esta escritura que se entregara al Agente para las
Garantias;______________________________________________________________________
seis. Todod los cargos por concepto de impuestos prediales han sido pagados, no
se encuentra pendiente pago cantidad alguna por contribuciones federales,
estatales, municipales o locales, pagos por servicio de agua, alcantarillado,
impuestos, derechos o impuestos de importacion relacionados con los Bienes
Hipotecados, y se han obtenido todos los permisos y autorizaciones relacionados
con los Bienes Hipotecados, salvo por contibuciones por montos no significativos
cuya falta de pago oportuno, o salvo por permisos y autorizaciones cuya
ausencia, no tiene ni se espera que tenga un efecto material adverso en el valor
de los Bienes Hipotecarios o en los derechos del Agente para las Garantias bajo
el presente contrato.___________________________________________________________
Pagina - 5
<PAGE>
Lic. Jose Visoso del Valle
Notario No. 92
del Distrito Federal
siete. Con fecha treinta de abril de mil novecientos noventa y ocho, CDRJ
Investments (Lux), Sociedad Anonima (la "Controladora"), Jafra Cosmetics
------------
International, Inc. ("JCI"), Jafra Cosmetics International, Sociedad Anonima de
---
Capital Variable ("JCISA" y conjuntamente con "JCI", los "Acreditados")
-----------
celebaron un contrato de credito, el cual se adjunta como Anexo "B" con los
acreedores que se mencionan en dicho contrato, el Banco Emisor (segun se define
en el Contrato de Credito) (dichos acreedores y el Banco Emisor en lo sucesivo
se les denominara conjuntamente con los "Acreedores") y el Agente para las
----------
Garantias (dicho contrato de credito, y como sea adicionado, modificado o
reespresado, en cualquier momento, se denominara el "Contrato de Credito"), en
-------------------
el cual se establece que los Acreedores otorgaran a los Acreditados (i) creditos
a plazo por un monto de hasta E.U.A.$25,000,000.00 (Veinticinco millones de
dolares 00/100, moneda de curso legal de los Estados Unidos de America) (los
"Creditos a Plazo"); (ii) lineas de credito revolvente hasta por un monto de
- -----------------
E.U.A.$65,000,000.00 (Sesenta y cinco millones de dolares 00/100, moneda de
curso legal de los Estados Unidos de America) (las "Lineas de Credito
-----------------
Revolvente"); (iii) creditos puente ("swingline") hasta por un monto de
E.U.A.$10,000,000.00 (Diez millones de dolares 00/100, moneda de curso legal de
los Estados Unido de America) (los "Creditos Puente" y conjuntamente con los
---------------
Creditos a Plazo y las Lineas de Credito Revolvente, los "Creditos"); y (iv)
--------
cartas de credito hasta por un monto de E.U.A.$15,000,000.00 (Quince millones de
dolares 00/100, moneda de curso legal de los Estados Unidos de America);________
ocho. En esta fecha, el Garante Hipotecario celebro un contrato de garantia con
el Agente para las Garantias el cual se adjunta al presente como Anexo "C" (el
"Contrato de Garantia") bajo el cual el Garante Hipotecario garantiza las
- ---------------------
obligaciones de los Acreditados bajo el Contrato de Credito.____________________
nueve. Con fecha treinta de abril de mil novecientos noventa y ocho, Jafra
Cosmetics Internaitonal, Inc. y JCISA (conjuntamente las "Garentes en el Credito
de Chase") el cual se adjunta como Anexo "D" se obligaron bajo un Contrato de
Comision y Garantia (Fee and Guarnatee Agreement) el "Contrato de Chase") a
resoponder ante The Chase Manhattan Bank ("Chase") en forma solidaria por
cualquier falta de pago bajo las Cartas de Acuerdo) (Letter Agreements) segun
dicho termino se define en el Contrato de Chase) por parte de los Acreedores
(Borrowers) segun dicho termino se define en el Contrato de Chase).
diez. La suscripcion del presente instrumento no viola sus estatutos sociales
vigentes a esta fecha, ni existe ley o disposicion contractual alguna que le
prohiba llevar a cabo dicha suscripcion;________________________________________
once. Ha obtenido todas lo autorizaciones coporativas y gubernamentales
necessarias para la suscripcion del presente instrumento, y a esta fecha, no se
encuentra en huelga, ni tiene conociemiento de que exista emplazamiento a
huelga, o de cualquier otro hecho o situacion que afecte o pudiera afectar su
condicion financiera u operacones, o que pudiera afectar la legalidad, validez o
exigibilidad del presente instrumento ni la prioridad en el otorgamiento de la
garantia que en el mismo se contiene. A esta fecha, no existe evento o motivo
alguno del que pudiera derivar un gravamen o derecho preferente sobre la
Hipoteca que se constituye por este instrumento;________________________________
doce. Con el objeto de cumplir con las obligaciones contractuales contraidas
bajo el Contrato de Credito, y las demas Obligaciones Garantizadas a las que se
refiere la clausula Cuarta del presente, esta dispuesta a constituir una
hipoteca en primer lugar y grado de prelacion en favor del Agente para las
<PAGE>
Lic. Jose Visoso del Valle
Notario No. 92 [SEAL]
del Distrito Federal
Garantias actuando en beneficio de los Acreedores, sobre los Bienes Hipotecados
en los terminos preristos en el presente instrumento; y_________________________
trece. Su representante goza de poderes y faculteades suficientes para
obligaria en los terminos del presente instrumento, mismos que no le han sido
revocados, limitados ni restringidos en forma alguna.___________________________
catorce. Todas las declaraciones, garantias, clausulas y obligaciones
contenidas en el Contrato de Credito son ratificadas en este acto por el Garante
Hipotecario.____________________________________________________________________
De acuerdo con las declariones anteiores, el Garante Hipotecrio se obliga de
acuerdo con las siguientes:_____________________________________________________
- -----------------------------------CLAUSULAS------------------------------------
Los terminos definidos en mayusculas bajo este instrumento y que no hayan sido
definidos de otra forma en esta misma Hipoteca, tendran el significado previsto
bajo el Contrato de Credito.____________________________________________________
PRIMERA. Reconocimiento de Adeudo._____________________________________________
(uno) EL Garante Hipotecario reconoce expresamente en este acto que el monto
total de principal disponsible bajo los Creditos a Plazo, a esta fecha, asciende
a la cantidad de 25,000,000.00 (Veinticinco millones de dolares 00/100, moneda
de curso legal de los Estados Unidos de America), el cual debera ser pagado en
los terminos previstos bajo el Contrato de Credito y que el monto recibido a
esta fecha bajo dichos contratos a plazo asciende a DIEZ MILLONES MONEDA DE LOS
ESTADOS UNIDOS DE AMERICA.______________________________________________________
(dos) EL Garante Hipotecario reconoce expresamente en este acto que el monto
total de principal disponible bajo las Lineas de Credito Revolvente, a esta
fecha, asciende a la cantidad de 65,000,000.00 (Sesenta y cinco millones de
dolares 00/100, moneda de curso legal de los Estados Unidos de America), el cual
debera ser pagado en los terminos previstos bajo el Contrato de Credito.________
(tres) EL Garante Hiptecario reconoce expresamente en este acto que el monto
total de principal disponible bajo los Creditos Puente, a esta fecha, asciende a
la cantidad de 10,000,000.00 (Diez millones de dolares 00/100, moneda de curso
legal de los Estados Unidos de America), el cual debera ser pagado en los
terminos previstos bajo el Contrato de Credito._________________________________
SEGUNDA. Constitucion de la Hipoteca. El Garante Hipotecario constituye
Hipoteca Voluntaria en Primer Lugar y Grado de Prelacion en favor del Agente
- ----------------------------------------------------------------------------
para las Garantias en beneficio de los Acreedores, sobre los Bienes Hipotecados,
- -------------------------------------------------
a efecto de garantizar el puntual y debido cumplimiento de todas y cada una de
las Obligaciones Garantizadas (como se definen mas adelante en la Clausula
Cuarta).________________________________________________________________________
La Hipoteca cubre, y el termino "Bienes Hipotecados" incluye, lo siguiente:_____
uno. Las accesiones que de hecho y por derecho correspondan a los Bienes
Hipotecados;____________________________________________________________________
dos. Las mejoras hechas a los Bienes Hipotecados;______________________________
tres. Cualquier objeto mueble incorporado permanentemente a los Bienes
Hipotecados, y que no pueda separarse sin menoscabo de estos o deterioro de esos
bienes;_________________________________________________________________________
cuatro. Cualquier edificio que se construya en los terrenos de los Bienes
Hipotecados;____________________________________________________________________
cinco. Los frutos industriales de los Bienes Hipotecados; y____________________
seis. Cualesquiera rentas vencidas y no satisfechas al momento de exigirse el
cumplimiento de las Obligaciones Garantizadas.__________________________________
Pagina - 7
<PAGE>
Lic. Jose Visoso del Valle
Notario No. 92
del Distrito Federal
TERCERA. La Hipoteca se constituye por el Garante Hipotecario en los terminos
de los Capitulos I y II del Titulo Decimoquinto, y demas articulos aplicables
del Codigo Civil para el Distrito Federal (el "Codigo Civil"), asi como en los
------------
terminos del Articulo doscientos noventa y ocho del la Ley General de Titulos y
Operaciones de Credito. En este acto, el Garante Hiptotecario manifiesta
conocer en su integridad el texto de dichas disposiciones legales, y otorga su
conformidad respecto del contenido y consecuencias previstas por las mismas.____
CUARTA. Obligaciones Garantizadas. El objeto de la Hipoteca constituida en
este acto por el Garante Hipotecario en favor del Agente para las Garantias, es
garantizar, en favor del Agente para las Garantias actuando en beneficio de los
Acreedores, el cumplimiento de las siguientes obligaciones (en adelante las
"Obligaciones Garantizadas"):___________________________________________________
- --------------------------
uno. Todas las obligaciones a cargo del Garante Hipotecario y de los
Acreditados bajo el Contrato de Credito, incluyendo sin limitacion, el pago
puntual y adecuado de principal e intereses ordinarios y moratorios sobre
cualquier cantidad que el Garante Hipotecario y los Acreditados lleguen a
adeudar a los Acreedores o al Agente para las Garantias bajo el Contrato de
Credito, la obligacion de pagar las comisiones previstas en la Seccion dos punto
cero cinco (e.05) del Contrato de Credito y la obligaciion de pagar cualquier
cantidad por concepto de indemizacion de acuerdo con la Seccion dos punto
dieciseis (2.16) del Contrato de Credito; y_____________________________________
dos. Todas las obligaciones a cargo del Garante Hipotecario bajo el Contrato de
Garantia. En este acto se acuerda expresamente que para los efectos del
Articulo dos mil novecientos quince del Codigo Civil, esta Hipoteca garantiza el
pago de todos los intereses bajo el Contrato de Credito y el Contrato de
Garantia, hasta que todas las cantidades bajo dichos contratos hayan sido
pagadas en su totalidad a los Acreedores y/o al Agente para las Garantias,
circunstancia de la cual se tomara razon en el Registro Publico de la Propiedad
de la Ciudad de Mexico, Distrito Federal; y_____________________________________
tres. Todas las obligaciones de los Garantes en el Credito de Chase bajo el
Contrato de Chase. La Hipoteca que se constituye en el presente acto sera
indivisible y garantizara la totalidad de las cantidades adeudadas bajo las
Obligaciones Garantizadas y la misma no se reducira o se liberara parcialmente
mientras cualquiera de las Obligaciones Garantizadas continue vigente. Para los
efectos del Articulo dos mil novecientos doce del Codigo Civil, las partes
acuerdan expresamente que cada uno de los predios que integran los Bienes
Hipotecados responden por el valor total de las Obligaciones Garantizadas.______
La Hipoteca que se constituye en el presente acto garantiza las Obligacions
Garantizadas hasta por el valor de los Bienes Hipotecados, independientemente de
cualquier otra garantia otorgada en favor del Agente para las Garantias en
beneficio de los Acreedores para garantizar las Obligaciones Garantizadas.______
QUINTA. Modificaciones a las Obligaciones Garantizadas. Mediante la presente
Hipoteca se garantiza en favor del Agente para las Garantias en beneificio de
los Acreedores cualquier modificacion, prorroga o renovacion de las Obligaciones
Garantizadas que el Agente para las Garantias otorgne en favor del Garante
Hipotecario, sin ser necesario el otorgamiento de una nueva hipoteca; en caso de
ocurrir dicha modificacion, prorroga o renovacion de las Obligaciones
Garantizadas, el Garante Hipotecario acepta que las cantidades adeudadas bajo
las Obligaciones Garantizadas una vez modificadas, prorrogadas o renovadas,
seran garantizadas por esta Hipoteca en favor del Agente para las Garantias en
beneficio del los
<PAGE>
Lic. Jose Visoso del Valle
Notario No. 92 [SEAL]
del Distrito Federal
Acreedores, para lo cual el Garante Hipotecario debera realizar todos los actos
necesarios para ______ esta Hipoteca respecto a dichas modificaciones, prorrogas
o renovaciones._________________________________________________________________
Cualquier incremento en cualquier cantidad que deba ser pagada conforme a las
Obligaciones Garantizadas estara garantizada en primer lugar por esta Hipoteca._
SEXTA. Plazo. La Hipoteca constituida en el presente acto continuara vigente
hasta que los Acreditados hayan cumplido con todos y cada uno de los terminos y
condiciones de las Obligaciones Garantizadas. Por lo tanto, los Bienes
Hipotecados no seran liberados de esta Hipoteca hasta que los Acreditados hayan
cumplido con todos y cada uno de los terminos y condiciones de las Obligaciones
Garantizadas.___________________________________________________________________
SEPTIMA. Accesso. El Garante Hipotecario debera:______________________________
uno. Permitir el acceso a los Bienes Hipotecados al Agente para las Garantias y
a cualquiera de sus funcionarios, empleados y agentes, durante las horas
normales de operacion del Garante Hipotecario y con la frecuencia que el Agente
para las Garantias razonablemente determine, mediante previo aviso por escrito
realizado con tres dias habiles de anticipacion, a menos que un evento de
incumpliemiento bajo la Clausula Decima Tercera de esta Hipoteca (cada uno un
"Evento de Incumplimiento"), haya ocurrido y continue vigente con base en el
- -------------------------
cual el requisito de previo aviso no sera requerido y el Agente para las
Garantias tendra acceso a los Bienes Hipotecados en cualquier y todo momento;
dos. Permitir al Agente para las Garantias y a cualquiera de sus respectivos
funcionarios, empleados y agentes inspeccionar, auditar y elaborar extractos de
todos los registros, archivos y libros contables del Garante Hipotecario,
siempre que exista una solicitud previa por escrito por parte del Agente para
las Guarantias con cuando menos cinco (5) dias habiles de anticipacion; y_______
tres. Permitir al Agente para las garantias segun este lo considere razonable,
y previo aviso por escrito realizado con cinco dias habiles de anticipacion.
(salvo que un Evento de Incumplimiento haya ocurrido y continue, en cuyo caso no
se requerira el aviso), conducir auditorias para inspeccionar, revisar y evaluar
los Bienes Hipotecados, y el Garante Hipotecario acepta proveer al Agente para
las Garantias, a cuenta y costo del Garante Hipotecario, el auxilio secretarial
y otros tipos de asistencia que de modo razonable le sea solicitado por el
Agente par las Garantias en relacioin con lo anterior.__________________________
OCTAVA. Impuestos sobre Propiedad y Servicios. El Garante Hipotecario debera
pagar puntualmente todos los impuestos prediales, pagos por servicio de agua,
drenaje y alcantarillado, serivicios y cualquier otro pago relacionado con los
Bienes Hipotecados pagaderos a particulares o a las autoridades, y entegara al
Agente para las Garantias, constancia de dichos pagos en la medida en que este
lo solicite por escrito con anticipacion razonable._____________________________
NOVENA. Seguros. El Garante Hipotecario debera, a su cuenta y costo, mantener
los Bienes Hipotecados adecuadamente asegurados todo el tiempo con una compania
de suguros, y mantener dicho seguro en vigor durante todo el tiempo que subsista
cualquiera de las Obligaciones Garantizadas. En la poliza de seguro respectiva
se hara constar expresamente que los hienes asegurados estan hipotecados en
primer lugar y en grado de prelacion en favor del Agente para las Garantias, y
dicha poliza debera ser endorsada en favor del Agente para las Garantias
mediante el nombramiento del mismo como beneficiario en primer lugar.___________
Ademas, el
Garante Hipotecario debera mantener el seguro de acuerdo con las siguientes
condiciones:____________________________________________________________________
uno. El Garante Hipotecario debera (i) mantener en todo momento los Bienes
Hipotecados adecuadamente asegurados por companias aseguradoras solventes y de
buena reputacion, aceptables para el Agente para las
Pagina - 9
<PAGE>
Lic. Jose Visoso del Valle
Notario No. 92
del Distrito Federal
Garantias, (ii) mantener tales otros seguros que cubran completamente tales
riesgos, incluyendo incendio y otros riesgos asegurados con cobertura amplia,
como es la costumbre para companias en el mismo ramo o similares, incluyendo
seguro frente a terceros contra reclamaciones de dano personal o muerte o dano a
propiedad ocurrido sobre, en, acerca de o en conexion con el uso de los Bienes
Hipotecados, y (iii) mantener cualquier otro seguro que pueda ser requerido por
ley, El Garante Hipotecario notificara oportunamente al Agente para las
Garantias respecto de cualquier suceso que cause una perdida material o
reduccion en el valor de los Bienes Hipotecados y el valor estimado (o actual si
esta disponible) de tal perdida o reduccion;____________________________________
dos. El Garante Hipotecario debera entregar al Agente para las Garantias, si
este asi lo solicita por escrito con anticipacion razonable y con la frecuencia
que lo requiera, copies de las polizas, certifcados y endosos, asi como
constancia del pago de las primas;______________________________________________
tres. El Garante Hipotecario debera instruir a todos los aseguradores presentes
o futuros bajo todas las polizas relacionadas con los Bienes Hipotecados para
que realicen todos los pagos derivados de dichas polizas directamente al Agente
para las Guarantias. El Garante Hipotecario en este acto designa y autoriza al
Agente para las Garantias en beneficio de las Acreedores (y a todos los
funcionarios, empleados o representantes designados por el Agente para las
Garantias) como su mandatario, apoderado y representante al momento y durante la
continuacion de un Evento de Incumplimiento para efectos de interponer, ajustar
y finalizar cualesquiera reclamaciones bajo todas las polizas de seguros
relacionadas con los Bienes Hipotecados, endosando a nombre del Garante
Hipotecario cualquier cheque, pagare, instrumento o cualquier otro medio de pago
del seguro y para tomar todas las decisiones respecto a dichas polizas de
seguros. En caso de que el Garante Hipotecario no obtenga o mantenga o cause
que se obtenga o mantenga cualquier seguro requerido por esta Clausula Novena o
de pagar parcial o totalmente cualquier prima relacionada con lo anterior, el
Agente para las Garantias, sin liberar o renunciar a cualquiera de las
obligaciones bajo este instrumento, podra en cualquier momento obtener y
mantener dichas polizas de seguro y pagar dichas primas y realizar cualquier
otro acto en relacion con lo anterior que el Agente para las Garantias considere
necesario. Todas las cantidades desembolsadas de acuerdo con esta Clausula,
incluyendo gastos razonables de abogados, gastos y costas judiciales y otros
gastos relacionados con lo anterior, deberan ser pagadas por el Garante
Hipotecario al Agente para las Garantias en beneficio de los Acreedores.
_________________________________________________________________________
DECIMA. INDEMNIZACION. El Garante Hipotecario debera indemnizar y mantener al
Agente para las Garantias y a sus afiliadas libre y a salvo de y en contra de
cualesquiera y todas demandas, acciones, costos, multas, deficiencias,
sanciones, procedimientos, reclamaciones, danos, perdidas, responsabilidades y
gastos (incluyendo los honorarios razonables de abogados y desembosos asi como
cualesquiera otros costos de investigacion o defensa, incluyendo aquellos
incurridos en cualquier apelacion o recurso) (cada uno una "Demanda") que
-------
pudiera ser instaurada o iniciada en contra o en la que haya incurrido dicha
persona indemnizada con motivo del otorgamiento de los Creditos de conformidad
con el Contrato de Credito, o por el uso de los recursas de dichos Creditos, o
en relacion con o derivado de la presente Hipoteca o del Contrato de Credito o
de las operaciones contempladas en la presente Hipoteca o en el Contrato de
Credito, en el entendido de que, el Garante Hipotecario o los Acreditados no
seran responables del pago de cualquier indemnizacion en favor de dicha persona
indmnificada respecto de
Pagina - 10
<PAGE>
Lic. Jose Visoso del Valle
Notario No. 92
del Distrito Federal
[SEAl]
aquella parte de dicha Demanda que se derive unicamente de su negligencia dolo o
culpa graves seg____ determinado por una sentencia definitiva emitida por un
tribunal competente.__________________________________________________________
DECIMA PRIMERA. VENTA DE LOS ACTIVOS. El Garante Hipotecario en ningun momento
podra transmitir la propiedad de todos o parte de los Bienes Hipotecados durante
el termino de vigencia de la presente Hipoteca._________________________________
DECIMA SEGUNDA. GASTOS. El Garante Hipotecario debera registrar la presente
Hipoteca en los Registros Publicos de la Propiedad y del Comercio de la Ciudad
de Mexico, Distrito Federal y de Tlalnepantla, Estado de Mexico, dentro de los
siguientes quince dias habiles contados a partir de la fecha de firma de la
presente Hipoteca, y debera pagar cualesquiera gastos, derechos, impuestos u
honorarios derivados de la celebracion y registro de la presente Hipoteca,
incluyendo sin limitar, los honorairos notariales.______________________________
El Garante Hipotecario debera resembolsar al Agente para las Garantias todos los
gastos, incluyendo sin limitar, los honorarios razonables de abogados y gastos
legales, gastos derivados del rigistro realizados o erogados por el Agente para
las Garantias en relacion con (i) el incumplimiento por parte del garante
Hipotecario a cualquier estipulacion, acuerdo o condicion de las contenidas en
la presente Hipoteca, o (ii) el ejercicio por parte del Agente para las
Garantias de cualquiera de sus derechos o recursos previstos en la presente
Hipoteca, o (iii) la proteccion de los Bienes Hipotecados, asi como de los
intereses del Agente para las Garntias sobre los mismos. Cualquier cantidad
pagadera de conformidad con la presente Hipoteca por parte del Garante
Hipotecario en favor del Agente para las Garantias consituira una obligacion
pagadera a la vista del Garante Hipotecario en favor del Agente para las
Garantias, y el pago oportuno de la misma se encontrara garantizado por la
presente Hipoteca.______________________________________________________________
DECIMA TERCERA. INCUMPLIMIENTO DE LAS OBLIGACIONES GARANTIZADAS. El Garante
Hipotecario acepta que el Agente para las Garantias podra ejecutar la presente
Hipoteca y considerar vencidas y exigibles cada una de las cantidades adeudadas
por el Garante Hipotecario y cada uno de los Acreditados de conformidad con las
Obligaciones Garantizadas, en caso de que cualquiera de los siguientes eventos,
sin estar limitado a, llegase a ocurrir:_______________________________________
uno. Si el Garante Hipotecario no cumpliera oportunamente con el pago de
cualesquiera de sus obligaciones asumidas de conformidad con el Contrato de
Credito, el Contrato de Garantia, el Contrato de Chase o esta Hipoteca cuando
deban cumplirse;________________________________________________________________
dos. Si cualquierade los Acreditados no paga immedaitemente al Agente para las
Garantias en beneficio de los Acreedores cualesquiera cantidades de principal,
intereses, asi como cualesquiera otras cantidades vencidas y exigibles de
conformidad con el Contrato de Credito;_________________________________________
tres. Si, ocurriese un evento de incumplimiento (Event of Default) bajo el
Contrato de Credito;____________________________________________________________
cuatro. Si el Garante Hipotecario deja de pagar cuatro o mas pagos consecutivos
de impuestos prediales o derechos por servicios de agua o cualesquiera otros
impuestos o contribuciones pagaderas bajo ley aplicable con respecto a los
Bienes Hipotecados;_____________________________________________________________
cinco. Si el Garante Hipotecario transmite la propiedad de los Bienes
Hipotecados, afecta los mismos en fideicomiso o constituye cualquier otra
garantia adicional sobre los mismos, sin el previo consentimiento por escrito
del Agente para las Garantias;__________________________________________________
Pagina - 11
<PAGE>
Lic. Jose Visoso del Valle
Notario No. 92
del Distrito Federal
seis. Si los Bienes Hipotecados son embargados, o si cualquier procedimiento
judicial o administrativo es iniciado en contra del Garante Hipotecario con
motivo de los cuales se origine un gravamen sobre los Bienes Hipotecados, y
dicho gravamen no es liberado dentro de un periodo de setenta y cinco (75) dias
habiles;_______________________________________________________________________
siete. Si los Bienes Hipotecados son en cualquier forma modificados
substancialmente o modificados fuera del curso normal de sus operaciones, sin el
previo consentimiento por escrito otorgado por el Agente para las Garantias y su
valor se vuelve insuficiente para garntizar las Obligaciones Garantizadas, para
lo cual, el Garante Hipotecario por medio de la presente renuncia expresamente
al requisito de que medie una order judicial para tales efectos, contenida en el
Articulo dos mil novecientos nueve del Codigo Civil;____________________________
ocho. Si se iniciare en contra, o en forma voluntaria de el Garante Hipotecario
o de cualquiera de los Acrditados procedimiento de quiebra, suspension de pagos
o reorganizacion y que estos no sean revocados o suspendidos dentro de un
periodo de noventa (90) dias habiles;___________________________________________
DECIMA CUARTA. EJECUCION. En caso de ejecucion de esta Hipoteca, el Garante
Hipotecario acepta y se obliga en los siguientes terminos:______________________
uno. El Garante Hipotecario renuncia a los derechos que le confiere el Articulo
quinientos treinta y sies del Codigo de Procedimientos Civiles para el Distrito
Federal (el "Codigo de Procedimientos Civiles"), y en este acto autoriza
--------------------------------
expresamente al Agente para las Garantias para que senale los bienes que seran
embargados, de conformidad con lo dispuesto por el Articulo quinientos treinta y
siete del Codigo de Procedimientos Civiles._____________________________________
dos. En caso de que se llegasen a embargar bienes, el Agente para las Garantias
no se sujetara a las disposiciones contenidas en el Articulo mil trescientos
novent y cinco (1395) del Codigo de Comerico Mexicano.__________________________
tres. Para efectos de lo dispuesto por el Articulo quinientos cuarenta y tres
del Codigo de Procedimientos Civiles, el Garante Hipotecario en este acto
renuncia expresamente a ser designado como depositario de los Bienes Hipotecados
embargados, o a nombrar a un depositario de los mismos._________________________
cuatro. Los Bienes Hipotecados deberan adjudicarse en favor del Agente para las
Garantias al momento de la ejecucion de la sentencia que ordene el pago de todas
las cantidades adeudadas de conformidad con las Obligaciones Garantizadas, a un
precio que sera determinado por valuadores expertos nombrados de conformidad con
lo establecido en el Articulo dos mil novencientos dieciseis del Codigo Civil y
por el Articulo quinientos sesenta y nueve del Codigo de Procedimientos Civiles.
____________________________________ cinco. Todas las notificaciones judiciales,
asi como cualquier otra notificacion dirigida al Garante Hipotecario bajo esta
Hipoteca deberan dirigirse al domicilio senalado para este en la Clausula Decima
Sexta de la presente.___________________________________________________________
DECIMA QUINTA. CESION. El Agente para las Garantias se encuentra facultado en
todo momento para ceder los derechos que le derivan de la presente Hipoteca de
conformidad con lo dispuesto por el Articulo dos mil novecientos veintiseis del
Codigo Civil.___________________________________________________________________
DECIMA SEXTA. NOTIFICACIONES. Cualquier notificacion o cualquier otra
comunicacion requerida o permitida de conformidad con la presente Hipoteca,
debera realizarse por escrito a la parte respectiva segun se indica abajo, y
podra, a menos que se disponga otra cosa en esta Hipoteca, ser entregada
personalmente, por transmision via fax o enviada por servicio de correo expreso
y sera considerada como notificada,
Pagina - 12
<PAGE>
Lic. Jose Visoso del Valle
Notario No. 92
del Distrito Federal
[SEAL]
cuando sea entregada (A) por la entrega personal, cuando sea entregada, (B) por
transmision, cua____ envia por fax u otra trnsmision similar si es tranmitida en
un dia habil antes de las diecisiete horas) o si no al dia habil siguente; o (C)
por la entrega por servicio de correo expreso, dos dias despues de la entrega al
domicilio adecuado._____________________________________________________________
Los avisos deberan dirigirse a las siguientes direcciones:______________________
para el Garante Hipotecario:____________________________________________________
Boulevard Adolfo Lopez Mateos numero quinientos quince, Colonia Tlacopac,
Mexico, Distrito Federal, Codigo Postal, cero diez cuarenta.____________________
Atencion: Luis Alberto Mena Adame, Director Juridico.__________________________
Fax: (quinientos veinticinco) cuatrocientos noventa guion mil setecientos
ochenta y nueve.________________________________________________________________
Para el Agente par las Garantias:_______________________________________________
Once Madison Avenue, New York, New York dies mil diez, Estados Unidos de
America.________________________________________________________________________
Atencion: Yvette McQueen________________________________________________________
Fax: cero cero uno (doscientos doce) trescientos veinticinco guion ocho mil
trescientos ocho._______________________________________________________________
con copia para:_________________________________________________________________
Franck, Galicia, Duclaud y Robles, Sociedad Civil.______________________________
Avenida Paseo de las Palmas cuatrocientos cinco guion, tercer Piso, Colonia
Lomas de Chapultepec, Codigo Postal once mil, Mexico Distrito Federal.__________
Atencion: Licenciado Alejandro Duclaud__________________________________________
Numero de Telefax: (quinientos veinticinco) quinientos cuarenta guion nueve mil
doscientos dos._________________________________________________________________
Numero de Telefono: (quinientos veinticinco) quinientos cuarenta guion nueve
mil doscientos._________________________________________________________________
En caso de que cualquiera de las personas arriba mencionadas cambiaran su
domicilio, deberan notificarle por escrito a las otras partes indicando al
efecto su nuevo domicilio.______________________________________________________
DECIMA SEPTIMA. Ley Aplicable. El presente Contrato sera regido e interpretado
de conformidad con las leyes de Mexico, Distrito Federal, Mexico._______________
DECIMA OCTAVA. Jurisdiccion. Para todo lo relacionado con la interpretacion,
cumplimiento y validez de las disposiciones de la presente Hipoteca, las partes
en este acto expresa e irrevocablemente se someten a la jurisdiccion de los
tribunales de la Ciudad de Mexico, Distrito Federal, renunciando expresamente a
cualquier otra jurisdiccion que les pudiera corresponder acutalmente o en el
futuro por razon de sus domicilios o por cualquier otra causa.__________________
PERSONALIDAD: El compareciente, acredita su personalidad y la legal existencia
de su representada, con la certificacion que agrego al apendice de esta escrtura
marcada con la letra "E"._______________________________________________________
YO, EL NOTARIO CERTIFICO:_______________________________________________________
UNO. Que me cerciore de la identidad del compareciente, persona a la que
conceptuo capacitada legalmente para la celebracion de esta acto._______________
DOS. Que por sus generales y advertido de las penas en que incurre quien
declara falsamente, manifesto ser:______________________________________________
Mexicano originario de Mexicano, Distrito Federal, lugar donde nacio el dia
cinco de febrero de mil novecientos sesenta y cuatro, casado, abogado, con
domicilio en Amberes numero cinco, Colonia Cuauhtemoc, Distrito Federal.________
Pagina - 13
<PAGE>
Lic. Jose Visoso del Valle
Notario No. 92
del Distrito Federal
Se identifica con: Licencia para conducir numero C cero cero ciento cuarenta y
ocho mil cuatrocientos noventa y dos, expedida a su favor por el Departamento
del Distrito Federal.___________________________________________________________
TRES. El representante de "REDAY", SOCIEDAD ANONIMA DE CAPITAL VARIABLE,
manifesta que la personalidad que ostenta no le ha sido revocada ni en forma
alguna modificada y que su representada se encuentra legalmente capacitada para
le celebracion de este acto.____________________________________________________
CUATRO. El compareciente manifiesta que su representada se encuentra inscrita
en el Registro Nacional de Inversion Extranjera y me lo acredita con el
documento que agrego al apendice de esta escritura con la letra "F".____________
CINCO. Que tuve a la vista los documentos citados en esta escritura.___________
SEIS. Que leida y explicada esta escritura al comparaciente, manifesto su
conformidad con ella y la firmo el dia treinta de abril de mil novecientos
noventa y ocho, mismo momento en que la AUTORIZO DEFINITVAMENTE. DOY FE._______
JAMES ENRIQUE RITCH GRANDE AMPUDIA. RUBRICA. JOSE VISOSO DEL VALLE.
RUBRICA. EL SELLO DE AUTORIZAR.________________________________________________
____________________________"NOTAS COMPLEMENTARIAS".____________________________
NOTA: UNO. BAJO LAS LETRAS "G UNO A G CINCO" AGREGO AL APENDICE DE ESTA
ESCRITURA, COPIAS DE LOS SEGUNDOS AVISOS PREVENTIVOS PRESENTADOS AL REGISTRO
PUBLICO DE LA PROPIEDAD.________________________________________________________
DISTRITO FEDERAL, A SEIS DE MAYO DE MIL NOVECIENTOS NOVENTA Y OCHO. DOY
FERUBRICA.______________________________________________________________________
NOTA: DOS. BAJO LA LETRA "H" AGREGO AL APENDICE DE ESTA ESCRITURA SEGUNDO
AVISO PREVENTIVO PRESENTADO AL REGISTRO PUBLICO DE LA PROPIEDAD EN EL ESTADO DE
MEXICO._________________________________________________________________________
DISTRITO FEDERAL, A OCHO DE MAYO DE MIL NOVECIENTOS NOVENTA Y OCHO. DOY FE.
RUBRICA.________________________________________________________________________
ES COPIA CERTIFICADA, QUE EXPIDO PARA "CREDIT SUISSE FIRST BOSTON", CONSTA DE
SEISCIENTOS VEINTIUN HOJAS, VEINTIUNA ESCRITAS POR AMBOS LADOS Y SEISCIENTAS POR
UN SOLO LADO, COTEJADAS Y CORREGIDAS.___________________________________________
MEXICO, DISTRITO FEDERAL, A VEINTE DE MAYO DE MIL NOVECIENTOS NOVENTA Y
OCHO.___________________________________________________________________________
DOY FE._________________________________________________________________________
[SEAL]
<PAGE>
Anexo "A"
[CERTIFICATES OF FREEDOM FROM ENCUMBRANCES]
<PAGE>
Anexo "B"
[CREDIT AGREEMENT]
<PAGE>
Anexo "C"
[JCISA SUBSIDIARY GUARANTEE AGREEMENT]
<PAGE>
Anexo "D"
[FEE AND GUARANTEE AGREEMENT]
<PAGE>
[seal]
ATTY. JOSE VISOSO DEL VALLE
NOTARY OFFICE NO. 92, MEXICO, FEDERAL DISTRICT
UNITED STATES OF MEXICO
Atty. Jose Visoso del Valle
Notary Office No. 92
of the Federal District
67,934
BOOK NUMBER SEVEN HUNDRED FORTY-SIX
DOCUMENT NUMBER SIXTY-SEVEN THOUSAND NINE HUNDRED THIRTY-FOUR.
IN MEXICO CITY, ON THE THIRTIETH DAY OF APRIL, NINETEEN NINETY-EIGHT.
I, JOSE VISOSO DEL VALLE, NOTARY NUMBER NINETY-TWO OF THE FEDERAL DISTRICT,
CERTIFY:
THE ACKNOWLEDGMENT OF OBLIGATIONS AND MORTGAGE (THE "MORTGAGE") GRANTED BY
--------
REDAY, A PUBLIC CORPORATION OF VARIABLE CAPITAL (HEREINAFTER THE "MORTGAGE
--------
GUARANTOR") REPRESENTED IN THIS ACT BY MR. JAMES ENRIQUE RITCH GRANDE AMPUDIA,
- ---------
IN FAVOR OF CREDIT SUISSE FIRST BOSTON, ACTING THROUGH ITS BRANCH OFFICE IN NEW
YORK, IN ITS CAPACITY AS AGENT FOR GUARANTEES (HEREINAFTER THE "AGENT FOR
---------
GUARANTEES") FOR THE BENEFIT OF THE CREDITORS MENTIONED IN THE CREDIT CONTRACT
- ----------
(REFERRED TO BELOW), in accordance with the following statements and clauses:
STATEMENTS
1. The Mortgage Guarantor, through its representative, in this act states
that:
One. It is a corporation that has been duly established and is validly in
existence in accordance with the United States of Mexico ("Mexico"), as is
------
evidenced in publicly recorded document number twenty-six thousand six hundred
six, dated January second, nineteen ninety-one, executed before Atty. Roberto
Nunez y Bandera, Notary Public number One of the Federal District, the original
copy of which was entered in the Commercial Registry of Mexico City, Federal
District, under commercial page one hundred thousand three hundred thirteen,
dated October twenty-fourth, nineteen ninety-one;
Two. The Mortgage Guarantor has its corporate domicile in Mexico City, Federal
District, Mexico;
Three. The corporate purpose of the Mortgage Guarantor includes, among other
things, the granting of guarantees;
Four. On the date of the signing of this instrument, it is the legitimate and
sole owner of the real property described in the following instruments
(hereinafter the "Mortgaged Property");
------------------
(i) With publicly registered document number twenty-three thousand two
hundred twenty-eight, dated September twenty-eighth, nineteen ninety-
five, executed before Attorney Carlos Alejandro Duran Loera, Notary
Public number eleven of the Federal District, the original copy of
which was entered in the Public Registry of Property of Mexico City,
Federal District, under page nine million three hundred forty-seven
thousand nine hundred twenty-four, dated December fourteenth, nineteen
ninety-five, "REDAY", PUBLIC CORPORATION OF VARIABLE CAPITAL, acquired
for the price of TWO MILLION SEVEN HUNDRED TWENTY-TWO THOUSAND SIX
HUNDRED SEVENTY-ONE NEW PESOS, NINETY-NINE CENTS, NATIONAL CURRENCY,
lot number one of block five hundred eighty-five of the fifty-fourth
real estate survey area, facing Avenida de las Flores, formerly
Calzada de Flor de Maria, of this City, marked with official number
three hundred ninety of Las Flores street, in Colonia (neighborhood)
Tlacopac, Delegacion (Office) Villa Alvaro Obregon, Federal District,
with the surface area, measurements, and adjoining property that in
said title are described as follows:
"...SURFACE AREA: ONE THOUSAND TWO HUNDRED FIFTY-ONE SQUARE METERS, SEVENTY-
THREE SQUARE CENTIMETERS.
MEASUREMENTS AND ADJOINING PROPERTY:
-1-
<PAGE>
TO THE NORTHWEST, in two sections of nineteen meters eighty centimeters and
nineteen meters, with the former Calzada de Flor de Maria, today called Avenida
de las Flores.
TO THE EAST, forty-nine meters forty centimeters, with property that was owned
by Atty. Angel Martin Perez, now registered property number nineteen of block
number five hundred eighty-five of region fifty-four;
TO THE SOUTHEAST, eighteen meters sixty centimeters, with a parcel sold to Ms.
Ana Martinez Ibarrola de Del Toro, now registered property number sixty-one of
said blocks and land registry zone;
TO THE SOUTH, thirty meters, sixty centimeters, with the property that was owned
by Mr. Torres, now registered land numbers fifty-nine and sixty of said block
and zone..."
(ii) With publicly recorded document number twenty-three thousand two hundred
twenty-four, dated September twenty-eighth, nineteen ninety-five,
executed before Attorney Carlos Alejandro Duran Loera, Notary Public
number eleven of the Federal District, the original copy of which was
entered in the Public Registry of Property of Mexico City, Federal
District, under page six hundred fifty thousand six hundred sixty-two,
dated November thirtieth, nineteen ninety-five, "REDAY", PUBLIC
CORPORATION OF VARIABLE CAPITAL, acquired for the price of SIXTY-SEVEN
MILLION EIGHT HUNDRED SEVENTY-EIGHT THOUSAND TWO HUNDRED THIRTY-ONE NEW
PESOS, NINETY-NINE CENTS, NATIONAL CURRENCY, the real property marked
with official number five hundred fifteen of Boulevard Adolfo Lopez
Mateos in Colonia Tlacopac, Delegacion Villa Alvaro Obregon, Federal
District, with the surface area, measurements, and adjoining property set
forth in the title and described below:
"...SURFACE AREA: NINE THOUSAND EIGHT HUNDRED NINE SQUARE METERS SIXTY-EIGHT
SQUARE CENTIMETERS.
MEASUREMENTS AND ADJOINING PROPERTY.
TO THE EAST, two hundred twelve meters sixty-five centimeters with Boulevard
Adolfo Lopez Mateos, Anillo Periferico, South;
TO THE SOUTH, (vertex of the land) four meters fifty centimeters, with Pancoupe
forming said Boulevard Adolfo Lopez Mateos Anillo Periferico South and Barranca
de Pilares Street;
TO THE SOUTHWEST, one hundred forty-eight meters, twenty centimeters, with
Barranca de Pilares street;
TO THE NORTHWEST, twenty-four meters, with property that is or was owned by
Octavio Reyos Ruiz and Pedro Tellez;
TO THE NORTHEAST, twenty meters, with property that is or was owned by Aurelio
Diaz Noriega;
TO THE NORTH OR NORTHEAST, forty-four meters, ten centimeters, with property
that is or was owned by Alejandro Moncada Angeles and Emilio Rivera;
TO THE NORTHEAST, twenty-nine meters sixty centimeters, with property that is or
was owned by Emilio Rivera
TO THE NORTHEAST, one hundred four meters thirty centimeters, with property that
is or was owned by Emilio Rivera; and
TO THE NORTHEAST, closing the polygon, two meters seventy-five centimeters, with
property that is or was owned by Ms. Guadalupe Saavedra de Ayala, now facing
Boulevard Adolfo Lopez Mateos Anillo Perifico South..."
(iii) With public document number twenty-three thousand two hundred twenty-five
dated September twenty-eighth, nineteen ninety-five, executed before
Atty. Carlos Alejandro Duran Loera, Notary Public number eleven of the
Federal District, the original copy of which was entered in the Public
Registry of Property of the Federal District, on page six hundred eighty-
three thousand five hundred seventeen, dated December fourteenth,
nineteen ninety-five, "REDAY", PUBLIC CORPORATION OF VARIABLE CAPITAL,
for the price of TWO MILLION ONE HUNDRED SEVENTY-FIVE THOUSAND SEVEN
HUNDRED THIRTY NEW PESOS, NINETY-TWO CENTS, NATIONAL CURRENCY, acquired
lot number eighteen of block five hundred eighty-two of the fifty-fourth
land registry zone, marked with official number five hundred seventy-four
on ROMULO O'FARRIL Street, in Colonia Tlacopac, Federal District, Mexico,
with the surface area, measurements, and adjoining areas set forth in the
title and described below:
"...SURFACE AREA: EIGHT HUNDRED NINETY-ONE SQUARE METERS SEVENTY-NINE SQUARE
CENTIMETERS.
-2-
<PAGE>
MEASUREMENTS AND ADJOINING AREAS:
TO THE NORTH, twenty meters, with the Mexico-Cuernavaca railroad;
TO THE EAST, sixty-one meters fifty centimeters, with a portion resulting from
the subdivision of the aforementioned group, today land registry number thirteen
of the same block and region;
TO THE SOUTH, ten meters, with land transferred to Mr. Carlos Lopez, today
registered lot number thirteen of the same block and region;
TO THE WEST, sixty-four meters four centimeters, with property that is or was
owned by Mrs. Kawage, now registered lots thirty-five, thirty-three, and
seventeen of said block and region;
(iv) With publicly recorded document number twenty-three thousand two hundred
twenty-six, dated September twenty-eighth, nineteen ninety-five, executed
before Attorney Carlos Alejandro Duran Loera, Notary Public number eleven
of the Federal District, the original copy of which was entered in the
Public Registry of Property of Mexico City, Federal District, under page
six hundred eighty-three thousand five hundred eighteen, dated December
fourteenth, nineteen ninety-five, "REDAY", PUBLIC CORPORATION OF VARIABLE
CAPITAL, acquired for the price of THREE MILLION TWO HUNDRED FOURTEEN
THOUSAND ONE HUNDRED AND THIRTY NEW PESOS, EIGHTY CENTS, NATIONAL
CURRENCY, lot number nineteen of block five hundred eighty-two, of the
fifty-fourth land registry area, facing Ferrocarril de Cuernavaca
(Cuernavaca railroad) street, marked with official number five hundred
seventy-eight on Romulo O'Farril Street, in Colonia Tlacopac, Delegacion
Villa Alvaro Obregon, Federal District, with the surface area,
measurements, and adjoining areas set forth in the title and described as
follows:
"...SURFACE AREA: ONE THOUSAND THREE HUNDRED SEVENTEEN SQUARE METERS AND ONE
SQUARE CENTIMETER.
MEASUREMENTS AND ADJOINING AREA:
TO THE NORTH, in two sections of sixteen meters thirteen centimeters and eleven
meters seventy-two centimeters, to the right of the Cuernavaca railroad, now
Ferrocarril de Cuernavaca street;
TO THE EAST, fifty-six meters two centimeters, with registered land number
twenty of the same block and region, the result of the same group and
subdivision;
TO THE SOUTH, twenty meters, with registered land number twelve of the same
block and region, formerly property owned by Mrs. Viuda de Pena;
TO THE WEST, sixty-one meters fifty centimeters, with registered land number
eighteen, the result of said group and subdivision..."
(v) With publicly recorded document number 23227 dated September eighteenth,
nineteen ninety-five, executed before Atty. Carlos Alejandro Duran Loera,
Notary Public number eleven of the Federal District, the original copy of
which was entered in the Public Registry of Property of Mexico City,
Federal District, under page six hundred eighty-three thousand five
hundred nineteen, dated January thirtieth, nineteen ninety-six, "REDAY",
PUBLIC CORPORATION OF VARIABLE CAPITAL, acquired for the price of ONE
MILLION NINE HUNDRED FORTY THOUSAND THREE HUNDRED NINETY-FOUR NEW PESOS
AND THIRTY CENTS, NATIONAL CURRENCY, lot number twenty of block number
five hundred eighty-two, of land registry region number fifty-four, facing
Ferrocarril de Cuernavaca Street, marked with official number five hundred
seventy on Romulo O'Farril Street in Colonia Tlacopac, Delegacion Villa
Alvaro Obregon, in Mexico City, Federal District, with the surface area,
measurements, and adjoining areas stated in the title and described as
follows:
"... SURFACE AREA: SEVEN HUNDRED NINETY-FIVE SQUARE METERS THIRTY-THREE SQUARE
CENTIMETERS.
MEASUREMENTS AND ADJOINING AREAS:
TO THE NORTH, twenty meters, with access to the Cuernavaca railway, now
Ferrocarril de Cuernavaca street;
TO THE EAST, fifty-two meters ninety-two centimeters, with lots that were owned
by Mrs. Micaela Arias, today registered land number twenty-one of the same block
and region;
TO THE SOUTH, eleven meters fifty-centimeters, with lots that were owned by Mrs.
Viuda de Pena, today registered land number ten of the same block and region;
TO THE WEST, fifty-six meters two centimeters, with the land resulting from said
group and subdivision, now registered land number nineteen of said block and
region..."
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<PAGE>
(vi) With document number fifty-three thousand two hundred thirty-nine, dated
April twentieth, nineteen ninety-eight, executed before Attorney MIGUEL
ALESSIO ROBLES, Notary Number Nineteen of the Federal District, pending
recording in the Public Registry of Property of Tlalnepantla, the State of
Mexico, due to the recent date of execution "REDAY", PUBLIC CORPORATION OF
VARIABLE CAPITAL, acquired, for the price of ONE MILLION FOUR HUNDRED ONE
THOUSAND DOLLARS, United States currency, the building marked number
twenty-five of Victoria Streets and the land on which it was built, which
is the northern portion of lot number seven of block ten of the industrial
subdivision named "ALCE BLANCO" located in San Bartolo Naucalpan, within
the District of Tlalnepantla, State of Mexico, with the surface area,
measurements, and adjoining areas set forth in the title and described as
follows:
"...SURFACE AREA: FOUR THOUSAND ONE HUNDRED SEVENTY-THREE SQUARE METERS FOURTEEN
DECIMETERS, and the following boundaries:
TO THE NORTH, sixty-five meters twenty-one centimeters, with Victoria Street,
TO THE SOUTH, sixty-seven meters forty-five centimeters, with the southern
portion of lot seven;
TO THE EAST, fifty-one meters seventy centimeters, with lot one of block ten;
TO THE WEST, sixty-three meters seventy centimeters, with Fourth Street (calle
cuatro), and
TO THE NORTH, nine meters five centimeters, with the intersection of Fourth
Street and Victoria Street..."
It is worth noting that said real property is entered in the Public Registry of
Property of Tlalnepantla, State of Mexico, in section one, book one, volume six
hundred sixty-one and under entry number two hundred ninety-four, in the name of
Guillette de Mexico and Company, a Public Corporation of Variable Capital.
five. The MORTGAGE GUARANTOR states that the Mortgaged Property is free of any
kind of encumbrance or legal limitations regarding property rights, as is
evidenced with certificates of freedom from encumbrances dated April twenty-
ninth nineteen ninety-eight, issued by the Public Registry of Property of
Tlalnepantla, State of Mexico, a copy of which is attached to the Appendix of
this publicly recorded document, with letter "A", and with the certificates of
freedom from encumbrances to be issued by the Public Registry of Property of
Mexico City, Federal District, which I will attach to the appendix of this
document, forming an integral part thereof, and other copies will be attached to
the original of this document that will be submitted to the Agent for the
Guarantees;
six. All charges for property taxes have been paid. No payment of any sum for
federal, state, municipal, or local taxes, water, sewerage, taxes, import duties
or taxes related to the Mortgaged Property is pending, and all permits and
authorization related to the Mortgaged Property have been obtained, except for
permits and authorization the absence of which does not have nor is expected to
have a significant adverse effect on the value of the Mortgaged Property or the
rights of the Agent for the Guarantees under this contract.
seven. On April thirtieth, nineteen ninety-eight, CDRI Investments (Lux.) Public
Corporation (the "Controller"), Jafra Cosmetics International, Inc. ("JCI"),
---------- ---
Jafra Cosmetics International, Public Corporation of Variable Capital ("JCISA"
and jointly with "JCI", the "Borrowers") entered into a credit contract, which
---------
is attached as Appendix "B" with the "Creditors" mentioned in said contract, the
Bank of Issue (as defined in the Credit Contract) (said creditors and the Bank
of Issue hereinafter shall be jointly called the "Creditors") and the Agent for
---------
the Guarantees (said credit contract, and however it is added to, amended, or
restated at any time, shall be called the "Credit Contract") in which it is
---------------
provided that the Creditors shall grant the Lenders (i) term credit for a sum of
up to US$25,000,000.00 (Twenty-five million dollars and 00/100, United States
legal tender) (the "Term Credit"); (ii) lines of revolving credit for a sum of
-----------
$US65,000,000.00 (Sixty five million dollars and 00/100 United States legal
tender) (the Lines of Revolving Credit); (iii) the "swingline" credit for a sum
of $US10,000,000.00 (Ten million dollars and 00/100 United States legal tender
(the "Swingline Credit" jointly with the Term Credit and the Lines of Revolving
----------------
Credit, the "Credit"; and (v) letters of credit for up to a sum of
US$15,000,000.00 (Fifteen million dollars and 00/100, United States legal
tender).
eight. On this date, the Mortgage Guarantor entered into a security agreement
with the Agent for the Guarantees that are attached as Appendix "C" (the
"Security Agreement") by which the Mortgage Guarantor guarantees the obligations
- -------------------
of the Borrowers under the Credit Contract.
nine. On April thirtieth, nineteen ninety-eight, Jafra Cosmetics International,
Inc., and JCISA (jointly with the "Guarantors at Credito de Chase") which is
attached as Appendix "D" agreed under a Fee and Guarantee
-4-
<PAGE>
Agreement (the "Chase Contract") to be jointly responsible with regard to The
Chase Manhattan Bank ("Chase") for any failure to pay under the Letter
Agreements as said term is defined in the Chase Contract on the part of the
Borrowers as said term is defined in the Chase Contract.
ten. The signing of this instrument does not violate its corporate bylaws in
force on this date, nor is there any law or contractual provision prohibiting
said signing;
eleven. It has obtained all corporate and governmental authorization necessary
for signing this instrument, and on this date, it is not in a labor strike, nor
does it know of any strike call, or any other fact or situation affecting or
that may affect its financial situation or operations, or that may affect the
legality, validity, or enforceability of this instrument, or priority in
executing the guarantee contained herein. As of this date, there is no event nor
cause from which an encumbrance or preferential right on the Mortgage being set
up in this instrument may arise.
twelve. For the purposes of complying with the contractual obligations under the
Credit Contract and other Guaranteed Obligations referred to in clause Four of
this document, it is willing to establish a first mortgage in favor of the Agent
for the Guarantees, acting for the benefit of the Creditors, on the Mortgaged
Property, under the terms set forth in this instrument; and
thirteen. Its representative has sufficient power and authority to bind it to
the terms of this instrument, which have not been revoked, limited, nor
restricted in any way.
fourteen. All the statements, guarantees, clauses, and obligations contained in
the Credit Contract are ratified in this act by the Mortgage Guarantor.
In accordance with the foregoing statements, the Mortgage Guarantor agrees to
the following:
CLAUSES
The terms defined in upper case letters under this instrument not defined
otherwise in this Mortgage shall have the meaning stated in the Credit Contract.
ONE. Acknowledgment of Obligations.
(one) The Mortgage Guarantor expressly acknowledges in this act that the total
amount of the principal available under the Term Credit, as of this date,
amounts to the sum of 25,000,000.00 (Twenty-five million dollars and 00/100,
United States legal tender), which must be paid under the terms established in
the Credit Contract, and that the amount received as of this date under said
terms contracts totals TEN MILLION DOLLARS UNITED STATES CURRENCY.
(two) The Mortgage Guarantor expressly acknowledges in this act that the total
amount of the available principal under the Lines of Revolving Credit, as of
this date, amounts to the sum of 65,000,000.00 (sixty-five million dollars and
00/100, United States legal tender), which must be paid under the terms stated
in the Credit Contract.
(three) The Mortgage Guarantor acknowledges in this act that the total sum of
the available principal under the [illegible] credit as of this date, amounts to
the sum of 10,000,000.00 (Ten million dollars and 00/100, United States legal
tender), which must be paid under the terms set forth in the Credit Contract.
TWO. Establishment of the Mortgage. The Mortgage Guarantor establishes a
Conventional First Mortgage in favor of the Agent for Guarantees for the benefit
- --------------------------------------------------------------------------------
of the Borrowers, on the Mortgaged Property, for the purpose of guaranteeing
- ----------------
timely and due compliance with each and every one of the Guaranteed Obligations
(as defined below in Clause Four).
The Mortgage covers, and the term "Mortgaged Property" includes, the following:
one. Any accessions belonging to the Mortgage Property by fact or by law;
two. Any improvements made on the Mortgaged Property;
three. Any piece of movable property permanently incorporated into the Mortgaged
Property that cannot be separated without damaging the Mortgaged Property or the
movable property;
four. Any building constructed on the land of the Mortgaged Property;
five. Any industrial profits from the Mortgaged Property; and
six. Any rent due and not paid at the time that compliance with the Guaranteed
Obligations is demanded.
THREE. The Mortgage is established by the Mortgage Guarantor under the terms of
Chapters I and II of Title Fifteen, and other relevant articles of the Civil
Code for the Federal District (the "Civil Code") as well as under the terms of
----------
Article two hundred ninety-eight of the General Law of Titles and Credit
Operations. In this act, the Mortgage Guarantor acknowledges the entire text of
said legal provisions, and grants its agreement regarding the content and
consequences set forth therein.
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<PAGE>
FOUR. Guaranteed Obligations. The purpose of the Mortgage established in this
act by the Mortgage Guarantor in favor of the Agent for the Guarantees is to
guarantee, in favor of the Agent for the Guarantees, acting for the benefit of
the Creditors, compliance with the following obligations (hereinafter the
"Guaranteed Obligations"):
- -----------------------
one. All of the obligations of the Mortgage Guarantor and the Borrowers under
the Credit Contract, including but not limited to, timely and proper payment of
principal and regular interest and interest for late payment on any sum that the
Mortgage Guarantor and the Borrowers come to owe the Creditors or the Agent for
the Guarantees under the Credit Contract, the obligation to pay commissions
established in Section two point zero five (2.05) of the Credit Contract and the
obligation to pay any sum for compensation in accordance with Section two point
sixteen (2.16) of the Credit Contract; and
two. All obligations of the Mortgage Guarantor under the Security Agreement. In
this act, it is expressly agreed that for the purposes of Article two thousand
nine hundred fifteen of the Civil Code, this Mortgage guarantees payment of all
interest under the Credit Contract and the Security Agreement until all sums
under said contracts are paid in full to the Creditors and/or the Agent for the
Guarantees, which circumstance shall be entered in the Public Registry of
Property of Mexico City, Federal District; and
three. All obligations of the Guarantors in Credito de Chase under the Chase
Contract.
The Mortgage being established in this act shall be indivisible and shall
guarantee all sums owing under the Obligations Guaranteed and the same shall not
be reduced or partially discharged as long as any of the Guaranteed Obligations
remain pending. For the purposes of Article two thousand twelve of the Civil
Code, the parties expressly agree that each of the properties included in the
Mortgaged Property shall be responsible for the total value of the Guaranteed
Obligations.
The Mortgage being established in this act guarantees the Guaranteed Obligations
up to the value of the Mortgaged Property, independently of any other guarantee
executed in favor of the Agent for the Guarantees for the benefit of the
Creditors in order to guarantee the Guaranteed Obligations.
FIVE. Amendments to the Guaranteed Obligations. By means of this Mortgage, any
amendment, extension, or renewal of the Guaranteed Obligations that the Agent
may execute for the Guarantees in favor of the Mortgage Guarantor is guaranteed
in favor of the Agent for the Guarantees and for the benefit of the Creditors,
without the need for the granting of a new mortgage; should said amendment,
extension, or renewal take place, the Mortgage Guarantor agrees that said sums
owing under the Guaranteed Obligations once amended, extended, or renewed, shall
be guaranteed by this Mortgage in favor of the Agent for the Guarantees and for
the benefit of the Creditors, for which the Mortgage Guarantor must perform any
acts necessary in order to comply with this Mortgage with regard to said
amendments, extensions, or renewals.
Any increase in any amount that must be paid according to the Guaranteed
Obligations shall be guaranteed first by this Mortgage.
SIX. Term. The Mortgage being established in this act shall remain in force
until the Borrowers have complied with each and every one of the terms and
conditions of the Guaranteed Obligations. Therefore, the Mortgaged Property
shall not be discharged from this Mortgage until the Borrowers have complied
with each and every one of the terms and conditions of the Guaranteed
Obligations.
SEVEN. Access. The Mortgage Guarantor must:
one. Allow the Agent for the Guarantees and any of its officers, employees, and
agents access to the Mortgaged Property during the Mortgage Guarantor's normal
hours of operation and with whatever frequency is determined by the Agent for
the Guarantees, by means of written notice at least three working days in
advance, unless an event of default under Clause Thirteen of this Mortgage (each
one a "Non-compliance Event") has occurred and remains pending, based on which
--------------------
the requirement for advance notice shall not be required and the Agent for the
Guarantees shall have access to the Mortgaged Property at any time;
two. Allow the Agent for the Guarantees and any of its respective officers,
employees, and agents to inspect, audit, and take abstracts from the records,
files, and accounting books of the Mortgage Guarantor, provided that there is a
written request by the Agent for the Guarantees at least five (5) working days
in advance; and
three. Allow the Agent for the Guarantees to conduct audits to inspect, review,
or evaluate the Mortgaged Property, if the Agent for the Guarantees deems it
reasonable, and with written notice at least five (5) working days in advance
(except when an Event of Default has occurred and continues, in which case no
-6-
<PAGE>
notice is required), and the Mortgage Guarantor agrees to provide the Agent for
the Guarantees, at its own expense, any secretarial and other types of
assistance that are reasonably requested by the Agent for the Guarantees with
regard to the foregoing.
EIGHT. Taxes on Property and Services. The Mortgage Guarantor must pay in a
timely manner all property taxes, payments for water, drainage, and sewerage
services, services and any other payment related to the Mortgaged Property
payable to individuals or the authorities, and shall submit to the Agent for the
Guarantees proof of said payments when the Agent requests it in writing a
reasonable time in advance.
NINE. Insurance. The Mortgage Guarantor must, at its own expense, keep the
Mortgaged Property adequately insured the entire time with an insurance company,
and keep said insurance current during the entire time that any Guaranteed
Obligation persists. The respective insurance policy shall expressly reflect
that the insured property is under a first mortgage in favor of the Agent for
the Guarantees and said policy must be endorsed in favor of the Agent for the
Guarantees by naming the same as the first beneficiary.
Moreover, the Mortgage Guarantor must maintain the insurance in accordance with
the following conditions:
one. The Mortgage Guarantor must (i) at all times maintain the Mortgaged
Property adequately insured by solvent, reputable insurance companies that are
acceptable to the Agent for the Guarantees, (ii) keep any other insurance in
order to completely cover said risks, including fire and other risks insured
with ample coverage, as is customary for companies in the same or similar
fields, including insurance for third parties against claims for personal injury
or death or property damage occurring on, near, or in connection with the use of
the Mortgaged Property, and (iii) maintain any other insurance required by law.
The Mortgage Guarantor shall notify the Agent for the Guarantees in a timely
manner of any incident causing a material loss or reduction in the value of the
Mortgaged Properties and the estimated value (or actual value if available) of
said loss or reduction;
two. The Mortgage Guarantor must submit to the Agent for Guarantees copies of
the policies, certificates, and endorsements, as well as proof of premium
payments, if the Agent so requests in writing with sufficient advance notice and
as frequently as it wishes;
three. The Mortgage Guarantor must instruct all present or future insurers under
all policies related to the Mortgaged Property to make all payments derived from
said policies directly to the Agent for the Guarantees. The Mortgage Guarantor
in this act designates and authorizes the Agent for the Guarantees for the
benefit of the Creditors (and all officers, employees, or representatives
designated by the Agent for the Guarantees) as its agent, attorney-in-fact, and
representative at the time of and during the continuation of an Event of
Default for the purposes of filing, settling, or finalizing any claims under the
insurance policies related to the Mortgage Property, endorsing on behalf of the
Mortgage Guarantor any check, promissory note, instrument, or any other means of
insurance payment and to make any decisions regarding said insurance policies.
In the event that the Mortgage Guarantor does not obtain or maintain or cause to
be obtained or maintained any insurance required by this Clause Nine or fails to
pay partially or in full any premium related thereto, the Agent for the
Guarantees, without canceling or waiving any of the obligations under this
instrument, may at any time obtain and maintain said insurance policies and pay
said premiums and perform any other acts with regard to the foregoing that the
Agent for the Guarantees deems necessary. All amounts disbursed in accordance
with this Clause, including reasonable attorney fees, expenses, and court costs
and other expenses related to the foregoing, must be paid by the Mortgage
Guarantor to the Agent for the Guarantees for the benefit of the Creditors.
TEN. Compensation. The Mortgage Guarantor must indemnify and keep the Agent for
the Guarantees and its affiliates free and safe against any and all lawsuits,
actions, costs, fines, faults, sanctions, proceedings, claims, damage, loss,
liability, and expenses (including reasonable attorney fees and expenses as well
as any other costs of investigation or defense, including those incurred in any
appeal or motion) (each one a "Complaint") that may be brought or filed against
---------
it or in which said indemnified person has become involved due to the granting
of the Credit in accordance with the Credit Contract, or due to the use of the
resources of said Credit, or related to or resulting from this Mortgage or
Credit Contract or from the operations contemplated in this Mortgage or in the
Credit Contract, with the understanding that the Mortgage Guarantor or the
Borrowers shall not be responsible for the payment of any compensation to said
indemnified person with respect to the part of said Complaint resulting solely
from his negligence, fraud, or gross fault, as determined by a final ruling
issued by a competent court.
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<PAGE>
ELEVEN. Sale of Assets. The Mortgage Guarantor at no time may transfer the
property of all or part of the Mortgaged Assets during the term of this
Mortgage.
TWELVE. Expenses. The Mortgage Guarantor must record this Mortgage with Public
Registries of Property and of Commerce of Mexico City, Federal District and of
Tlalnepantla, State of Mexico, within fifteen working days of the date this
Mortgage is signed, and it must pay any expenses, duties, taxes, or fees
resulting from the signing and registration of this Mortgage, including, but not
limited to, notary fees.
The Mortgage Guarantor must reimburse the Agent for the Guarantees for all
expenses, including, but not limited to, reasonable attorney fees and legal
costs, expenses arising from registration or disbursed by the Agent for the
Guarantees with regard to (i) non-compliance by the Mortgage Guarantor with any
stipulation, agreement, or condition contained herein, or (ii) the exercise by
the Agent for the Guarantees of any of its rights or recourses established in
this Mortgage, or (iii) protection of the Mortgaged Property, as well as of the
interests of the Agent for the Guarantees with regard thereto. Any sum to be
paid by the Mortgage Guarantor to the Agent for the Guarantees, in accordance
with this Mortgage, shall be an obligation payable on sight by the Mortgage
Guarantor to the Agent for the Guarantees, and timely payment thereof shall be
guaranteed by this Mortgage.
THIRTEEN. Noncompliance with Guaranteed Obligations. The Mortgage Guarantor
agrees that the Agent for the Guarantees may execute this Mortgage and deem each
of the sums owed by the Mortgage Guarantor and by each of the Borrowers due and
demandable, in accordance with the Guaranteed Obligations, in the event that any
of the following events, but not limited thereto, should occur:
one. If the Mortgage Guarantor does not comply in a timely manner with payment
of any of its obligations assumed in accordance with the Credit Contract, the
Security Agreement, the Chase Contract, or this Mortgage, when they must be
complied with;
two. If any of the Borrowers does not immediately pay the Agent for the
Guarantees for the benefit of the Creditors any amounts of principal, interest,
as well as any other amounts due and demandable in accordance with the Credit
Contract;
three. If an Event of Default should occur under the Credit Contract;
four. If the Mortgage Guarantor fails to make four or more consecutive payments
of property tax or utility fees for water or any other tax or assessment payable
under applicable law with regard to the Mortgaged Property;
five. If the Mortgage Guarantor transfers the Mortgaged Property assets, assigns
them to a trust or establishes any other additional guarantee thereon, without
prior written approval of the Agent for the Guarantees;
six. If the Mortgaged Property is seized, or if any judicial or administrative
action is filed against the Mortgage Guarantor based on which a lien is placed
on the Mortgaged Property, and said lien is not discharged within a period of
seventy-five (75) working days;
seven. If the Mortgaged Property is in any way substantially modified or
modified outside the normal course of its operations, without prior written
consent granted by the Agent for the Guarantees and its value becomes
insufficient to guarantee the Guaranteed Obligations, for which the Mortgage
Guarantor thereby expressly waives the requirement for a judicial order for said
purposes, contained in Article two thousand nine hundred nine of the Civil Code.
eight. If bankruptcy, insolvency, or reorganization proceedings are filed
against, or voluntarily by, the Mortgage Guarantor or any of the Borrowers, and
the proceedings are not revoked or suspended within a term of ninety (90)
working days.
FOURTEEN. Execution. In the event of execution of this Mortgage, the Mortgage
Guarantor agrees and promises under the following terms:
one. The Mortgage Guarantor waives the rights granted it by Article five hundred
thirty-six of the Code of Civil Procedure for the Federal District (the "Code of
-------
Civil Procedure"), and hereby expressly authorizes the Agent for the Guarantees
- ---------------
to indicate which assets will be attached, in accordance with the provisions of
Article five hundred thirty-seven of the Code of Civil Procedure.
two. In the event that the assets are attached, the Agent for the Guarantees
shall not be subjected to the provisions of Article one thousand three hundred
ninety-five (1395) of the Mexican Commercial Code.
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<PAGE>
three. For the purposes of the provisions of Article five hundred forty-three of
the Code of Civil Procedure, the Mortgage Guarantor hereby expressly waives the
right to be designated as the trustee of the seized Mortgaged Property, or to
name the trustee thereof.
four. The Mortgaged Property must be awarded to the Agent for the Guarantees at
the time of execution of the ruling ordering payment of all sums owing in
accordance with Guaranteed Obligations, at a price to be determined by expert
appraisers appointed in accordance with provisions of Article two thousand nine
hundred sixteen of the Civil Code and Article five hundred sixty-nine of the
Code of Civil Procedure.
five. All judicial notice, as well as any other notice served on the Mortgage
Guarantor under this Mortgage, must be served at the domicile indicated therefor
in Clause Sixteen herein.
FIFTEEN. Assignment. The Agent for the Guarantees is authorized to assign the
rights resulting from this Mortgage at any time, in accordance with the
provisions of Article two thousand nine hundred twenty-six of the Civil Code.
SIXTEEN. Notice. Any notice or other communication required or allowed in
accordance with this Mortgage must be in writing to the respective party, as
indicated below and may, unless otherwise provided in this Mortgage, be served
personally, sent by fax, or sent by express mail and the party shall be deemed
notified when served (A) by personal service, when delivered, (B) by
transmission, when sent by fax or another similar type of transmission if sent
one working day in advance by five o'clock p.m., or if not, the following
working day; or (C) delivered by express mail, two days after delivery to the
proper domicile.
Notice must be sent to the following addresses:
For the Mortgage Guarantor:
Boulevard Adolfo Lopez Mateos, number five hundred fifteen (515), Colonia
Tlacopac, Mexico, Distrito Federal, Postal code, zero ten forty (01040).
Attn: Luis Alberto Mena Adame, Legal Director
Fax: (five hundred twenty-five) (525) four nine zero dash seventeen eighty-nine
(490-1789)
For the Agent for the Guarantees:
Eleven Madison Avenue, New York, New York, ten thousand ten (10010), USA
Attention: Yvette McQueen
Fax: zero zero one (two one two) three twenty-five dash eight three zero eight
(212-325-8308)
with a copy for:
Franck, Galicia, Duclaud and Robles, Civil Partnership
Avenida Paseo de las Palmas four hundred five dash third floor (405-3o), Colonia
Lomas de Chapultepec, Postal code eleven thousand (11000), Mexico, Federal
District
Attn: Attorney Alejandro Duclaud
Fax: (five hundred twenty-five -525) five hundred forty dash nine two zero two
(540-9202)
Phone: (five hundred twenty five - 525) five hundred forty dash nine two zero
(540-9200)
Should any of the aforementioned persons change their domicile, they must notify
the other parties in writing, indicating the new domicile.
SEVENTEEN. Applicable Law. This contract shall be governed and interpreted in
accordance with the laws of Mexico, Federal District, Mexico.
EIGHTEEN. Jurisdiction. For everything related to the interpretation,
compliance, and validity of the provisions of this Mortgage, the parties to this
act expressly and irrevocably submit to the jurisdiction of the courts of Mexico
City, Federal District, expressly waiving any other jurisdiction that may now or
in the future apply due to their domiciles or for any other reason.
LEGAL CAPACITY. The appearing party proves his legal capacity and the legal
existence of his principal with a certificate that I am attaching to the
appendix of this document, marked with letter "E".
I, THE NOTARY, CERTIFY:
ONE. That I made certain of the identity of the appearing party, whom I believe
to have the legal capacity to execute this document.
TWO. That, when advised of the penalty for perjury, giving his personal
information, he stated that he is:
A native and citizen of Mexico, Federal District, where he was born February
fifth, nineteen sixty-four, married, an attorney, domiciled at Amberes number
five, Colonia Cuauhtemoc, Federal District.
He is identifying himself by means of: His drivers license number C zero
forty-eight thousand four hundred ninety-two, issued to him by the Department of
the Federal District.
-9-
<PAGE>
THREE. The representative of "REDAY", PUBLIC CORPORATION OF VARIABLE CAPITAL,
states that the legal capacity he claims has not been revoked nor amended in any
way and that his principal is legally authorized to enter into this contract.
FOUR. The appearing party states that his principal is registered in the
National Registry of Foreign Investment and he proves it with the document I am
attaching to the appendix of this document with letter "F".
FIVE. That I had before me the documents mentioned in this document.
SIX. That once this document was read and explained to the appearing party, he
stated his agreement therewith and signed it on the thirtieth day of April,
nineteen ninety-eight, at the same time that I am giving my DEFINITIVE
AUTHORIZATION. I ATTEST.
JAMES ENRIQUE RITCH GRANDE AMPUDIA, FLOURISH, JOSE VISOSO DEL VALLE, FLOURISH,
THE AUTHORIZING SEAL.
"SUPPLEMENTAL NOTES"
NOTE: ONE. UNDER LETTER "G ONE TO G FIVE" I AM ATTACHING TO THE APPENDIX OF THIS
DOCUMENT COPIES OF THE SECOND NOTICE SUBMITTED TO THE PUBLIC REGISTRY OF
PROPERTY IN THE STATE OF MEXICO.
FEDERAL DISTRICT, MAY SIXTH, NINETEEN NINETY-EIGHT, I ATTEST, FLOURISH.
NOTE: TWO. UNDER LETTER "H" I AM ATTACHING TO THE APPENDIX OF THIS DOCUMENT THE
SECOND NOTICE SUBMITTED TO THE PUBLIC REGISTRY OF THE STATE OF MEXICO.
FEDERAL DISTRICT, MAY EIGHTH, NINETEEN NINETY-EIGHT, I ATTEST, FLOURISH.
THIS IS A CERTIFIED COPY THAT I AM ISSUING FOR "CREDIT SUISSE FIRST BOSTON", IT
CONSISTS OF SIX HUNDRED TWENTY-ONE PAGES, TWENTY-ONE WRITTEN ON BOTH SIDES AND
SIX HUNDRED ON JUST ONE SIDE, COMPARED AND CORRECTED.
MEXICO, FEDERAL DISTRICT, MAY TWENTIETH, NINETEEN NINETY-EIGHT.
I ATTEST.
JVV/ahs
[signature and seal]
-10-
<PAGE>
Annex "A"
[CERTIFICATES OF FREEDOM FROM ENCUMBRANCES]
<PAGE>
Annex "B"
[CREDIT AGREEMENT]
<PAGE>
Annex "C"
[JCISA SUBSIDIARY GUARANTEE AGREEMENT]
<PAGE>
Annex "D"
[FEE AND GUARANTEE AGREEMENT]
<PAGE>
EXHIBIT 4.17
TRUE COPY
---------
of the deed of:
PLEDGE
------
in the capital of:
CDRJ Europe Holding Company B.V. and
------------------------------------
CDRJ Latin America Holding Company B.V.
---------------------------------------
Deed of: 30 April 1998.
-----------------------
<PAGE>
DEED OF PLEDGE
--------------
On this, the thirtieth day of April one thousand nine hundred and ninety-eight,
appeared before me, Gerard Cornelis van Eck, assistant civil law notary,
residing at Utrecht, hereinafter to be referred to as civil law notary, acting
as a substitute for Frits Willem Oldenburg, civil law notary, practising at
Amsterdam:
1. Paul Robert Schut, assistant civil law notary residing at 1017 NR
Amsterdam, Lange Leidsedwarsstraat 206 II, born at De Bilt on the
eighteenth day of December one thousand nine hundred and seventy-one,
holder of driver's licence number 0087239597, single and non-registered
partner, acting for the purposes hereof as attorney - duly authorized in
writing - of each of:
i. CDRJ Acquisition (to be renamed in: Jaffra Cosmetics International,
---------------- -------------------------------
Inc.), a corporation under the laws of the State of Delaware, United
---
States of America, having its registered office at c/o Corporation
Trust Center, 1209 Orange Street, Wilmington DE 19801, the United
States of America, hereinafter referred to as the "Pledgor I"; and
ii. CDRJ North Atlantic (Lux) S.aa.R.L., a limited liability company under
the laws of Luxembourg, whose registered office is at 10, Rue Antoine
Jans, 1820 Luxembourg, Luxembourg, hereinafter referred to as the
"Pledgor II".
The Pledgor I and the Pledgor II hereinafter also collectively referred to
as: the "Pledgor".
2. Robert Peter ten Have, lawyer, residing at 1251 ZA Laren, De Dissel 27,
born at Leiden on the twenty-second day of March one thousand nine hundred
and sixty-eight, holder of passport number L758921, married, acting for the
purposes hereof as attorney duly- authorized in writing -of each of:
i. CDRJ Europe Holding Company B.V.,
-------------------------------
a private company with limited liability under the laws of The
Netherlands ("besloten vennootschap met
<PAGE>
beperkte aansprakelijkheid"), having its corporate seat at
Amsterdam and its principal place of business at 1017 CG Amsterdam,
Herengracht 548, hereinafter referred to as: "Company I"; and
ii. CDRJ Latin America Holding Company B.V., a private company with
--------------------------------------
limited liability under the laws of The Netherlands ("besloten
vennootschap met beperkte aansprakelijkheid"), having its corporate
seat at Amsterdam and its principal place of business at 1017 CG
Amsterdam, Herengracht 548, hereinafter referred to as: "Company II",
Company I and Company II hereinafter also collectively referred to as:
the "Companies
iii. Credit Suisse First Boston, a banking organization, organized and
--------------------------
existing under the laws of Switzerland, having an office at Eleven
Madison Avenue, New York, the United States of America, acting as
Collateral Agent under the Credit Agreement as hereinafter defined -
hereinafter referred to as: the "Pledgee".
The persons appearing, acting in said capacities declared and said as
follows:
WHEREAS:
-------
(a) by notarial deed of contribution and transfer of shares, executed on
this, the thirtieth day of April one thousand nine hundred and ninety-
eight, before the undersigned civil-law notary, Pledgor I acquired the
legal and beneficial title to all issued and outstanding shares in the
capital of Company I, such deed also containing the acknowledgement of
the above acquisition by Company I;
(b) by notarial deed of contribution and transfer of shares, executed on
this, the thirtieth day of April one thousand nine hundred and ninety-
eight, before the undersigned civil-law notary, the Pledgor II
acquired the legal and beneficial title to all issued and outstanding
shares in the capital of Company II, such deed also containing the
2
<PAGE>
acknowledgement of the above acquisition by Company II;
(c) inter alia - the Pledgor I is signatory to that certain credit
agreement dated as of this, the thirtieth day of April one thousand
nine hundred and ninety-eight - a photocopy of which is attached to
this Deed - with among other parties, the Secured Party (as the same
may be amended, supplemented or otherwise modified from time to time,
hereinafter referred to as the "Credit Agreement") under the terms of
which - inter alia -the Pledgee agreed to make available certain loans
- inter alia - to the Pledgor I, as defined in the Credit Agreement,
all of such loans on the terms and for the purposes as defined in the
Credit Agreement;
(d) inter alia - the Pledgor is signatory to that certain pledge agreement
dated as of this, the thirtieth day of April one thousand nine hundred
and ninety-eight - a photocopy of which is attached to this Deed -
with among other parties, the Pledgee (as the same may be amended,
supplemented or otherwise modified from time to time, hereinafter
referred to as the "Pledge Agreement") under the terms of which the
Pledgor agreed to execute this Deed in order to secure the Obligations
as defined in the Pledge Agreement;
NOW THEREFORE on the terms and subject to the conditions of this Deed, the
-------------
parties hereto agree as follows:
Section 1 - Defined Terms and Related Matters
---------------------------------------------
Capitalized terms not otherwise defined in this Deed shall for all purposes
of this Deed, including the preceding recitals, have the same meaning as
the terms defined in the Credit Agreement and the Pledge Agreement.
Section 2 - Agreement to Pledge
-------------------------------
In order to secure the payment and performance, as the case may be, in full
of the Obligations (as defined in the Pledge Agreement) of the respective
Pledgor I or Pledgor II, as the case may be, and in pursuance of the
3
<PAGE>
provisions in the Credit Agreement and the Pledge Agreement, Pledgor I and
Pledgor II respectively and the Pledgee hereby agree to create a first
ranking right of pledge ("eerste pandrecht") in favour of the Pledgee, as
meant in Section 3:227 and following of the Netherlands' Civil Code over
twenty-four (24) ordinary shares, having a par value of one thousand Dutch
Guilders (NLG 1,000.--) each, numbered 1 up to and including 24, in the
share capital of Company I (hereinafter referred to as: the "Shares I")
and over forty (40) ordinary shares having a par value of one thousand
Dutch Guilders (NLG 1,000.--) each, numbered 1 up to and including 40, in
the share capital of Company II (hereinafter referred to as: the "Shares
II") respectively. The Shares I and the Shares II hereinafter also
collectively referred to as the "Shares". The provisions of the Credit
Agreement and the Pledge Agreement, shall - to the extent permitted under
Netherlands' law - mutatis mutandis be applicable, in so far as not
----------------
deviated therefrom by this Deed.
Section 3 - Creation of Right of Pledge
---------------------------------------
3.1 In pursuance of the provisions in Section 2 hereof, Pledgor I and
Pledgor II respectively hereby grant to the Pledgee a first ranking
right of pledge ("eerste pandrecht") over the Shares I and the Shares
II respectively in accordance with Section 3:236, paragraph 2, in
conjunction with Sections 3:98 and 2:196 of the Netherlands' Civil
Code, and the Pledgee hereby accepts such first ranking rights of
pledge.
3.2 In pursuance of the provisions in Section 2 hereof, Pledgor I and
Pledgor II respectively pledge by anticipation and/or undertake to
pledge any and all proceeds of the Shares I and Shares II respectively
including, without limitation, all additional shares, shares
receivable or received by virtue of a stock split, or any other shares
receivable or received in exchange for any and all of the Shares I and
the Shares II respectively, dividends, cash, instruments, warrants and
other property from time to time received, receivable or otherwise
4
<PAGE>
distributed in respect of, or in exchange for, any or all of the
Shares I and the Shares II respectively, and in as far as they are not
capable of being pledged on the date hereof, as soon as the same are
capable of being pledged in accordance with Netherlands' law to the
Pledgee, and the Pledgee hereby accepts such pledges. The above
proceeds of the Shares I and the Shares II respectively will be
pledged to the Pledgee as soon as they become eligible for pledging.
This will be effected with due observance of the specific requirements
under Netherlands' law regarding the pledge of such proceeds of the
Shares I and the Shares II respectively.
3.3.1. The Managing Board of Company I has resolved to approve of the
creation of the right of pledge over the Shares I in favour of
the Pledgee, as evidenced by Board Minutes dated the thirtieth
day of April one thousand nine hundred ninety eight, a copy of
which will be attached to this deed.
3.3.2. The Managing Board of Company II has resolved to approve of
the creation of the right of pledge over the Shares II in
favour of the Pledgee, as evidenced by Board Minutes dated the
thirtieth day of April one thousand nine hundred ninety eight,
a copy of which will be attached to this deed.
Section 4 - Acknowledgement
---------------------------
Company I and Company II respectively hereby acknowledge the creation of
the pledges pursuant to this Deed and declare that they will, in so far as
it regards the creation of a right of pledge over the Shares I and the
Shares II respectively, cause these pledges to be recorded in their
respective shareholders' registers without delay.
5
<PAGE>
Section 5 - Representations and Warranties
------------------------------------------
5.1 Pledgor I and Pledgor II respectively hereby represent and warrant
that they are, or shall be, as the case may be, entitled to pledge the
Shares I and the Shares II respectively and the proceeds referred to
in Section 3.2 to the Pledgee and that there are no or will not be any
attachments, rights of pledge in favour of third parties or any right
of retention on or against the Shares I and the Shares II respectively
and the proceeds referred to in Section 3.2, with the exception of the
security interest in and lien upon the Shares I and the Shares II
respectively granted to the Pledgee pursuant to the Credit Agreement,
the Pledge Agreement and this Deed. Pledgor I and Pledgor II
respectively further represent and warrant that they have not
previously and/or in advance transferred or created rights of pledge
on or over the Shares I and the Shares II respectively and the
proceeds referred to in Section 3.2, either in whole or in part, to or
in favour of any third parties.
5.2 Pledgor I and Pledgor II respectively furthermore represent and
warrant that no depositary receipts have been issued for the Shares I
and the Shares II respectively, that there are no outstanding claims
on Company I and Company II respectively for the issue of shares in
there respective capital, that there are no outstanding options or
other rights entitling the holder thereof to the transfer of the
Shares I and the Shares II respectively or of any part thereof, and
that no resolution to dissolve Company I and Company II respectively
has been taken.
Section 6 - Voting Rights Under the suspensive condition that Company I's
- -------------------------
Articles of Association and Company II's Articles of Association respectively
are amended to the effect that the voting rights attached to the Shares I and
the Shares II respectively may vest in a pledgee (hereinafter referred to as:
the "Suspensive
6
<PAGE>
Condition") the Pledgee shall have the voting rights attached to the Shares I
and the Shares II respectively. Under the Suspensive Condition the Pledgee
hereby revocably authorizes the Pledgor I and the Pledgor II respectively to
exercise the voting rights attached to the Shares I and the Shares II
respectively, which power of attorney shall be revocable only if and when an
Event of Default shall have occurred and be continuing under the Credit
Agreement, provided, however that the Pledgor I and the Pledgor II respectively
shall not vote the Shares I and the Shares II respectively if the result thereof
could materially and adversely affect the rights inuring to a holder of the
Pledged Securities or the rights and remedies of any of the Secured Parties
under the Credit Agreement, the Pledge Agreement, this Deed or any other Loan
Document or the ability of the Secured Parties to exercise the same.
Section 7 - Remedies
- --------------------
Without prejudice to the rights and remedies provided to the Pledgee by law and
subject to the mandatory rules of law, the Pledgee may, upon the occurrence and
during the continuance of an Event of Default under the Credit Agreement, the
Pledge Agreement or this Deed:
(i) take all measures, whether judicial or extra-judicial, which a pledgee may
take in the event of enforcement of pledged goods and which are permitted
by law and which in its opinion are required in its interests; (ii) apply
any proceeds of the Shares without regard to the provisions of Sections
6:43 and 6:44 of the Netherlands Civil Code.
Section 8 - Release
- -------------------
The provisions of this Deed and the pledges created hereby shall remain in full
force and effect until all of the Pledgor's respective Obligations shall have
been fully and finally paid and performed and all Pledgee's commitments under
the Credit Agreement and/or other Loan Documents shall have expired or been
terminated.
Section 9 - Governing law This Deed shall be interpreted and the rights and
- -------------------------
liabilities of the parties hereto determined in accordance with the laws of The
Netherlands.
7
<PAGE>
Section 10 - Jurisdiction
- -------------------------
Any dispute under this Deed shall exclusively be settled by the court of
competent jurisdiction at Amsterdam, The Netherlands, provided that the Pledgee
may seek enforcement of the obligations of Pledgor hereunder through any other
competent court in any other jurisdiction.
Section 11 - Inconsistencies In the event of any irreconcilable inconsistencies
- ----------------------------
between any provision of the Credit Agreement, the Pledge Agreement, the Loan
Documents and this Deed, the provisions of this Deed shall prevail.
Final Part The persons appearing have been granted powers of attorney by means
- ----------
of five non-notarial instruments of attorney, photocopies of which will after
the present Deed has been executed be attached to this Deed. Sufficient
evidence has been furnished to me, the civil-law notary, of the existence of the
powers of attorney included in the authority. The persons appearing are known
to me, the civil-law notary.
WHEREOF THE PRESENT DEED,
the Original of which was executed at Amsterdam, the day and year first above
written. After the substance of this Deed had been made known to the persons
appearing, they unanimously declared that they had taken cognizance of the
contents of this Deed and that they did not wish the same to be read out to them
in full. Subsequently, after this Deed had been read out in part, the persons
appearing and I, the civil law notary, thereunto appended our signatures.
Signed: P.R. Schut, R.P. ten Have, G.C. van Eck
ISSUED FOR TRUE COPY
--------------------
8
<PAGE>
EXHIBIT 10.1
CONFORMED COPY
INDEMNIFICATION AGREEMENT
-------------------------
INDEMNIFICATION AGREEMENT, dated as of April 30, 1998 (the
"Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme
("Lux SA"), CDRJ Acquisition Corporation, a Delaware corporation to be renamed
- --------
Jafra Cosmetics International, Inc ("JCI"), Jafra Cosmetics International, S.A.
---
de C.V., a sociedad anonima de capital variable ("JCISA"), Clayton, Dubilier &
-----
Rice, Inc., a Delaware corporation ("CD&R"), CDRJ Holding Company, a Cayman
----
Islands Company "Cayman Co") and Clayton, Dubilier & Rice Fund V Limited
Partnership, a Cayman Islands exempted limited partnership (together with any
other investment vehicle managed by CD&R, "CD&R Fund"). Capitalized terms used
---------
herein without definition have the meanings set forth in Section 1 of this
Agreement.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, CD&R Fund is managed by CD&R, and the general partner of CD&R
Fund is Clayton, Dubilier & Rice Associates V Limited Partnership, a Cayman
Islands exempted limited partnership (together with any general partner of any
other investment vehicle managed by CD&R, "CD&R Associates"), and the general
---------------
partner of CD&R Associates is CD&R Investment Associates, Inc., a Delaware
corporation (together with any other general partner of CD&R Associates,
"Associates Inc.");
- ----------------
WHEREAS, CD&R organized Lux SA, JCI, JCISA and other Subsidiaries to
effect the acquisition of the Jafra cosmetics business of The Gillette Company
(the "Acquisition") pursuant to the Acquisition Agreement, dated as of January
26, 1998, as amended (the "Acquisition Agreement"), between The Gillette
---------------------
Company, Cayman Co. and Lux SA and the other parties thereto;
WHEREAS, concurrently with the execution and delivery of this
Agreement, JCI is entering into a Consulting Agreement, dated as of the date
hereof (the "Consulting Agreement"), by and between Lux SA, JCI, JCISA and CD&R;
--------------------
WHEREAS, in order to finance the Acquisition, Lux SA is offering,
issuing and selling shares of its stock, par value $2.00 per share, to CD&R Fund
and to certain purchasers who are executive officers or key employees of Lux SA,
JCI or JCISA (such transactions collectively, the "Equity Offering");
---------------
WHEREAS, in order to finance the Acquisition and related transactions,
Lux SA, JCI and JCISA entered into a Credit Agreement, dated as of April 30,
1998, among, Lux SA, JCI and JCISA and the lenders named therein and Credit
Suisse First Boston as administrative agent and Chase Securities Inc. as
syndication agent, providing
<PAGE>
for borrowing of up to a maximum principal amount of $90 million (the "Senior
-----
Secured Credit Facilities");
- ---------------------------
WHEREAS, in order further to finance the Acquisition and related
transactions, JCI and JCISA offered and sold (the "Note Offering"), in an
-------------
offering to institutional investors pursuant to Rule 144A under the Securities
Act of 1933, as amended (the "Securities Act"), $100,000,000 aggregate principal
--------------
of 11 3/4% Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes");
-------------------------
WHEREAS, CD&R has performed financial, management advisory and other
services for the Company, including but not limited to providing assistance in
connection with, (i) the preparation, negotiation, execution and delivery of the
-
Acquisition Agreement, (ii) the retention of legal, accounting, insurance,
--
investment banking, financial and other advisors and consultants in connection
with the Acquisition and (iii) the preparation, negotiation, execution and
---
delivery of the commitment, fee and engagement letters, registration rights and
purchase agreements, credit agreements, indentures and indenture supplements,
guarantees, mortgages, pledge agreements and other security agreements,
subscription, registration rights and participation agreements, exchange agent
agreements, and other agreements, instruments and documents, relating to the
Financings or the other Transactions, (iv) the preparation and circulation of
--
information and offering memoranda and other materials in connection with the
Senior Secured Facilities, the Note Offering and the Equity Offering and (v) the
-
structuring, implementation and consummation of the Acquisition (such services
collectively, the "Acquisition Services");
--------------------
WHEREAS, it is contemplated that JCI and JCISA will offer (the "Note
----
Exchange Offer") to exchange the Senior Subordinated Notes for substantially
- --------------
identical notes to be registered on Form S-4 with the Securities and Exchange
Commission (the "Commission");
WHEREAS, CD&R Fund will purchase capital stock of Lux SA pursuant to
the Equity Offering, becoming the majority stockholder of Lux SA;
WHEREAS, Lux SA or one or more of its respective Subsidiaries from
time to time in the future (a) may offer and sell or cause to be offered and
-
sold equity or debt securities (such offerings, together with the Note Exchange
Offer, being collectively referred to as the "Subsequent Offerings"), including
--------------------
without limitation (i) offerings of shares of Lux SA, and/or options to purchase
-
such shares to employees, directors, managers and consultants of and to Lux SA
or any Subsidiary (a "Management Offering"), and (ii) one or more offerings of
------------------- --
debt securities for the purpose of refinancing any indebtedness of JCI or JCISA
or any Subsidiary or for other corporate purposes, and (b) may repurchase,
-
redeem or otherwise acquire certain securities of Lux SA or one or
2
<PAGE>
more of its Subsidiaries (any such repurchase or redemption being referred to
herein as a "Redemption");
-----------
WHEREAS, the parties hereto recognize the possibility that claims
might be made against and liabilities incurred by CD&R, CD&R Fund, CD&R
Associates, Associates Inc. or related persons or affiliates under applicable
securities laws or otherwise in connection with the Transactions or the
Securities Offerings, or relating to other actions or omissions of or by Lux SA,
JCI, JCISA or its respective Subsidiaries, or relating to the provision by CD&R
of management consulting, monitoring and financial advisory services to Lux
SA, JCI, JCISA and their respective Subsidiaries, and the parties hereto
accordingly wish to provide for CD&R, CD&R Fund, CD&R Associates, Associates
Inc. and related persons and affiliates to be indemnified in respect of any such
claims and liabilities; and
WHEREAS, the parties hereto recognize that claims might be made
against and liabilities incurred by directors and officers of Lux SA, JCI, JCISA
and any Subsidiary in connection with their acting in such capacity, and
accordingly wish to provide for such directors and officers to be indemnified to
the fullest extent permitted by law in respect of any such claims and
liabilities;
NOW, THEREFORE, in consideration of the foregoing premises, and the
mutual agreements and covenants and provisions herein set forth, the parties
hereto hereby agree as follows:
1. Definitions.
-----------
(a) "Claim" means, with respect to any Indemnitee, any claim against
-----
such Indemnitee involving any Obligation with respect to which such Indemnitee
may be entitled to be defended and indemnified by Lux SA, JCI or JCISA under
this Agreement.
(b) "Consulting Agreement" means the Consulting Agreement, dated as of
--------------------
the date hereof, among Lux SA, JCI, JCISA and CD&R, as the same may be amended,
waived, modified or supplemented from time to time.
(c) "Financing" means the financings provided for by the Senior
---------
Secured Credit Facilities and the Senior Subordinated Notes.
(d) "Indemnitee" means each of CD&R, Cayman Co., CD&R Fund, CD&R
----------
Associates, Associates Inc. CD&R Investment Associates II, Inc., their
respective successors and assigns, and their respective directors, officers,
partners, members, employees, agents, advisors, representatives and controlling
persons (within
3
<PAGE>
the meaning of the Securities Act of 1933, as amended (the "Securities Act"))
---------------
and each other person who is or becomes a director or an officer of Lux SA, JCI,
JCISA, Cayman Co or any Subsidiary.
(e) "Obligations" means, collectively, any and all claims,
-----------
obligations, liabilities, causes of actions, actions, suits, proceedings,
investigations, judgments, decrees, losses, damages, fees, costs and expenses
(including without limitation interest, penalties and fees and disbursements
of attorneys, accountants, investment bankers and other professional advisors),
in each case whether incurred, arising or existing with respect to third parties
or otherwise at any time or from time to time.
(f) "Related Document" means any agreement, certificate, instrument or
----------------
other document to which Lux SA, JCI, JCISA or any Subsidiary may be a party or
by which it or any of its properties or assets may be bound or affected from
time to time relating in any way to the Transactions or any Securities Offering
or any of the transactions contemplated thereby, including without limitation,
in each case as the same may be amended, modified, waived or supplemented from
time to time, (A) any registration statement filed by or on behalf of Lux SA,
-
JCI, JCISA or any Subsidiary with the Commission in connection with the
Transactions or any Securities Offering, including all exhibits, financial
statements and schedules appended thereto, and any submissions to the Commission
in connection therewith, (B) any prospectus, preliminary or otherwise, included
-
in such registration statements or otherwise filed by or on behalf of Lux SA,
JCI, JCISA or any Subsidiary in connection with the Transactions or any
Securities Offering or used to offer or confirm sales of their respective
securities in any Securities Offering, (C) any private placement or offering
-
memorandum or circular, or other information or materials distributed by or on
behalf of Lux SA, JCI, JCISA or any Subsidiary or any placement agent or
underwriter in connection with the Transactions or any Securities Offering, (D)
-
any federal, state or foreign securities law or other governmental or regulatory
filings or applications made in connection with any Securities Offering, the
Transactions or any of the transactions contemplated thereby, (E) any dealer-
-
manager, underwriting, subscription, purchase, stockholders, option or
registration rights agreement or plan entered into or adopted by Lux SA, JCI,
JCISA or any Subsidiary in connection with any Securities Offering, (F) any
-
purchase, repurchase, redemption or other agreement entered into by Lux SA, JCI,
JCISA or any Subsidiary in connection with any Redemption, or (G) any quarterly,
-
annual or current reports filed by Lux SA, JCI, JCISA or the Company with the
Commission, including all exhibits, financial statements and schedules appended
thereto, and any submission to the Commission in connection therewith.
4
<PAGE>
(g) "Securities Offerings" means the Note Exchange Offer, the Equity
--------------------
Offering, any Management Offering, any Redemption and any Subsequent Offering.
(h) "Subsidiary" means each corporation or other person or entity in
----------
which Lux SA, JCI, Cayman Co. or JCISA owns or controls, directly or indirectly,
capital stock or other equity interests representing at least 25% of the
outstanding voting stock or other equity interests.
(i) "Transactions" means the Acquisition, the Equity Offering and the
------------
Financing.
2. Indemnification.
---------------
(a) Each of Lux SA, JCI and JCISA (each an "Indemnifying Party" and
------------------
collectively, the "Indemnifying Parties"), jointly and severally, agrees to
--------------------
indemnify, defend and hold harmless each Indemnitee:
(i) from and against any and all Obligations, whether incurred with
respect to third parties or otherwise, in any way resulting from, arising
out of or in connection with, based upon or relating to (A) the Securities
-
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
------------
or any other applicable securities or other laws, in connection with any
Securities Offering, the Financing, any Related Document or any of the
transactions contemplated thereby, (B) any other action or failure to act
-
of Lux SA, JCI, JCISA or any Subsidiary or any of their predecessors,
whether such action or failure has occurred or is yet to occur or (C)
-
except to the extent that any such Obligation is found in a final judgment
by a court of competent jurisdiction to have resulted from the gross
negligence or intentional misconduct of CD&R, the performance by CD&R of
management consulting, monitoring, financial advisory or other services for
Lux SA, JCI or JCISA (whether performed prior to the date hereof,
hereafter, pursuant to the Consulting Agreement or otherwise); and
(ii) to the fullest extent permitted by applicable law, from and
against any and all Obligations in any way resulting from, arising out of
or in connection with, based upon or relating to (A) the fact that such
-
Indemnitee is or was a director or an officer of Lux SA, JCI, JCISA, Cayman
Co. or any Subsidiary, as the case may be, or is or was serving at the
request of such corporation as a director, officer, employee or agent of or
advisor or consultant to another corporation, partnership, joint venture,
trust or other enterprise or
5
<PAGE>
(B) any breach or alleged breach by such Indemnitee of his or her fiduciary
-
duty as a director or an officer of Lux SA, JCI, JCISA, Cayman Co. or any
Subsidiary, as the case may be;
in each case including but not limited to any and all fees, costs and expenses
(including without limitation fees and disbursements of attorneys) incurred by
or on behalf of any Indemnitee in asserting, exercising or enforcing any of its
rights, powers, privileges or remedies in respect of this Agreement or the
Consulting Agreement.
(b) Without in any way limiting the foregoing Section 2(a), each of
the Indemnifying Parties agrees, jointly and severally, to indemnify, defend and
hold harmless each Indemnitee from and against any and all Obligations resulting
from, arising out of or in connection with, based upon or relating to
liabilities under the Securities Act, the Exchange Act or any other applicable
securities or other laws, rules or regulations in connection with (i) the
-
inaccuracy or breach of or default under any representation, warranty, covenant
or agreement in any Related Document, (ii) any untrue statement or alleged
--
untrue statement of a material fact contained in any Related Document or (iii)
---
any omission or alleged omission to state in any Related Document a material
fact required to be stated therein or necessary to make the statements therein
not misleading. Notwithstanding the foregoing, the Indemnifying Parties shall
not be obligated to indemnify such Indemnitee from and against any such
Obligation to the extent that such Obligation arises out of or is based upon an
untrue statement or omission made in such Related Document in reliance upon and
in conformity with written information furnished to Lux SA, JCI or JCISA, as the
case may be, in an instrument duly executed by such Indemnitee and specifically
stating that it is for use in the preparation of such Related Document.
3. Contribution.
------------
(a) Except to the extent that Section 3(b) is applicable, if for any
reason the indemnity provided for in Section 2(a) is unavailable or is
insufficient to hold harmless any Indemnitee from any of the Obligations covered
by such indemnity, then the Indemnifying Parties, jointly and severally, shall
contribute to the amount paid or payable by such Indemnitee as a result of such
Obligation in such proportion as is appropriate to reflect (i) the relative
-
fault of each of Lux SA, JCI, JCISA and their Subsidiaries, on the one hand, and
such Indemnitee, on the other, in connection with the state of facts giving rise
to such Obligation, (ii) if such Obligation results from, arises out of, is
--
based upon or relates to the Transactions or any Securities Offering, the
relative benefits received by each of Lux SA, JCI, JCISA and their Subsidiaries,
on the one hand, and such Indemnitee, on the other, from such Transaction or
Securities
6
<PAGE>
Offering and (iii) if required by applicable law, any other relevant equitable
---
considerations.
(b) If for any reason the indemnity specifically provided for in
Section 2(b) is unavailable or is insufficient to hold harmless any Indemnitee
from any of the Obligations covered by such indemnity, then the Indemnifying
Parties, jointly and severally, shall contribute to the amount paid or payable
by such Indemnitee as a result of such Obligation in such proportion as is
appropriate to reflect (i) the relative fault of each of Lux SA, JCI, JCISA and
-
their Subsidiaries, on the one hand, and such Indemnitee, on the other, in
connection with the information contained in or omitted from any Related
Document, which inclusion or omission resulted in the inaccuracy or breach of or
default under any representation, warranty, covenant or agreement therein, or
which information is or is alleged to be untrue, required to be stated therein
or necessary to make the statements therein not misleading, (ii) the relative
--
benefits received by Lux SA, JCI, JCISA and their Subsidiaries, on the one hand,
and such Indemnitee, on the other, from such Transaction or Securities Offering
and (iii) if required by applicable law, any other relevant equitable
---
considerations.
(c) For purposes of Section 3(a), the relative fault of each of Lux
SA, JCI, JCISA and their Subsidiaries, on the one hand, and of the Indemnitee,
on the other, shall be determined by reference to, among other things, their
respective relative intent, knowledge, access to information and opportunity to
correct the state of facts giving rise to such Obligation. For purposes of
Section 3(b), the relative fault of each of Lux SA, JCI, JCISA and their
Subsidiaries, on the one hand, and of the Indemnitee, on the other, shall be
determined by reference to, among other things, (i) whether the included or
-
omitted information relates to information supplied by Lux SA, JCI, JCISA and
their Subsidiaries, on the one hand, or by such Indemnitee, on the other, and
(ii) their respective relative intent, knowledge, access to information and
- ---
opportunity to correct such inaccuracy, breach, default, untrue or alleged
untrue statement, or omission or alleged omission. For purposes of Section 3(a)
or 3(b), the relative benefits received by each of Lux SA, JCI, JCISA and their
Subsidiaries, on the one hand, and the Indemnitee, on the other, shall be
determined by weighing the direct monetary proceeds to Lux SA, JCI, JCISA and
their Subsidiaries, on the one hand, and such Indemnitee, on the other, from
such Transaction or Securities Offering.
(d) The parties hereto acknowledge and agree that it would not be just
and equitable if contributions pursuant to Section 3(a) or 3(b) were determined
by pro rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to in such respective
Section. The Indemnifying Parties shall not be liable under Section 3(a) or
3(b), as applicable, for contribution to the amount paid or payable by any
Indemnitee except to the extent and under such circumstances any Indemnifying
Party would have been liable to indemnify, defend and
7
<PAGE>
hold harmless such Indemnitee under the corresponding Section 2(a) or 2(b), as
applicable, if such indemnity were enforceable under applicable law. No
Indemnitee shall be entitled to contribution from any Indemnifying Party with
respect to any Obligation covered by the indemnity specifically provided for in
Section 2(b) in the event that such Indemnitee is finally determined to be
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) in connection with such Obligation and the Indemnifying
Parties are not guilty of such fraudulent misrepresentation.
4. Indemnification Procedures.
--------------------------
(a) Whenever any Indemnitee shall have actual knowledge of the
reasonable likelihood of the assertion of a Claim, CD&R (acting on its own
behalf or, if requested by any such Indemnitee other than itself, on behalf of
such Indemnitee) or such Indemnitee shall notify Lux SA, JCI, JCISA or the
appropriate Subsidiary, as the case may be, in writing of the Claim (the "Notice
------
of Claim") with reasonable promptness after such Indemnitee has such knowledge
- --------
relating to such Claim and has notified CD&R thereof. The Notice of Claim shall
specify all material facts known to CD&R (or if given by such Indemnitee, such
Indemnitee) that may give rise to such Claim and the monetary amount or an
estimate of the monetary amount of the Obligation involved if CD&R (or if given
by such Indemnitee, such Indemnitee) has knowledge of such amount or a
reasonable basis for making such an estimate. The failure of CD&R to give such
Notice of Claim shall not relieve any Indemnifying Party of its respective
indemnification obligations under this Agreement except to the extent that such
omission results in a failure of actual notice to it and it is materially
injured as a result of the failure to give such Notice of Claim. The
Indemnifying Parties shall, at their expense, undertake the defense of such
Claim with attorneys of their own choosing satisfactory in all respects to CD&R.
CD&R may participate in such defense with counsel of CD&R's choosing at the
expense of the Indemnifying Parties. In the event that none of the Indemnifying
Parties undertake the defense of the Claim within a reasonable time after CD&R
has given the Notice of Claim, or in the event that CD&R shall in good faith
determine that the defense of any claim by the Indemnifying Parties is
inadequate or may conflict with the interest of any Indemnitee, CD&R may, at the
expense of the Indemnifying Parties and after giving notice to the Indemnifying
Parties of such action, undertake the defense of the Claim and compromise or
settle the Claim, all for the account of and at the risk of the Indemnifying
Parties. In the defense of any Claim, the Indemnifying Parties shall not,
except with the prior written consent of CD&R, consent to entry of any judgment
or enter into any settlement that includes any injunctive or other non-monetary
relief, or that does not include as an unconditional term thereof the giving by
the person or persons asserting such Claim to such Indemnitee of a release from
all liability with respect to such Claim. In each case,
8
<PAGE>
CD&R and each other Indemnitee seeking indemnification hereunder will cooperate
with the Indemnifying Parties, so long as the Indemnifying Parties are
conducting the defense of the Claim, in the preparation for and the prosecution
of the defense of such Claim, including making available evidence within the
control of CD&R or such Indemnitee, as the case may be, and persons needed as
witnesses who are employed by CD&R or such Indemnitee, as the case may be, in
each case as reasonably needed for such defense and at cost, which cost, to the
extent reasonably incurred, shall be paid by the Indemnifying Parties.
(b) The Indemnifying Parties hereby agree to advance costs and
expenses, including attorney's fees, incurred by CD&R (acting on its own behalf
or, if requested by any such Indemnitee other than itself, on behalf of such
Indemnitee) or any Indemnitee in defending any Claim in advance of the final
disposition of such Claim upon receipt of an undertaking by or on behalf of CD&R
or such Indemnitee to repay amounts so advanced if it shall ultimately be
determined that CD&R or such Indemnitee is not entitled to be indemnified by any
Indemnifying Party as authorized by this Agreement.
(c) CD&R shall notify the Indemnifying Parties in writing of the
amount of any Claim actually paid by CD&R (the "Notice of Payment"). The amount
-----------------
of any Claim actually paid by CD&R shall bear simple interest at the rate equal
to The Chase Manhattan Bank prime rate as of the date of such payment plus 2%
per annum, from the date any Indemnifying Party receives the Notice of Payment
to the date on which any Indemnifying Party shall repay the amount of such Claim
plus interest thereon to CD&R.
5. Certain Covenants. Lux SA agrees to cause each of JCI and JCISA
-----------------
to perform its obligations under this Agreement. The rights of each Indemnitee
to be indemnified under any other agreement, document, certificate or instrument
or applicable law are independent of and in addition to any rights of such
Indemnitee to be indemnified under this Agreement. The rights of each
Indemnitee and the obligations of Lux SA, JCI and JCISA hereunder shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnitee. Following its merger with Jafra Cosmetics International, Inc.,
a California corporation, JCI shall maintain the State of Delaware as its state
of incorporation and shall implement and maintain in full force and effect any
and all corporate charter and by-law provisions that may be necessary or
appropriate to enable it to carry out its obligations hereunder to the fullest
extent permitted by Delaware corporate law, including without limitation a
provision of its certificate of incorporation eliminating liability of a
director for breach of fiduciary duty to the fullest extent permitted by Section
102(b)(7) (or any successor section
9
<PAGE>
thereto) of the General Corporation Law of the State of Delaware, as it may be
amended from time to time.
6. Notices. All notices and other communications hereunder shall be
-------
in writing and shall be delivered by certified or registered mail (first class
postage prepaid and return receipt requested), telecopier, overnight courier or
hand delivery, as follows:
(a) if to Lux SA, JCI or JCISA, to:
Jafra Cosmetics International, Inc.
2451 Townsgate Road
Westlake Village, CA 91361
Telephone: (805) 449-3000
Facsimile:
Attention: Ralph S. Mason, III, Esq.
---------
(b) if to CD&R, to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue, 18th Floor
New York, New York 10152
Telephone: (212) 407-5200
Facsimile: (212) 407-5252
Attention: Donald J. Gogel
---------
(c) if to the CD&R Fund, to:
Clayton, Dubilier & Rice
Fund V Limited Partnership
1403 Foulk Road, Suite 106
Wilmington, Delaware 19803
Attention: General Partner
---------
or to such other address or such other person as Lux SA, JCI, JCISA, CD&R or the
CD&R Fund, as the case may be, shall have designated by notice to the other
parties hereto. All communications hereunder shall be effective upon receipt by
the party to
10
<PAGE>
which they are addressed. A copy of any notice or other communication given
under this Agreement shall also be given to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telephone: (212) 909-6000
Facsimile: (212) 909-6836
Attention: Paul S. Bird, Esq.
---------
7. Governing Law. This Agreement shall be governed in all respects,
-------------
including validity, interpretation and effect, by the law of the State of New
York, regardless of the law that might be applied under principles of conflict
of laws.
8. Severability. If any provision or provisions of this Agreement
------------
shall be held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
9. Miscellaneous. The headings contained in this Agreement are for
-------------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement shall be binding upon and
inure to the benefit of each party hereto and its successors and permitted
assigns, and each other Indemnitee, but neither this Agreement nor any right,
interest or obligation hereunder shall be assigned, whether by operation of law
or otherwise, by Lux SA, JCI or JCISA without the prior written consent of CD&R
and the CD&R Fund. This Agreement is not intended to confer any right or remedy
hereunder upon any person other than each of the parties hereto and their
respective successors and permitted assigns and each other Indemnitee. No
amendment, modification, supplement or discharge of this Agreement, and no
waiver hereunder shall be valid and binding unless set forth in writing and duly
executed by the party or other Indemnitee against whom enforcement of the
amendment, modification, supplement or discharge is sought. Neither the waiver
by any of the parties hereto or any other Indemnitee of a breach of or a default
under any of the provisions of this Agreement, nor the failure by any party
hereto or any other Indemnitee on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right, powers or privilege
hereunder, shall be construed as a waiver of any other breach or default of a
similar nature, or as a waiver of any provisions hereof, or any rights, powers
or privileges hereunder. The rights and remedies herein provided are cumulative
and are not exclusive of any rights or remedies that any party or other
Indemnitee may otherwise have at law or in equity or
11
<PAGE>
otherwise. This Agreement may be executed in several counterparts, each of which
shall be deemed an original, and all of which together shall constitute one and
the same instrument.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement by their authorized representatives as of the date first above
written.
CDRJ INVESTMENTS (LUX) S.A.
By: /s/ David A. Novak
-----------------------------------
Name: David A. Novak
Title: Secretary
CDRJ ACQUISITION CORPORATION
(to be renamed Jafra Cosmetics International, Inc.)
By: /s/ David A. Novak
----------------------------------------
Name: David A. Novak
Title: Secretary
JAFRA COSMETICS INTERNATIONAL,
S.A. de C.V.
By: /s/ David A. Novak
----------------------------------------------
Name: David A. Novak
Title: Vice President
CLAYTON, DUBILIER & RICE, INC.
By: /s/ Donald J. Gogel
-----------------------------------------
Name: Donald J. Gogel
Title: President, Assistant Secretary and
Assistant Treasurer
13
<PAGE>
CLAYTON, DUBILIER & RICE FUND V
LIMITED PARTNERSHIP
By: CD&R Associates V Limited Partnership,
the General Partner
By: CD&R Investment Associates II, Inc.
its managing general partner
By:/s/ Donald J. Gogel
---------------------------------------
Name: Donald J. Gogel
Title: President, Assistant Secretary and
Assistant Treasurer
CDRJ HOLDING COMPANY
By:/s/ David A. Novak
-------------------------------------
Name: David A. Novak
Title: Vice President
14
<PAGE>
EXHIBIT 10.2
CONFORMED COPY
CONSULTING AGREEMENT
--------------------
This CONSULTING AGREEMENT, dated as of April 30, 1998 (the
"Agreement"), by and among CDRJ Investments (Lux) S.A., a Luxembourg societe
---------
anonyme ("Lux SA"), Jafra Cosmetics International, Inc., a Delaware corporation
------
("JCI") and Jafra Cosmetics International, S.A. de C.V., a sociedad anonima de
---
capital variable ("JCISA" and collectively with Lux SA and JCI, the "Company
-------
Group"), and Clayton, Dubilier & Rice, Inc., a Delaware corporation ("CD&R").
- ----- ----
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company Group has acquired the Jafra cosmetics business
of The Gillette Company pursuant to the Acquisition Agreement, dated as of
January 26, 1998, as amended (the "Acquisition Agreement") between The Gillette
---------------------
Company and Lux SA and CDRJ Holding Company, an affiliate of Lux SA ("Cayman
Co"), and the other parties thereto (such transaction being hereinafter referred
to as the "Acquisition");
-----------
WHEREAS, CD&R has performed financial, management advisory and other
services for the Company Group, including but not limited to assistance in
connection with (i) the preparation, negotiation, execution and delivery of the
-
Acquisition Agreement, (ii) the retention of legal, accounting, insurance,
--
investment banking, financial and other advisors and consultants in connection
with the Acquisition, (iii) the preparation, negotiation, execution and delivery
---
of the commitment, fee and engagement letters, registration rights and purchase
agreements, credit agreements, guarantees, mortgages, pledge agreements and
other security agreements, subscription, management equity agreements, and other
agreements, instruments and documents, relating to the Acquisition, the
financing of the Acquisition and (iv) the structuring, implementation and
--
consummation of the Acquisition (such services collectively, the "Acquisition
-----------
Services");
- --------
WHEREAS, the Company Group desires, following the Acquisition, to
receive financial and managerial advisory services from CD&R, and CD&R desires
to provide such services to the Company Group;
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth and the mutual benefits to be derived herefrom,
the parties hereto hereby agree as follows:
1. Engagement. The Company Group hereby engages CD&R as a
----------
consultant, and CD&R hereby agrees to provide financial and managerial advisory
ser vices to the Company Group, all on the terms and subject to the conditions
set forth below.
<PAGE>
2. Services, etc. (a) CD&R hereby agrees during the term of this
-------------
Agreement to assist, advise and consult with the respective Boards of Directors
and management of each member of the Company Group and their respective
subsidiaries in such manner and on such business, management and financial
matters, and provide such other financial and managerial advisory services
(collectively, the "Continuing Services"), as may be reasonably requested from
-------------------
time to time by the Boards of Directors of each member of the Company Group,
including but not limited to assistance in:
(i) establishing and maintaining banking, legal and other business
relationships for each such member and its subsidiaries;
(ii) developing and implementing corporate and business strategy and
planning for each such member and its subsidiaries, including plans and
programs for improving operating, marketing and financial performance,
budgeting of future corporate investments, acquisition and divestiture
strategies, and reorganizational programs;
(iii) arranging future debt and equity financings and refinancings; and
(iv) providing professional employees to serve as directors or officers
of each member of the Company Group.
(b) Each member of the Company Group will furnish CD&R with such
information as CD&R believes appropriate to its engagement hereunder (all such
information so furnished being referred to herein as the "Information"). Each
-----------
member of the Company Group recognizes and confirms that (i) CD&R will use and
-
rely primarily on the Information and on information available from generally
recognized public sources in performing the services to be performed hereunder
and (ii) CD&R does not assume responsibility for the accuracy or completeness of
--
the Information and such other information.
3. Compensation; Payment of Expenses. (a) The Company Group jointly
---------------------------------
and severally agree to pay CD&R, concurrent with the execution of this
Agreement, as compensation for the Acquisition Services, a fee of $2,700,000.
(b) The Company Group jointly and severally agree to pay to CD&R, as
compensation for Continuing Services rendered and to be rendered by CD&R
hereunder, a fee of $500,000 per year (the "Continuing Services Fee"), one-
-----------------------
twelfth of which shall be payable on the first day of each month commencing on
the first day of the month following the date of the closing of the Acquisition.
Such Continuing
2
<PAGE>
Services Fee may, in the sole discretion of a majority of the members of the
Company's Board of Directors who are not affiliated with CD&R, be increased but
may not be decreased without the prior written consent of CD&R. If any employee
of CD&R shall be elected to serve on the Board of Directors of any member of the
Acquisition Group or any of their affiliates (a "Designated Director"),
---------- --------
in consideration of the Continuing Services Fee being paid to CD&R, CD&R shall
cause such Designated Director to waive any and all fees to which such director
would otherwise be entitled as a director for any period for which the Fee or
any installment thereof is paid.
(c) The Company Group jointly and severally agree to reimburse CD&R
for such reasonable travel and other out-of-pocket expenses ("Expenses") as may
--------
be incurred by CD&R and its employees and agents in the course or on account of
rendering any Acquisition Services or Continuing Services including but not
limited to any fees and expenses of any legal, accounting or other professional
advisors to CD&R engaged in connection with Acquisition Services or Continuing
Services previously provided or being provided hereunder and any expenses
incurred by any Designated Director in connection with the performance of his
duties. CD&R may submit monthly expense statements, which shall be payable
within thirty days.
4. Term, etc. (a) This Agreement shall be in effect until, and
---------
shall terminate upon, the earlier to occur of (x) the tenth anniversary of the
-
date hereof and (y) the date on which Clayton, Dubilier & Rice Fund V Limited
-
Partnership ("CD&R Fund") no longer owns any shares of the capital stock of Lux
---------
SA, and may be earlier terminated by either party hereto upon 30 days' prior
written notice to the other party hereto. The provisions of this Agreement
shall survive any termination of this Agreement, except for the provisions of
Section 1, Section 2(a), the first sentence of Section 2(b) and (solely as to
any portion of the Continuing Services Fee or any Expense not paid or reimbursed
prior to such termination and not required to be paid or reimbursed thereafter
pursuant to Section 4(c) hereof) Section 3 hereof.
(b) Upon any consolidation or merger, or any conveyance, transfer or
lease of all or substantially all of the assets of JCI or JCISA as an entirety,
the successor corporation formed by such consolidation or into which JCI or
JCISA, as the case may be, is merged or to which such conveyance, transfer or
lease is made shall succeed to, and be substituted for, JCI or JCISA, as the
case may be, under this Agreement with the same effect as if such successor
corporation had been a party thereto. No such consolidation, merger or
conveyance, transfer or lease of all or substantially all of the assets of JCI
or JCISA shall have the effect of terminating this Agreement or of releasing JCI
or JCISA or any such successor corporation from its obligations hereunder.
3
<PAGE>
(c) Upon any termination of this Agreement, any accrued and unpaid
installment of the Continuing Services Fee or portion thereof (pro rated, with
respect to the month in which such termination occurs, for the portion of such
month that precedes such termination), and any unpaid and unreimbursed Expenses
that shall have been incurred prior to such termination (whether or not such
Expenses shall then have become payable), shall be immediately paid or
reimbursed, as the case may be, by the Company Group. In the event of the
liquidation of any member of the Company Group, all amounts due CD&R hereunder
shall be paid to CD&R before any liquidating distributions or similar payments
are made to stockholders of such member of the Company Group.
5. Indemnification. (a) Each member of the Company Group confirms
---------------
and reaffirms its obligations pursuant to the Indemnification Agreement, dated
as of the date hereof, (the "Indemnification Agreement"), among Lux SA, JCI,
-------------------------
JCISA, Cayman Co., CD&R and CD&R Fund, as the same may be amended, waived,
modified or supplemented from time to time. Without limiting the generality of
the foregoing, each member of the Company Group confirms and agrees that (a) it
-
shall indemnify, defend and hold harmless CD&R, CD&R Fund, CD&R Associates, CD&R
Associates Inc. (each as defined in the Indemnification Agreement), and CD&R
Investment Associates II, Inc. and each of the respective directors, officers,
partners, members, employees, agents, advisors, representatives and controlling
persons (within the meaning of the Securities Act of 1933, as amended) of CD&R,
CD&R Fund and CD&R Associates (collectively, "Indemnitees") from and against any
-----------
and all claims, obligations, liabilities, causes of action, actions, suits,
proceedings, investigations, judgments, decrees, losses, damages, fees, costs
and expenses (including without limitation interest, penalties and fees and
disbursements of attorneys, accountants, investment bankers and other
professional advisors) (collectively, "Obligations"), whether incurred with
-----------
respect to third parties or otherwise, in any way resulting from, arising out of
or in connection with, based upon or relating to, the performance of the
Acquisition Services or the Continuing Services contemplated hereby, except to
the extent that any such Obligation is found in a final judgment by a court
having jurisdiction to have resulted from the gross negligence or intentional
misconduct of CD&R, (b) no Indemnitee shall have any liability (whether direct
-
or indirect, in contract or tort or otherwise) to a member of the Company Group
or their respective security holders or creditors with respect to any Obligation
in any way resulting from, arising out of or in connection with, based upon or
relating to, the performance of the Acquisition Services or the Continuing
Services contemplated hereby, except to the extent that any such Obligation is
found in a final judgment by a court having jurisdiction to have resulted from
the gross negligence or intentional misconduct of CD&R, and (c) the rights of
-
each Indemnitee to be indemnified under any agreement, document, certificate or
instrument or applicable law are independent of and in addition
4
<PAGE>
to any rights of such Indemnitee under any other agreement, document,
certificate or instrument or applicable law.
(b) The Company hereby agrees to advance costs and expenses,
including attorneys' fees, incurred by CD&R (acting on its own behalf or, if
requested by any such Indemnitee other than itself, on behalf of such
Indemnitee) or any Indemnitee in defending any claim relating to any Obligation
in advance of the final disposition of such claim within 30 days of receipt from
CD&R of (i) a notice setting forth the amount of such costs and expenses (a
-
"Payment Notice") and (ii) an undertaking by or on behalf of CD&R or such
- --------------- --
Indemnitee to repay amounts so advanced if it shall ultimately be determined
that CD&R or such Indemnitee is not entitled to be indemnified by the Company as
authorized by this Agreement. CD&R may submit Payment Notices to the Company
monthly.
6. Independent Contractor Status. The parties agree that CD&R shall
-----------------------------
perform services hereunder as an independent contractor, retaining control over
and responsibility for its own operations and personnel. Neither CD&R nor any
of its employees or agents shall, solely by virtue of this Agreement or the
arrangements hereunder, be considered employees or agents of any member of the
Company Group nor shall any of them have authority to contract in the name of a
member of or bind any member of the Company Group, except (a) to the extent that
-
any professional employee of CD&R may be serving as a director or an officer of
a member of the Company Group pursuant to Section 2(a)(iv) hereof or (b) as
-
expressly agreed to in writing by a member of the Company Group. Each member of
the Company Group hereby acknowledges and agrees that any agreements,
arrangements or understandings entered into by CD&R on behalf of any member of
the Company Group prior to the date hereof in connection with the Acquisition
(including, but not limited to, any confidentiality agreements, agreements with
brokers or finders and any arrangements relating to the financing of the
Acquisition) shall be obligations of the members of the Company Group binding on
them to the same extent as such obligations may be binding on CD&R, and the
Company Group shall fully perform, and shall indemnify and hold harmless CD&R
from and against, all such obligations. Any duties of CD&R arising out of its
engagement to perform services hereunder shall be owed solely to the Company
Group.
7. Notices. Any notice or other communication required or permitted
-------
to be given or made under this Agreement by one party to the other parties shall
be in writing and shall be deemed to have been duly given and effective (i) on
-
the date of delivery if delivered personally or (ii) when sent if sent by
--
prepaid telegram, or mailed first-class, postage prepaid, registered or
certified mail, or facsimile transmission as follows (or to such other address
as shall be given in writing by one party to the other parties in accordance
herewith):
5
<PAGE>
If to Lux SA, JCI or JCISA to:
Jafra Cosmetics International, Inc.
2451 Towngate Road
Westlake Village, CA 91361
Telephone: (805) 449-3000
Facsimile: (805) 449-
Attention: Ralph S. Mason, III, Esq.
----------
If to CD&R, to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue, 18th Floor
New York, New York 10152
Telephone: (212) 407-5200
Telecopy: (212) 407-5252
Attention: Donald J. Gogel
---------
With a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telephone: (212) 909-6000
Telecopy: (212) 909-6836
Attention: Paul S. Bird, Esq.
---------
8. Entire Agreement. This Agreement, together with the
----------------
Indemnification Agreement, (a) contains the complete and entire understanding
-
and agreement of CD&R and each member of the Company Group with respect to the
subject matter hereof and (b) supersedes all prior and contemporaneous
-
understandings, conditions and agreements, oral or written, express or implied,
in respect of the subject matter hereof, including but not limited to in respect
of the engagement of CD&R in connection with the subject matter hereof. There
are no representations or warranties of CD&R in connection with this Agreement
or the services to be provided hereunder, except as expressly made and contained
in this Agreement.
6
<PAGE>
9. Headings. The headings contained in this Agreement are for
--------
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
10. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
11. Binding Effect; Assignment. This Agreement shall be binding upon
--------------------------
and inure to the benefit of the parties to this Agreement and their respective
successors and assigns and to each Indemnitee, provided that none of CD&R or any
--------
member of the Company Group may assign any of its rights or obligations under
this Agreement without the express written consent of the other party hereto.
This Agreement is not intended to confer any right or remedy hereunder upon any
person other than the parties to this Agreement and their respective successors
and permitted assigns and each Indemnitee.
12. Governing Law. This Agreement shall be deemed to be a contract
-------------
made under, and is to be governed and construed in accordance with, the laws of
the State of New York, without regard to the conflict of laws principles or
rules thereof. Each member of the Company Group and CD&R hereby irrevocably
submit to the jurisdiction of the courts of the State of New York and the
Federal courts of the United States of America, in each case located in the
State, City and County of New York, solely in respect of the interpretation and
enforcement of the provisions of this Agreement, and hereby waive, and agree not
to assert, as a defense in any action, suit or proceeding for the interpretation
or enforcement hereof, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in such courts or that
the venue thereof may not be appropriate or that this Agreement may not enforced
in or by such courts, and the parties hereto irrevocably agree that all claims
with respect to such action or proceeding shall be heard and determined in such
a New York State or Federal court. Each member of the Company Group and CD&R
hereby consent to and grant any such court jurisdiction over the person of such
parties and over the subject matter of any such dispute and agree that mailing
of process or other papers in connection with any such action or proceeding in
the manner provided in Section 7, or in such other manner as may be permitted by
law, shall be valid and sufficient service thereof.
13. Waiver of Jury Trial. Each party hereto acknowledges and agrees
--------------------
that any controversy that may arise under this Agreement is likely to involve
complicated and difficult issues, and therefore it hereby irrevocably and
unconditionally waives any right it may have to a trial by jury in respect of
any litigation directly or indirectly arising out of or relating to this
Agreement, or the breach, termination or
7
<PAGE>
validity of this Agreement, or the transactions contemplated by this Agreement.
Each party certifies and acknowledges that (a) no representative, agent or
-
attorney of any other party has represented, expressly or otherwise, that such
other party would not, in the event of litigation, seek to enforce the foregoing
waiver, (b) it understands and has considered the implications of this waiver,
-
(c) it makes this waiver voluntarily, and (d) it has been induced to enter into
- -
this Agreement by, among other things, the mutual waivers and certifications
contained in this Section 13.
14. Amendment; Waivers. No amendment, modification, supplement or
------------------
discharge of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party or Indemnitee against
whom enforcement of the amendment, modification, supplement, discharge or waiver
is sought (and in the case of a member of the Company Group, approved by
resolution of the Board of Directors or the sole stockholder of such member of
the Company Group). Any such waiver shall constitute a waiver only with respect
to the specific matter described in such writing and shall in no way impair the
rights of the party or Indemnitee granting such waiver in any other respect or
at any other time. Neither the waiver by any of the parties hereto or any
Indemnitee of a breach of or a default under any of the provisions of this
Agreement, nor the failure by any party hereto or any Indemnitee on one or more
occasions, to enforce any of the provisions of this Agreement or to exercise any
right, powers or privilege hereunder, shall be construed as a waiver of any
other breach or default of a similar nature, or as a waiver of any of such
provisions, rights, power or privileges hereunder. The rights and remedies
herein provided are cumulative and are not exclusive of any rights or remedies
that any party or Indemnitee may otherwise have at law or in equity or
otherwise.
8
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
CLAYTON, DUBILIER & RICE, INC.
By:/s/ Donald J. Gogel
------------------------------------------
Name: Donald J. Gogel
Title: President
CDRJ INVESTMENTS (LUX) S.A.
By:/s/ David A. Novak
-----------------------------
Name: David A. Novak
Title: Secretary
JAFRA COSMETICS INTERNATIONAL, INC.
By:/s/ David A. Novak
-----------------------------
Name: David A. Novak
Title: Secretary
JAFRA COSMETICS INTERNATIONAL,
S.A. de C.V.
By:/s/ David A. Novak
----------------------------
Name: David A. Novak
Title: Vice President
9
<PAGE>
EXHIBIT 10.3
FORM OF EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is entered into as of this 30th day of
April, 1998 by and among CDRJ Investments (Lux) SA, a Luxembourg company
("Parent"), its indirect wholly owned subsidiary Jafra Cosmetics International,
Inc., a Delaware corporation ("Employer"), and [Name] ("Executive").
W I T N E S S E T H :
WHEREAS, pursuant to and subject to the terms of the Acquisition
Agreement, dated as of January 26, 1997, by and among Parent, CDRJ Holding
Company, a Cayman Islands exempted company, The Gillette Company and the other
parties thereto(the "Acquisition Agreement"), Parent and certain of its
Subsidiaries (as defined below) will acquire the Jafra Business (as defined in
the Acquisition Agreement)(the "Acquisition");
WHEREAS, subject to the consummation of the Acquisition, Employer
desires to employ Executive as its Chairman and Chief Executive Officer on the
terms and conditions set forth herein;
WHEREAS, Executive desires to accept such employment on the terms and
conditions set forth herein;
WHEREAS, each of Parent, Employer and Executive agrees that Executive
will have a prominent role in the management of the business, and the
development of the goodwill, of Parent, Employer and their respective
Affiliates (as defined below) and will establish and develop relations and
contacts with the principal customers and suppliers of Parent, Employer and
their respective Affiliates in the United States, Mexico, Latin America, Europe
and the rest of the world, all of which constitute valuable goodwill of, and
could be used by Executive to compete unfairly with, Parent, Employer and their
respective Affiliates;
WHEREAS, (i) in the course of his employment with Employer, Executive
-
will obtain confidential and proprietary information and trade secrets
concerning the business and operations of Parent, Employer and their respective
Affiliates in the United States, Mexico, Latin America, Europe and the rest of
the world that could be used to compete unfairly with Parent, Employer and their
respective Affiliates; (ii) the covenants and restrictions contained in Sections
--
8 through 13, inclusive, are intended to protect
<PAGE>
the legitimate interests of Parent, Employer and their respective Affiliates in
their respective goodwill, trade secrets and other confidential and proprietary
information; and (iii) Executive desires to be bound by such covenants and
---
restrictions;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and promises contained herein and for other good and valuable
consideration, Employer, Parent and Executive hereby agree as follows:
1. Agreement to Employ; No Conflicts. Upon the terms and subject to
---------------------------------
the conditions of this Agreement, Employer hereby employs Executive, and
Executive hereby accepts employment by Employer. Executive represents that he
is entering into this Agreement voluntarily and that his employment hereunder
and compliance with the terms and conditions hereof will not conflict with or
result in the breach by him of any agreement to which he is a party or by which
he may be bound.
2. Term; Position and Responsibilities.
-----------------------------------
(a) Term of Employment. Unless Executive's employment shall sooner
------------------
terminate pursuant to Section 7, Employer shall employ Executive for a term
commencing on the date of the consummation of the Acquisition (the "Commencement
Date") and ending on the third anniversary of the Commencement Date; provided,
--------
however, that on each day following the first anniversary of the Commencement
- -------
Date the period of Executive's employment pursuant to this Agreement shall be
automatically extended, upon the same terms and conditions, for an additional
day unless Employer or Executive gives 60 days prior written notice (a
"Non-Extension Notice") to the other of its or his intention not to extend such
period of Executive's employment hereunder; provided, further, that delivery of
-------- -------
a Non-Extension Notice by Employer or Executive to the other shall not
constitute a termination of Executive's employment by the Person delivering such
Non-Extension Notice unless such notice specifically provides for such
termination of employment in the manner described in Section 7 below and the
specific date thereof. The period commencing on the Commencement Date and
ending on the earlier of (i) the effective date of any termination of
-
Executive's employment pursuant to Section 7 and (ii) the later of (x) the third
-- -
anniversary of the Commencement Date and (y) the second anniversary of the 60th
-
day following receipt by Employer or Executive, as the case may be, of a
Non-Extension Notice
2
<PAGE>
delivered pursuant to this Section 2(a) shall be referred to herein as the
"Employment Period".
(b) Position and Responsibilities. During the Employment Period,
-----------------------------
Executive shall serve as Chairman and Chief Executive Officer of Employer and
have such duties and responsibilities as are customarily assigned to individuals
serving in such positions and such other duties consistent with Executive's
titles and positions as the Board of Directors of Employer (the "Board")
specifies from time to time. Executive shall devote all of his skill, knowledge
and working time to the conscientious performance of the duties and
responsibilities of such positions, except for (i) vacation time as set forth in
-
Section 6(c) and absence for sickness or similar disability and (ii) to the
--
extent that it does not interfere with the performance of Executive's duties
hereunder and is in compliance with Executive's covenants and obligations under
Sections 8 through 13, inclusive, (A) such reasonable time as may be devoted to
-
service on boards of directors of other corporations and entities and the
fulfillment of civic responsibilities and (B) such reasonable time as may be
-
necessary from time to time for personal financial matters. Parent and Employer
will each use its reasonable best efforts to cause Executive to be nominated and
elected to serve as a member of its Board of Directors during the Employment
Period.
3. Base Salary. As compensation for the services to be performed by
-----------
Executive during the Employment Period, Employer shall pay Executive a base
salary at an annualized rate of $ [ ] payable in installments on Employer's
regular payroll dates, and, in the event that Executive's employment hereunder
terminates by reason of his death, for one month after such termination. The
Board shall review Executive's base salary annually during the period of his
employment hereunder and, in its sole discretion, may increase (but may not
decrease) such base salary from time to time based upon the performance of
Executive, the financial condition of Employer, prevailing industry salary
levels and such other factors as the Board shall consider relevant; provided
that Executive's base salary shall be automatically increased on each
anniversary of the Commencement Date during the Employment Period by an amount
equal to the average increase in the consumer price index during the immediately
preceding twelve month period, as reported from time to time in the Wall Street
Journal. (The annual base salary payable to Executive under this
3
<PAGE>
Section 3, as the same may be increased from time to time, shall hereinafter be
referred to as the "Base Salary".)
4. Incentive Compensation Arrangements.
-----------------------------------
(a) Annual Incentive Compensation. Employer shall establish an annual
-----------------------------
bonus plan for its executive officers (the "Bonus Plan"). During the Employment
Period, Executive shall be entitled to participate in the Bonus Plan in
accordance with the generally applicable terms thereof as in effect from time to
time. The Bonus Plan shall provide that, for each fiscal year of Employer ending
during the Employment Period (each such year, a "Bonus Year"), (i) if Parent and
-
its Subsidiaries (collectively, the "Company") achieve [ ]% of the EBITDA target
established by the Board for such Bonus Year (the "EBITDA Target"), Executive
shall be entitled to an annual incentive bonus for such Bonus Year equal to [ ]%
of his Base Salary, (ii) if the Company achieves [ ]% of the EBITDA Target for
--
such Bonus Year, Executive shall be entitled to an annual incentive bonus for
such Bonus Year equal to [ ]% of his Base Salary, (iii) if the Company achieves
---
more than [ ]% of the EBITDA Target for such Bonus Year but less than [ ]% of
such EBITDA Target, Executive shall be entitled to an annual incentive bonus for
such Bonus Year equal to the sum of (x) [ ]% of his Base Salary and (y) [ ]% of
- -
his Base Salary for each 1% that the performance of the Company for such Bonus
Year exceeds 85% of such EBITDA Target, (iv) if the Company achieves more than
--
[ ]% of the EBITDA Target for such Bonus Year, Executive shall be entitled to an
annual incentive bonus for such Bonus Year equal to the sum of (x) [ ]% of his
-
Base Salary and (y) $[ ] for each $[ ] of EBITDA achieved by the Company in
-
excess of [ ]% of the EBITDA Target for such Bonus Year and an additional $[ ]
for each $[ ] of EBITDA achieved by the Company in excess of [ ]% of the EBITDA
Target for such Bonus Year (if any); provided that the EBITDA achieved by the
Company for purposes of the calculation under clause (y) shall be determined
after deduction for the amount payable to Executive pursuant to such clause (y),
and (v) if the EBITDA achieved by the Company for a Bonus Year is less than [ ]%
-
of the EBITDA Target for such Bonus Year, Executive shall not be entitled to any
annual incentive bonus for such Bonus Year. With respect to the first Bonus
Year, Executive shall be entitled to a minimum guaranteed annual incentive bonus
under the Bonus Plan equal to [ ]% of his annualized Base Salary for such Bonus
Year. The annual incentive bonus payable to Executive under the Bonus Plan shall
be paid in cash and shall be paid no later than 30 days following receipt by the
4
<PAGE>
Board of the audited consolidated financial statements of the Company for the
applicable Bonus Year.
(b) Opportunity to Purchase Shares. On or as soon as reasonably
------------------------------
practicable following the Commencement Date, Executive will be given the
opportunity to purchase up to [ ] Class A voting shares, par value $2.00
per share, of Parent (the "Shares"), for a per share purchase price equal to
$100 (the "Purchase Price"), but in no event will Parent be required to offer to
sell or to sell any Shares to Executive at any time at which making such an
offer or selling any such Shares would violate any applicable securities law.
The terms and conditions of Executive's purchase of any Shares, including the
restrictions on transfer of the Shares, the right of first refusal of Parent
with respect to such Shares, the right of Parent to repurchase all or a portion
of such Shares from Executive following any termination of Executive's
employment and the applicable repurchase price and the respective tag along and
drag along rights of Executive and Parent, shall be set forth in a separate
Management Stock Subscription Agreement, substantially in the form attached
hereto as Exhibit A, to be entered into by and between Parent and Executive.
Employer will use its reasonable best efforts to make third party financing,
guaranteed by Employer, available on customary terms to Executive for up to 75%
of the purchase price of the Shares purchased by Executive hereunder. Subject
to agreement of the lending bank and except as provided otherwise in connection
with an event of default (as defined in the applicable financing documents), the
principal amount financed shall become payable on the fifth anniversary of the
date of the origination of the loan and may be prepaid without penalty.
(c) Options. On or as soon as reasonably practicable following the
-------
Commencement Date, Executive shall be granted non-qualified stock options (the
"Options") to purchase two shares of the Class A voting shares of Parent for
each Share purchased by Executive in accordance with Section 4(b) above, at an
option exercise price per share equal to the Purchase Price. Subject in each
case to Executive's continued employment with Employer until the applicable
vesting date, one-half of the Options will become vested and, subject to
compliance with applicable securities laws, exercisable in three equal annual
installments on each of the first three anniversaries of the date of grant and
the remaining one half of the Options (the "Performance Options") will become
vested and, subject to compliance with applicable securities laws, exercisable
either (i) if,
5
<PAGE>
during the performance period specified in the Management Stock Option Agreement
referred to below, the Company achieves the performance objectives established
by the Board on the basis of the management case attached hereto as Exhibit B
and specified in such Management Stock Option Agreement or (ii) in the case of
--
any Performance Options that do not become vested under the foregoing clause
(i), nine years from the date of grant. The terms and conditions of the Options,
including those described in this Section 4(c), and the right of Parent to
purchase vested Options from Executive under certain circumstances, will be set
forth in a separate Management Stock Option Agreement, substantially in the form
attached hereto as Exhibit C, to be entered into by and between Executive and
Parent at the time that such Options are granted.
(d) At the request of Executive, Employer shall lend to Executive from
time to time an amount sufficient to enable Executive to pay any interest on any
loan obtained by Executive to purchase the Shares and guaranteed by Employer
that is due prior to Employer's payment to Executive of the annual incentive
bonus provided for in Section 4(a) for the first Bonus Year. Any such loan
shall (i) be full recourse to Executive, (ii) shall be evidenced by a promissory
- --
note in form reasonably satisfactory to Employer, (iii) shall bear interest at
---
the "applicable federal rate" (within the meaning of Section 1274 of the
Internal Revenue Code of 1986, as amended) and (iv) shall be due in full
--
(including any accrued interest thereon) at the time Employer pays to Executive
the annual incentive bonus provided for in Section 4(a) for the first Bonus
Year, and Employer shall be entitled to apply any such annual incentive bonus to
repayment of principal and interest on any such loans.
5. Employee Benefits. During the Employment Period, Executive shall
-----------------
be entitled to participate in the profit sharing, pension, retirement, deferred
compensation, savings, life, medical, dental, disability and other welfare
benefit plans maintained by Employer for its senior executives in accordance
with the terms thereof, as the same may be amended and in effect from time to
time. The benefits referred to in this Section 5 shall be provided to Executive
on a basis that is commensurate with Executive's position and duties with
Employer hereunder.
6. Perquisites and Expenses.
------------------------
(a) General. During the Employment Period, Executive shall be
-------
entitled to participate in all perquisite
6
<PAGE>
programs maintained by Employer for its senior executives, on a basis that is
commensurate with Executive's position and duties with Employer hereunder, in
accordance with the terms thereof, as the same may be amended and in effect from
time to time.
(b) Business Travel, Lodging, etc. Employer shall reimburse
------------------------------
Executive for reasonable travel, lodging, meal and other reasonable expenses
incurred by him in connection with his performance of services hereunder upon
submission of evidence, satisfactory to Employer, of the incurrence and purpose
of each such expense and otherwise in accordance with Employer's business travel
and expense reimbursement policy applicable to its senior executives as in
effect from time to time.
(c) Vacation. During the Employment Period, Executive shall be
--------
entitled to a number of weeks of paid vacation on an annualized basis, without
carryover accumulation, equal to the number of weeks of paid vacation per year
applicable to senior executives of Employer in accordance with its vacation
policy as in effect from time to time.
7. Termination of Employment.
-------------------------
(a) Termination Due to Death or Disability. In the event that
--------------------------------------
Executive's employment hereunder terminates due to his death or is terminated by
Employer due to Executive's Disability (as defined below), no termination
benefits shall be payable to or in respect of Executive except as provided in
Section 3 or Section 7(f)(ii). For purposes of this Agreement, "Disability"
shall mean a physical or mental disability that prevents or is reasonably
expected to prevent the performance by Executive of his duties hereunder for a
continuous period of six months or longer. The determination of Executive's
Disability shall (i) be made by an independent physician who is reasonably
-
acceptable to Employer and Executive (or his representative), (ii) be final and
--
binding on the parties hereto and (iii) be made taking into account such
---
competent medical evidence as shall be presented to such independent physician
by Executive and/or Employer or by any physician or group of physicians or other
competent medical experts employed by Executive and/or Employer to advise such
independent physician.
(b) Termination by Employer for Cause. Executive may be terminated
---------------------------------
for Cause (as defined below) by Employer, provided that Executive shall have
--------
been given prior written
7
<PAGE>
notice of any proposed termination of his employment for Cause, which notice
specifies in reasonable detail the circumstances claimed to provide the basis
for such termination, and Executive shall not have made reasonable effort to
correct such circumstances, satisfactory to the Board, within 30 days of receipt
of such written notice. "Cause" shall mean (i) the willful failure of Executive
-
substantially to perform his duties hereunder (other than any such failure due
to Executive's physical or mental illness), (ii) Executive's engaging in willful
--
and serious misconduct that has caused or is reasonably expected to result in
material injury to Employer or any of its Affiliates, (iii) Executive's
---
conviction of, or entering a plea of guilty or nolo contendere to, a crime that
---- ----------
constitutes a felony or (iv) the willful and material breach by Executive of any
--
of his obligations hereunder or under any other written agreement or covenant
with Employer or any of its Affiliates.
(c) Termination Without Cause. A termination "Without Cause" shall
-------------------------
mean a termination of Executive's employment by Employer other than due to
Disability as described in Section 7(a) or for Cause as described in Sec tion
7(b).
(d) Termination by Executive. Executive may terminate his employment
------------------------
for any reason. A termination of employment by Executive for "Good Reason"
shall mean a ter mination by Executive of his employment with Employer
following the occurrence, without Executive's consent, of any of the following
events: (i) the assignment to Executive of duties that are significantly
-
different from, and that result in a substantial diminution of, the duties that
he is to assume on the Commencement Date, (ii) the assignment to Executive of a
--
title that is different from and junior to the title specified in Section 2 or
the failure of Parent and Employer to use their reasonable best efforts to cause
Executive to be elected or reelected to serve as a member of their respective
Boards of Directors or (iii) the failure of Employer to obtain the assumption of
---
this Agreement by any Successor (as defined below) to Employer as contemplated
by Section 14, provided in any such case that within 30 days of Executive's
--------
becoming aware of the occurrence of any such event, Executive shall have
delivered written notice to Employer of his intention to terminate his
employment for Good Reason, which notice specifies in reasonable detail the
circumstances claimed to provide the basis for such termination, and Employer
shall not have made reasonable
8
<PAGE>
effort to correct such circumstances, to the satisfaction of Executive, within
30 days of receipt of such written notice.
(e) Notice of Termination. Any termination of Executive's employment
---------------------
by Employer pursuant to Section 7(a), 7(b) or 7(c), or by Executive pursuant to
Section 7(d), shall be communicated by a written Notice of Termination addressed
to the other parties to this Agreement. A "Notice of Termination" shall mean a
notice stating that Executive's employment with Employer has been or will be
terminated and the specific provisions of this Section 7 under which such
termination is being effected.
(f) Payments Upon Certain Terminations.
----------------------------------
(i) In the event of a termination of Executive's employment by
Employer Without Cause or a termination by Executive of his employment for Good
Reason in either such case during the Employment Period (any such termination, a
"Qualifying Termination"), Employer shall pay to Executive (or, following his
death, to Executive's beneficiaries) his full Base Salary through the Date of
Termination and, as liquidated damages in respect of claims based on provisions
of this Agreement and provided Executive executes and delivers a general release
of all claims substantially in the form attached hereto as Exhibit D, the
following additional amounts:
(A) his Base Salary, at the rate in effect hereunder immediately prior
-
to the Qualifying Termination, which shall be payable in installments on
Employer's regular payroll dates, for the period (such period, the
"Severance Period") beginning on the Date of Termination (as defined below)
and ending on the later of (i) the third anniversary of the Commencement
-
Date and (ii) the second anniversary of the Date of Termination; plus
-- ----
(B) if the Company achieves the performance objectives established
-
under the Bonus Plan for the Bonus Year that includes the Date of
Termination, an amount, payable in one lump sum as soon as reasonably
practicable following receipt by the Board of the consolidated financial
statements of the Company for such Bonus Year, equal to the product of (1)
-
the annual incentive bonus that would have been payable to Executive for
such Bonus Year pursuant to Section 4(b) under the Bonus Plan had he
remained employed for the entire Bonus Year, multiplied by (2) a fraction,
-
the
9
<PAGE>
numerator of which is equal to the number of days in such Bonus Year
that precede the Date of Termination and the denominator of which is equal
to 365, less
----
(C) the amount, if any, paid or payable to Executive under the terms
-
of any severance plan, severance policy, severance program or severance
practice of Employer or any of its Affiliates applicable to Executive, as
in effect on the Date of Termination (a "Severance Program");
provided that Employer may, at any time, pay to Executive, in a single lump sum
- --------
and in satisfaction of Employer's obligations under clauses (A) and (B) of
this Section 7(f)(i), an amount equal to (x) the installments of the Base Salary
-
then remaining to be paid to Executive pursuant to clause (A) above, and the
amount, if any, then remaining to be paid to Executive pursuant to clause (B)
above, without discount for immediate payment, less (y) the amount, if any,
---- -
remaining to be paid to Executive pursuant to any Severance Program identified
under clause (C) above.
In addition, in the event of a Qualifying Termination, Employer shall,
during the Severance Period, provide Executive continued coverage under the
medical and other health plans of Employer referred to in Section 5 (the
"Continued Benefits") in which Executive was a participant immediately prior to
the Date of Termination, subject to timely payment by Executive of all premiums,
contributions and other co-payments required to be paid during such period by
senior executives of Employer under the terms of such plans as in effect from
time to time.
Executive shall not have a duty to mitigate the costs to Employer
under this Section 7(f)(i), except that Continued Benefits shall be canceled to
the extent of any comparable benefit coverage offered to Executive during the
Severance Period by a subsequent employer or other Person (as defined below) for
which Executive performs services, including but not limited to consulting
services.
(ii) If Executive's employment shall terminate upon his death or due
to his Disability or if Employer shall terminate Executive's employment for
Cause or Executive shall terminate his employment without Good Reason during the
Employment Period, Employer shall pay Executive (or, in the event of his death,
his beneficiaries) his full Base Salary through the Date of Termination or as
provided in Section 3 above. In addition, in the case of any such
10
<PAGE>
termination due to Executive's death or Disability, if the Company achieves the
performance objectives established under the Bonus Plan for the Bonus Year that
includes the Date of Termination, Employer shall pay Executive (or his
beneficiaries if applicable) an amount, payable in one lump sum as soon as
reasonably practicable following receipt by the Board of the consolidated
financial statements of the Company for such Bonus Year, equal to the product of
(1) the annual incentive bonus that would have been payable to Executive for
-
such Bonus Year pursuant to Section 4(b) under the Bonus Plan had he remained
employed for the entire Bonus Year, multiplied by (2) a fraction, the numerator
-
of which is equal to the number of days in such Bonus Year that precede the Date
of Termination (exclusive of any time between the onset of a physical or mental
disability that prevents the performance by Executive of his duties hereunder
and the resulting Date of Termination) and the denominator of which is equal to
365.
(iii) Executive shall be entitled to receive all amounts payable and
benefits accrued under any otherwise applicable plan, policy, program or
practice of Employer in which Executive was a participant during his employment
with Employer in accordance with the terms thereof, provided that (x) Executive
-------- -
shall not be entitled to receive any payments or benefits under any such plan,
policy, program or practice providing any bonus or incentive compensation (and
the provisions of this Section 7(f) shall supersede the pro visions of any such
plan, policy, program or practice), and (y) the amount, if any, paid or payable
-
to Executive under the terms of any such plan, policy, program or practice
relating to severance shall reduce the amounts payable under Section 7(f)(i) as
provided in clause (C) thereof.
(g) Date of Termination. As used in this Agreement, the term "Date
-------------------
of Termination" shall mean (i) if Executive's employment is terminated by his
-
death, the date of his death, (ii) if Executive's employment is terminated by
--
Employer for Cause, the latest of the date on which Notice of Termination is
given as contemplated by Sec tion 7(e), the date of termination specified in
such notice and the date any applicable correction period ends, and (iii) if
---
Executive's employment is terminated by Employer Without Cause, due to
Executive's Disability or by Executive for any reason, the date that is 30 days
after the date on which Notice of Termination is given as contemplated by
Section 7(e) or, if no such notice is given, 30 days after the date of
termination of employment.
11
<PAGE>
(h) Resignation upon Termination. Effective as of any Date of
----------------------------
Termination under this Section 7 or otherwise as of the date of Executive's
termination of employment with Employer, Executive shall resign, in writing,
from all Board memberships and other positions then held by him with Employer
and its Affiliates.
8. Unauthorized Disclosure. During the period of Executive's
-----------------------
employment with Employer and the ten-year period following any termination of
such employment, without the prior written consent of the Board or its
authorized representative, except to the extent required by an order of a court
having jurisdiction or under subpoena from an appropriate government agency,
in which event, Executive shall use his best efforts to consult with the Board
prior to responding to any such order or subpoena, and except as required in the
performance of his duties hereunder, Executive shall not disclose any
confidential or proprietary trade secrets, customer lists, drawings, designs,
informa tion regarding product development, marketing plans, sales plans,
manufacturing plans, management organization information (including but not
limited to data and other information relating to members of the Board of
Directors of Parent, Employer or any of their respective Affiliates or to
management of Parent, Employer or any of their respective Affiliates),
operating policies or manuals, business plans, financial records, packaging
design or other financial, commercial, business or technical information (a)
-
relating to Parent, Employer or any of their respective Affiliates or (b) that
-
Parent, Employer or any of their respective Affiliates may receive belonging to
suppliers, customers or others who do business with Parent, Employer or any of
their respective Affiliates (collectively, "Confidential Information") to any
third person unless such Confidential Information has been previously disclosed
to the public or is in the public domain (other than by reason of Executive's
breach of this Section 8).
9. Non-Competition. During the period of Executive's employment with
---------------
Employer and, following any termination thereof, the period ending on (a) in the
-
case of a Qualifying Termination, the last day of the Severance Period or (b) in
-
the case of any other termination of Executive's employment with Employer, the
second anniversary of the effective date of such termination (such applicable
periods collectively, the "Restriction Period"),Executive shall not, directly or
indirectly, become employed in an executive capacity by, engage in business
with, serve as an agent or consultant to, or become a partner, member,
12
<PAGE>
principal or stockholder (other than a holder of less than 1% of the outstanding
voting shares of any publicly held company) of, any Person that competes
anywhere in the United States, Mexico, Latin America or Europe, with any part of
the business of Parent, Employer or any of their respective Affiliates that
relates to producing, marketing, manufacturing, designing, formulating,
procuring or developing facial skin care or body products, color cosmetics,
fragrances, health or beauty supplements or other such products or related
materials. For purposes of this Section 9, the phrase employment "in an
executive capacity" shall mean employment in any position in connection with
which Executive has or reasonably would be viewed as having powers and
authorities with respect to any other Person or any part of the business thereof
that are substantially similar, with respect thereto, to the powers and
authorities assigned to the executive officer or officers of Employer serving in
the capacities served by Executive during the Employment Period or any superior
executive officer of Employer in the By-Laws of Employer as in effect on the
date hereof, a copy of the relevant portions of which has been delivered to
Executive on or before the date hereof, and which Executive hereby confirms that
he has reviewed.
10. Non-Solicitation of Employees. During the Restriction Period,
-----------------------------
Executive shall not, directly or indirectly, for his own account or for the
account of any other Person anywhere in the United States, Mexico, Latin America
or Europe, (i) solicit for employment, employ or otherwise interfere with the
-
relationship of Parent, Employer or any of their respective Affiliates with any
natural person throughout the world who is or was employed by or otherwise
engaged to perform services for Parent, Employer or any of their respective
Affiliates at any time during which Executive was employed by Employer (in the
case of any such activity during such time) or during the six-month period
preceding such solicitation, employment or interference (in the case of any such
activity after the Date of Termination), other than any such solicitation or
employment on behalf of Parent, Employer or any of their respective Affiliates
during Executive's employment with Employer, or (ii) induce any employee of
--
Parent, Employer or any of their respective Affiliates who is a member of
management to engage in any activity which Executive is prohibited from engaging
in under any of Sections 8, 9, 10 or 11 or to terminate his employment with
Employer.
11. Non-Solicitation of Customers. During the Restriction Period,
-----------------------------
Executive shall not, directly
13
<PAGE>
or indirectly, for his own account or for the account of any other Person
anywhere in the United States, Mexico, Latin America or Europe, solicit or
otherwise attempt to establish any business relationship of a nature that is
competitive with the business or relationship of Parent, Employer or any of
their respective Affiliates with any Person throughout the world which is or was
a customer, client or distributor of Parent, Employer or any of their respective
Affiliates at any time during which Executive was employed by Employer (in the
case of any such activity during such time) or during the twelve-month period
preceding the Date of Termination (in the case of any such activity after the
Date of Termination), other than any such solicitation on behalf of Parent,
Employer or any of their respective Affiliates during Executive's employment
with Employer.
12. Return of Documents. In the event of the termination of
-------------------
Executive's employment for any reason, Executive shall deliver to Employer all
of (a) the property of each of Parent, Employer and their respective Affiliates
-
and (b) the documents and data of any nature and in whatever medium of each of
-
Parent, Employer and their respective Affiliates, and he shall not take with him
any such property, documents or data or any reproduction thereof, or any
documents containing or pertaining to any Confidential Information.
13. Injunctive Relief with Respect to Covenants; Forum, Venue and
-------------------------------------------------------------
Jurisdiction. Executive acknowledges and agrees that the covenants, obligations
- ------------
and agreements of Executive contained in Sections 8, 9, 10, 11, 12 and 13 relate
to special, unique and extraordinary matters and that a violation of any of the
terms of such covenants, obligations or agreements will cause Employer
irreparable injury for which adequate remedies are not available at law.
Therefore, Executive agrees that Employer shall be entitled to an injunction,
restraining order or such other equitable relief (without the requirement to
post bond) as a court of competent jurisdiction may deem necessary or
appropriate to restrain Executive from committing any violation of such
covenants, obligations or agreements. These injunctive remedies are cumulative
and in addition to any other rights and remedies Employer may have. Parent,
Employer and Executive each hereby irrevocably submits to the exclusive
jurisdiction of the courts of California and the Federal courts of the United
States of America, in each case located in Los Angeles, California, in respect
of the injunctive remedies set forth in this Section 13 and the interpretation
and enforcement of Sections 8, 9, 10, 11, 12 and 13 insofar
14
<PAGE>
as such interpretation and enforcement relate to any request or application for
injunctive relief in accordance with the provisions of this Section 13, and the
parties hereto hereby irrevocably agree that (a) the sole and exclusive
-
appropriate venue for any suit or proceeding relating solely to such injunctive
relief shall be in such a court, (b) all claims with respect to any request or
-
application for such injunc tive relief shall be heard and determined
exclusively in such a court, (c) any such court shall have exclusive
-
jurisdiction over the person of such parties and over the subject matter of any
dispute relating to any request or application for such injunctive relief, and
(d) each hereby waives any and all objections and defenses based on forum, venue
-
or personal or subject matter jurisdiction as they may relate to an application
for such injunctive relief in a suit or proceeding brought before such a court
in accordance with the provisions of this Section 13.
14. Assumption of Agreement. Employer shall require any Successor
-----------------------
thereto, by agreement in form and substance reasonably satisfactory to
Executive, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Employer would be required to perform it if
no such succession had taken place. Failure of Employer to obtain such
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle Executive to terminate his employment with
Employer for Good Reason as described in Section 7(c) provided that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
15. Entire Agreement. This Agreement (including the Exhibits hereto)
----------------
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof. All prior correspondence and proposals (including but
not limited to summaries of proposed terms) and all prior promises,
representations, understandings, arrangements and agreements relating to such
subject matter (including but not limited to those made to or with Executive by
any other Person) are merged herein and superseded hereby.
16. Indemnification. Employer hereby agrees that it shall indemnify
---------------
and hold harmless Executive to the fullest extent permitted by Delaware law from
and against any and all liabilities, costs, claims and expenses, including all
costs and expenses incurred in defense of litigation
15
<PAGE>
(including attorneys' fees), arising out of the employment of Executive
hereunder, except to the extent arising out of or based upon the gross
negligence or willful misconduct of Executive. Costs and expenses incurred by
Executive in defense of such litigation (including attorneys' fees) shall be
paid by Employer in advance of the final disposition of such litigation upon
receipt by Employer of (a) a written request for payment, (b) appropriate
- -
documentation evidencing the incurrence, amount and nature of the costs and
expenses for which payment is being sought, and (c) an undertaking adequate
-
under Delaware law made by or on behalf of Executive to repay the amounts so
paid if it shall ultimately be determined that Executive is not entitled to be
indemnified by Employer under this Agreement, including but not limited to as a
result of such exception.
17. Miscellaneous.
-------------
(a) Binding Effect; Assignment. This Agreement shall be binding on
--------------------------
and inure to the benefit of Parent, Employer, and their respective Successors
and permitted assigns. This Agreement shall also be binding on and inure to the
benefit of Executive and his heirs, executors, administrators and legal
representatives. This Agreement shall not be assignable by any party hereto
without the prior written consent of the other parties hereto, except as
pro vided pursuant to this Section 17(a). Each of Parent and Employer may effect
such an assignment without prior written approval of Executive upon the transfer
of all or substantially all of its business and/or assets (by whatever means),
provided that the Successor to Employer shall expressly assume and agree to
- --------
perform this Agreement in accordance with the provisions of Section 14.
(b) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of California without reference to principles of
conflicts of law, provided that the indemnification provisions contained in
--------
Section 16 shall be governed by and construed in accordance with Delaware law.
(c) Taxes. Employer may withhold from any payments made under this
-----
Agreement all applicable taxes, including but not limited to income, employment
and social insurance taxes, as shall be required by law.
(d) Amendments. No provision of this Agreement may be modified,
----------
waived or discharged unless such modification, waiver or discharge is approved
by the Board or
16
<PAGE>
a Person authorized thereby and is agreed to in writing by Executive and, in the
case of any such modification, waiver or discharge affecting the rights or
obligations of Parent, is approved by the Board of Directors of Parent or a
Person authorized thereby. No waiver by any party hereto at any time of any
breach by any other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No waiver of any provision of this Agreement shall be
implied from any course of dealing between or among the parties hereto or from
any failure by any party hereto to assert its rights hereunder on any occasion
or series of occasions.
(e) Severability. In the event that any one or more of the provisions
------------
of this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not be affected thereby.
(f) Notices. Any notice or other communication required or permitted
-------
to be delivered under this Agreement shall be (i) in writing, (ii) delivered
- --
personally, by courier service or by certified or registered mail, first-class
postage prepaid and return receipt requested, (iii) deemed to have been received
---
on the date of delivery or, if so mailed, on the third business day after the
mailing thereof, and (iv) addressed as follows (or to such other address as the
--
party entitled to notice shall hereafter designate in accordance with the terms
hereof):
(A) If to Employer, to it at:
2451 Townsgate Road
Westlake Village, California 91361
Attention: General Counsel
---------
(B) if to Parent, to it at:
3 Boulevard Royal
2449 Luxembourg
Luxembourg
Attention: General Counsel
---------
(C) if to Executive, to him at his residential address as currently
on file with Employer.
17
<PAGE>
Copies of any notices or other communications given under this Agreement shall
also be given to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue
New York, New York 10152
Attention: Donald J. Gogel
---------
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Paul S. Bird, Esq.
---------
and
Stephan G. Bachelder & Associates, P.A.
22 Free Street
Portland, Maine 04101
Attention: Stephen G. Bachelder, Esq.
---------
(g) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
(h) Headings. The section and other headings contained in this
--------
Agreement are for the convenience of the parties only and are not intended to be
a part hereof or to affect the meaning or interpretation hereof.
(k) Certain Definitions.
-------------------
"Affiliate": with respect to any Person, means any other Person that,
---------
directly or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with the first Person, including but
not limited to a Subsidiary of the first Person, a Person of which the first
Person is a Subsidiary, or another Subsidiary of a Person of which the first
Person is also a Subsidiary.
"Control": with respect to any Person, means the possession, directly
-------
or indirectly, severally or jointly, of the power to direct or cause the
direction of the management policies of such Person, whether through the
ownership of
18
<PAGE>
voting securities, by contract or credit arrangement, as trustee or executor, or
otherwise.
"Person": any natural person, firm, partnership, limited liability
------
company, association, corporation, com pany, trust, business trust,
governmental authority or other entity.
"Subsidiary": with respect to any Person, each corporation or other
----------
Person in which the first Person owns or Controls, directly or indirectly,
capital stock or other ownership interests representing 50% or more of the
combined voting power of the outstanding voting stock or other owner ship
interests of such corporation or other Person.
"Successor": of a Person means a Person that succeeds to the first
---------
Person's assets and liabilities by merger, liquidation, dissolution or otherwise
by operation of law, or a Person to which all or substantially all the assets
and/or business of the first Person are transferred.
19
<PAGE>
IN WITNESS WHEREOF, Parent and Employer have duly executed this
Agreement by their authorized representatives, and Executive has hereunto set
his hand, in each case effective as of the date first above written.
CDRJ Investments (Lux) SA
/s/
By: -------------------------
Name:
Title:
Jafra Cosmetics International,
Inc.
/s/
By: -------------------------
Name:
Title:
Executive:
/s/
-----------------------------
Name:
<PAGE>
Exhibit 10.4
AMENDED AND RESTATED
JAFRA COSMETICS INTERNATIONAL, INC.
STOCK INCENTIVE PLAN
---------------------------------------------------
Section 1. Purpose
-------------------
The purpose of this Amended and Restated Jafra Cosmetics
International, Inc. Stock Incentive Plan is to foster and promote the long-term
financial success of the Company and the Subsidiaries and to increase materially
stockholder value by (a) motivating superior performance by participants in the
-
Plan, (b) providing participants in the Plan with an ownership interest in CDRJ
-
Investments (Lux) S.A., a Luxembourg societe anoyme and of which the Company is
an indirect wholly owned subsidiary, and (c) enabling the Company and the
-
Subsidiaries to attract and retain the services of an outstanding management
team upon whose judgment, interest and special effort the successful conduct of
its operations is largely dependent.
Section 2. Definitions
-----------------------
2.1. Definitions. Whenever used herein, the following terms shall
-----------
have the respective meanings set forth below:
(a) "Affiliate" means, with respect to any person, any other person
controlled by, controlling or under common control with such person.
(b) "Acquisition Agreement" means the Acquisition Agreement, dated as
of January 26, 1998, by and among CDRJ Holding Company, a Cayman Islands
exempt company, Holding, The Gillette Company and the other parties
thereto, as amended.
(c) "Applicable Share Valuation" means, as of any date of
determination, the annual valuation of the Common Stock performed as of the
last day of the last Fiscal Year ending prior to such date of determination
by an independent valuation firm chosen by the Board, except that, in the
case of a date of determination occurring during the fourth fiscal quarter
of any Fiscal Year beginning with the fourth quarter of the 1998 Fiscal
Year, the term "Applicable Share Valuation" shall mean the annual valuation
of the Common Stock performed as of the last day of such fourth fiscal
quarter by an independent valuation firm chosen by the Holding Board. Such
annual valuations shall be performed as promptly as practicable following
the end of each Fiscal Year, beginning with the 1998 Fiscal Year.
(d) "Award Agreement" means the agreement evidencing the grant of any
Incentive Award under the Plan, including a Subscription Agreement and an
Option Agreement.
(e) "Board" means the Board of Directors of the Company.
<PAGE>
(f) "CD&R Fund" means the Clayton, Dubilier & Rice Fund V Limited
Partnership, a Cayman Islands exempted limited partnership, and any
successor investment vehicle managed by Clayton, Dubilier & Rice, Inc.
(g) "Cause" shall mean (i) the continued and willful failure of the
-
Participant substantially to perform the duties of his or her employment
for any member of the CDRJ Group (other than any such failure due to the
Participant's physical or mental illness) after a demand for substantial
performance has been delivered in writing to the Participant by the
executive to whom the Participant reports or by the Board, which demand
identifies the manner in which such executive or the Board, as the case may
be, believes that the Participant has not substantially performed such
duties, (ii) the Participant's engaging in willful and serious misconduct
--
that has caused or is reasonably expected to result in material injury to
Holding or any of its Subsidiaries or Affiliates, (iii) the Participant's
---
conviction of, or entering a plea of guilty or nolo contendere to, a crime
---- ----------
that constitutes a felony or (iv) the material breach by the Participant of
--
any of his or her obligations hereunder or under any other written
agreement or covenant with Holding or any of its Subsidiaries or
Affiliates; provided that in the event that the Participant is employed by
--------
Holding or any of its Subsidiaries or Affiliates under an effective
employment agreement on the date of determination and such employment
agreement contains a different definition of Cause, the definition of Cause
contained in such employment agreement shall be substituted for the
definition set forth above for all purposes hereunder.
(h) "CDRJ Group" means Holding and its subsidiaries.
(i) "CDRJ North Atlantic" means CDRJ North Atlantic (Lux) Sarl, a
wholly-owned subsidiary of Holding, and of which the Company is a wholly-
owned subsidiary.
(j) "Change in Control" means, with respect to Holding, CDRJ North
Atlantic or the Company, the first to occur after the date hereof of the
following events:
(i) the acquisition by any person, entity or "group" (as defined
in section 13(d) of the Exchange Act) (other than (x) any member of
-
the CDRJ Group, (y) any employee benefit plan of any member of the
-
CDRJ Group, or (z) the CD&R Fund or any Affiliate of the CD&R Fund)
-
through one transaction or a series of related transactions of 50% or
more of the combined voting power of the then outstanding voting
securities of Holding, CDRJ North Atlantic or the Company, as the case
may be;
(ii) the merger or consolidation of Holding, CDRJ North Atlantic
or the Company as a result of which persons who were stockholders of
Holding CDRJ North Atlantic or the Company, as the case may be,
immediately prior to such merger or consolidation, do not, immediately
thereafter, own, directly or indirectly, more than 50% of the combined
voting power entitled to vote generally in the election of directors
of the merged or consolidated company;
2
<PAGE>
(iii) the liquidation or dissolution of Holding, CDRJ North
Atlantic or the Company (other than a dissolution occurring upon a
merger or consolidation thereof) other than a liquidation of CDRJ
North Atlantic or the Company, as the case may be, into Holding or a
Subsidiary thereof or a liquidation or dissolution that is incident to
a Reorganization; and
(iv) the sale, transfer or other disposition of all or
substantially all of the assets of Holding, CDRJ North Atlantic or the
Company through one transaction or a series of related transactions to
one or more persons or entities that are not, immediately prior to
such sale, transfer or other disposition, Affiliates of Holding or the
CD&R Fund.
(k) "Change in Control Price" means the price per share of Common
Stock paid in conjunction with any transaction resulting in a Change in
Control (as determined in good faith by the Holding Board if any part of
such price is payable other than in cash).
(l) "Committee" means the Compensation Committee of the Board (or
such other committee of the Board which shall have jurisdiction over the
compensation of officers).
(m) "Common Stock" means the Class A voting shares, par value $2.00
per share, of Holding.
(n) "Company" means Jafra Cosmetics International, Inc., a Delaware
corporation.
(o) "Disability" means a physical or mental disability or infirmity
that prevents the performance of the Participant's employment-related
duties lasting (or likely to last, based on competent medical evidence
presented to the Board) for a period of six months or longer. The Board's
reasoned and good faith judgment as to Disability shall be final and shall
be based on such competent medical evidence as shall be presented to it by
the Participant or by any physician or group of physicians or other
competent medical expert employed by the Participant or Holding to advise
the Board; provided that in the event that the Participant is employed by
--------
Holding or any of its Subsidiaries or Affiliates under an effective
employment agreement on the date of determination and such employment
agreement contains a different definition of Disability, the definition of
Disability contained in such employment agreement shall be substituted for
the definition set forth above for all purposes hereunder.
(p) "EBITDA", for any period, shall, unless otherwise provided in an
Award Agreement, have the meaning assigned to such term in the Credit
Agreement, dated as of April 30, 1998, among the Company, the other
borrowers party thereto, Credit Suisse First Boston, as administrative
agent, and the lenders party thereto from time to time, as the same may be
amended from time to time.
(q) "Effective Date" means _______, 1998.
3
<PAGE>
(r) "Employee" means any executive officer or other key management
employee of the Company or a Subsidiary.
(s) "Extraordinary Termination" means, unless otherwise provided in
the Option Agreement, a termination of a Participant's employment with a
member of the CDRJ Group by reason of the Participant's death, Disability
or Retirement.
(t) "Fair Market Value"shall mean, as of any date, the fair market
value on such date of a share of Common Stock as determined in good faith
by the Holding Board. In making a determination of Fair Market Value, the
Holding Board shall give due consideration to such factors as it deems
appropriate, including, without limitation, the earnings and certain other
financial and operating information of Holding and its Subsidiaries in
recent periods, the potential value of Holding and its Subsidiaries as a
whole, the future prospects of Holding and its Subsidiaries and the
industries in which they compete, the history and management of Holding and
its Subsidiaries, the general condition of the securities markets, the fair
market value of securities of companies engaged in businesses similar to
those of Holding and its Subsidiaries and the Applicable Share Valuation.
The determination of Fair Market Value will not give effect to any
restrictions on transfer of the shares of Common Stock or the fact that
such Common Stock would represent a minority interest in Holding.
Notwithstanding the foregoing, following a Public Offering, Fair Market
Value shall mean the average of the high and low trading prices for a share
of Common Stock on the primary national exchange (including Nasdaq) on
which the Common Stock is then traded on the trading day immediately
preceding the date as of which such Fair Market Value is determined.
(u) "Holding" means CDRJ Investments (Lux) S.A., a Luxembourg societe
anoyme, and any successor thereto.
(v) "Holding Board" means the Board of Directors of Holding.
(w) "Incentive Award" means an award of Options under the Plan or the
right to purchase Common Stock pursuant to Article VIII of the Plan.
(x) "New Employer" means a Participant's employer, or the parent or a
subsidiary of such employer, immediately following a Change in Control.
(y) "Option" means the right granted to a Participant under the Plan
to purchase a stated number of shares of Common Stock from the Company at a
stated price, not less than Fair Market Value on the date of grant, for a
specified period of time.
(z) "Option Agreement" means a management stock option agreement
between the Company and the Participant setting forth the terms and
conditions of any Options granted hereunder, which agreement shall, unless
the Board otherwise determines, be substantially in the form attached
hereto as Exhibit A.
4
<PAGE>
(aa) "Participant" means any Employee designated by the Board to
participate in the Plan.
(bb) "Performance Option" means an Option granted pursuant to the
Plan which vests in accordance with the provisions of Section 6.3(b) based
upon the financial performance of Holding and/or the Subsidiaries.
(cc) "Plan" means this Amended and Restated Jafra Cosmetics
International Stock Incentive Plan, as the same may be amended from time to
time.
(dd) "Public Offering" means the first day as of which sales of
Common Stock are made to the public in the United States pursuant to an
underwritten public offering of the Common Stock led by one or more
underwriters at least one of which is an underwriter of nationally
recognized standing.
(ee) "Registration and Participation Agreement" means the
Registration and Participation Agreement, dated as of April 30, 1998, among
Holding and certain stockholders of Holding, as the same may be amended
from time to time.
(ff) "Reorganization" means a reincorporation of Holding in another
jurisdiction, whether through a merger with or into another entity, a
transfer of substantially all of its assets to another entity or other
transactions having a similar result.
(gg) "Retirement" means a Participant's retirement from active
employment with Holding and the Subsidiaries at or after age 65.
(hh) "Service Option" means an Option granted pursuant to the Plan
which vests in accordance with the provisions of Section 6.3(a) based upon
a Participant's completion of service.
(ii) "Subscription Agreement" means the management stock subscription
agreement entered into by Holding and a Participant setting forth the terms
and conditions of any purchase of Common Stock by such Participant under
the Plan which agreement shall be substantially in the form attached hereto
as Exhibit B, unless the Board, in consultation with the Holding Board,
determines otherwise.
(jj) "Subsidiary" means any corporation or other person, a majority
of whose outstanding voting securities or other equity interests is owned,
directly or indirectly, by Holding.
2.2. Gender and Number. Except when otherwise indicated by the
-----------------
context, words in the masculine gender used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.
5
<PAGE>
Section 3. Eligibility and Participation
-----------------------------------------
Participants in the Plan shall be those Employees selected by the
Board, in consultation with the Holding Board, to participate in the Plan from
time to time. The selection of an Employee as a Participant shall neither
entitle such Employee to nor disqualify such Employee from participation in any
other award or incentive plan.
Section 4. Powers of the Board
-------------------------------
4.1. Power to Grant and Establish Terms of Awards. The Board shall,
--------------------------------------------
subject to the terms of the Plan, determine the Participants to whom Incentive
Awards shall be granted and the terms and conditions of such Incentive Awards,
provided that nothing in the Plan shall limit the right of members of the Board
who are Employees to receive Incentive Awards hereunder.
4.2. Administration. The Board shall be responsible for the
--------------
administration of the Plan. Any authority exercised by the Board under the Plan
shall be exercised by the Board in its sole discretion. The Board, by majority
action thereof, is authorized to prescribe, amend and rescind rules and
regulations relating to the administration of the Plan, to provide for
conditions and assurances deemed necessary or advisable to protect the interests
of Holding and the Subsidiaries, and to make all other determinations necessary
or advisable for the administration and interpretation of the Plan or to carry
out its provisions and purposes. Determinations, interpretations or other
actions made or taken by the Board pursuant to the provisions of the Plan shall
be final, binding and conclusive for all purposes and upon all persons.
4.3 Delegation by the Board. Except as provided in an Option
-----------------------
Agreement, all of the powers, duties and responsibilities of the Board specified
in the Plan may, to the full extent permitted by applicable law, be exercised
and performed by the Committee or any other duly constituted committee of the
Board, in any such case, to the extent authorized by the Board to exercise and
perform such powers, duties and responsibilities.
Section 5. Stock Subject to Plan
---------------------------------
5.1. Number. Subject to the provisions of Section 5.3, the maximum
------
number shares of Common Stock subject to Incentive Awards under the Plan
(including shares that become available for grant pursuant to Section 5.2) may
not exceed, in the aggregate, 158,204 shares (the "Total Authorized Shares").
Up to one-third of the Total Authorized Shares may be purchased by Participants
pursuant to Section 7 and up to two-thirds of the Total Authorized Shares may be
subject to Options granted pursuant to Section 6. The shares to be delivered
under the Plan (other than shares purchased by the Participant directly from
Holding pursuant to Section 7) shall be purchased by the Company from Holding
pursuant to the Warrant Agreement, dated as of April 30, 1998, as amended
between the Company and Holding (the "Holding Warrant"), which shares may
consist, in whole or in part, of Common Stock held in treasury or authorized but
unissued shares of Common Stock, not reserved for any other purpose.
6
<PAGE>
5.2. Canceled, Terminated or Forfeited Awards. Any shares of Common
----------------------------------------
Stock subject to any portion of an Incentive Award which for any reason expires,
or is canceled, terminated, forfeited or otherwise settled without the issuance
of such shares of Common Stock, shall again be available for award under the
Plan, subject to the maximum limitation specified in Section 5.1.
5.3. Adjustment in Capitalization. The number and class of Incentive
----------------------------
Awards (and the number of shares of Common Stock available for issuance upon
exercise or settlement of such Incentive Awards) granted under the Plan, and the
number, class and exercise price of any outstanding Options, may be adjusted by
the Board, in consultation with the Holding Board, in its sole discretion, if it
shall deem such an adjustment to be necessary or appropriate to reflect any
Common Stock dividend, stock split or share combination or any recapitalization,
merger, consolidation, exchange of shares, liquidation, dissolution or
Reorganization of Holding.
Section 6. Terms of Options
----------------------------
6.1. Grant of Options. Options may be granted to Participants at
----------------
such time or times as shall be determined by the Board. Each Option granted to
a Participant shall be evidenced by an Option Agreement that shall specify the
exercise price at which a share of Common Stock may be purchased pursuant to
such Option, the duration of such Option and such other terms and conditions
consistent with the Plan as the Board shall determine, including customary
representations, warranties and covenants with respect to securities law
matters. Unless otherwise determined by the Board, such Option Agreement shall
also state that the holder thereof is entitled to the benefits of and shall be
bound by the obligations set forth in the Registration and Participation
Agreement, dated as of April 30, 1998 and as the same may be amended from time
to time, among Holding and certain stockholders of Holding, to the extent set
forth therein.
6.2. Option Price. The exercise price per share of Common Stock to
------------
be purchased upon exercise of an Option shall be determined by the Board but
shall not be less than the Fair Market Value on the date the option is granted.
6.3. Exercise of Options.
-------------------
(a) Service Options. Unless otherwise provided by the Board in the
---------------
Option Agreement evidencing such Award, subject to the continuous
employment of the Participant with a member of the CDRJ Group, Service
Options granted to a Participant shall become vested in three equal annual
installments on each of the first three anniversaries of the date of grant.
(b) Performance Options. Unless otherwise provided by the Board in
-------------------
the Option Agreement evidencing such Award, subject to Section 9.1 and 10,
no portion of any Performance Options shall become vested unless and until
Holding shall have achieved the annual or cumulative EBITDA target
specified in the Option Agreement evidencing such Performance Options and
provided the Participant is in the continuous employment of a member of the
CDRJ Group from the date of grant to the date such target is achieved.
Notwithstanding the
7
<PAGE>
foregoing provisions of this paragraph (b), subject to the continuous
employment of the Participant with a member of the CDRJ Group, Performance
Options shall become vested in full, nine years following the date of
grant, regardless of whether the applicable EBITDA target shall have been
achieved.
(c) Conditions. Notwithstanding any other provision herein, the
----------
Board may accelerate the vesting or exercisability of any Option, all
Options or any class of Options, at any time and from time to time. On or
before the date upon which any Employee will exercise any exercisable
Option, Holding and such Employee shall enter into a Subscription Agreement
with respect to the Common Stock to be purchased upon exercise of such
Option. Notwithstanding any other provision of the Plan, no Option shall
be exercisable for more than 10 years after the date on which it is
granted.
6.4. Payment. The Board shall establish procedures governing the
-------
exercise of Options, which procedures shall generally require that written
notice of the exercise thereof be given and that the exercise price thereof be
paid in full in cash or cash equivalents, including by personal check, at the
time of exercise. The exercise price of any Options exercised at any time
following a Public Offering may be paid in full or in part in the form of shares
of Common Stock that have been owned by the Participant for at least six months,
based on the Fair Market Value of such shares of Common Stock on the date of
exercise, subject to such rules and procedures as may be adopted by the Board
and, if the Board deems it necessary or appropriate, subject to shareholder
approval of the Plan. Subject to Section 6.3, as soon as practicable after
receipt of a written exercise notice and payment in full of the exercise price
of any Options (including any taxes or additional amounts required to be paid by
a Participant in connection with the exercise of an Option as specified in the
Option Agreement), Holding shall deliver to the Participant a certificate or
certificates representing the shares of Common Stock acquired upon the exercise
thereof, bearing appropriate legends if applicable. Notwithstanding the
foregoing, the Company, in consultation with the Holding Board, may, in lieu of
delivering the shares to be acquired on exercise of an Option may return to the
Participant the exercise price tendered for such shares and pay to the
Participant an additional amount equal to the excess of (i) the Fair Market
-
Value, as of the relevant date of determination, of such shares over (ii) the
--
exercise price therefor.
Section 7. Terms of Offers to Purchase Common Stock
----------------------------------------------------
7.1. Offers to Purchase Common Stock. Offers to purchase Common
-------------------------------
Stock from Holding may be made to Participants at such time or times as shall be
determined by the Board, in consultation with the Holding Board. Each purchase
of Common Stock by a Participant shall be made pursuant to a Subscription
Agreement that shall include customary representations, warranties, covenants
and other terms and conditions with respect to securities law matters and such
other terms and conditions as the Holding Board shall determine. Unless
otherwise determined by the Holding Board, such Subscription Agreement shall
also state that in respect of any shares of Common Stock purchased by the
Participant pursuant to such Subscription Agreement (i) prior to a Public
-
Offering, such shares shall be subject to certain rights of first refusal and
repurchase rights of Holding and the CD&R Fund and (ii) such Participant shall
--
be
8
<PAGE>
entitled to certain of the benefits set forth in the Registration and
Participation Agreement and shall be bound by the obligations set forth in such
Registration and Participation Agreement, in each case, to the extent set forth
in the Subscription Agreement evidencing the purchase of such Common Stock.
7.2. Purchase Price. The purchase price per share of Common Stock to
--------------
be purchased under the Plan shall be determined by the Holding Board.
Section 8. Termination of Employment
-------------------------------------
8.1. Extraordinary Termination. Unless otherwise provided in the
-------------------------
Option Agreement or otherwise determined by the Board, in the event that a
Participant's employment with a member of the CDRJ Group terminates by reason of
an Extraordinary Termination, any Options then held by such Participant that
have become vested on or prior to the date of such termination shall, subject to
Section 8.4, remain exercisable solely until the first to occur of (x) the six
-
month anniversary of the date of the Participant's termination of employment or
(y) the expiration of the term of any such Option. Unless otherwise provided in
-
the Option Agreement or otherwise determined by the Board, any Options held by
the Participant that are not vested Options as of the date of the Participant's
termination of employment shall terminate and be canceled immediately upon such
termination, and any vested Options that are not exercised within the period
described in the preceding sentence shall terminate and be canceled upon the
expiration of such period.
8.2. Termination for Cause. Unless otherwise provided in the Award
---------------------
Agreement or otherwise determined by the Board, in the event a Participant's
employment with a member of the CDRJ Group is terminated by such member for
Cause, any Options held by such Participant (whether or not then vested or
exercisable) shall terminate and be canceled immediately upon such termination
of employment and any Common Stock purchased by the Participant may be
repurchased for a purchase price calculated in accordance with the terms of the
Subscription Agreement.
8.3. Other Termination of Employment. Unless otherwise determined by
-------------------------------
the Board at the time of grant, the Board shall provide in the Option Agreement
evidencing options granted hereunder that, in the event that a Participant's
employment with a member of the CDRJ Group terminates for any reason other than
(i) an Extraordinary Termination or (ii) for Cause, any Options then held by
- --
such Participant that have become vested on or prior to the date of such
termination shall, subject to Section 8.4, remain exercisable until the first to
occur of (x) the 30th day after the expiration of the period, if any, specified
-
in such Participant's Option Agreement during which Holding or the CD&R Fund has
a right to purchase such Options from the Participant or (y) the expiration of
-
the term of such Option. Any Options held by the Participant that are not
vested Options as of the date of the Participant's termination of employment
shall terminate and be canceled immediately upon such termination, and any
vested Options that are not exercised within the period described in the
preceding sentence shall terminate and be canceled upon the expiration of such
period.
9
<PAGE>
8.4. Certain Rights upon Termination of Employment Prior to Public
-------------------------------------------------------------
Offering. Unless otherwise determined by the Board at the time of grant, the
- --------
Board shall provide in each Award Agreement evidencing Incentive Awards granted
hereunder that, upon a termination of a Participant's employment with a member
of the CDRJ Group prior to a Public Offering for any reason, (a) Holding and the
-
CD&R Fund and its Affiliates shall have successive rights to repurchase for cash
any vested Options or shares of Common Stock then held by the Participant for a
repurchase price equal to the Fair Market Value, reduced in the case of any
Options by the exercise price per share of Common Stock for such Option and (b)
-
upon an Extraordinary Termination, the Participant shall have the right to
require Holding to repurchase shares of Common Stock then owned by him or her
(provided the Participant has held such shares of Common Stock for at least six
months), for a repurchase price equal to the Fair Market Value, and in each case
upon such additional terms and conditions as are set forth in such Award
Agreement.
Section 9. Change in Control
-----------------------------
9.1. Accelerated Vesting and Payment.
-------------------------------
(a) Service Options and Vested Performance Options. Unless the Board
----------------------------------------------
otherwise determines in the manner set forth in Section 9.2, in the event
of a Change in Control, each outstanding Service Option (regardless of
whether such Option is at such time otherwise exercisable) and each
outstanding Performance Option that has become vested prior to the Change
in Control, without regard to this Section 9.1, shall be canceled in
exchange for a payment in cash of an amount equal to the product of (i) the
-
excess, if any, of the Change in Control Price over the Option Price,
multiplied by (ii) the number of shares of Common Stock covered by such
--
Option.
(b) Performance Options. Unless the Board otherwise determines in
-------------------
the manner set forth in Section 9.2 or at the time of grant, in the event
of a Change of Control prior to the date as of which Performance Options
have become vested in accordance with Section 6.3(b), a proportionate share
(determined in accordance with the immediately succeeding sentence) of each
outstanding Performance Option shall be canceled in exchange for a payment
in cash of an amount equal to the product of (i) the excess, if any, of the
-
Change in Control Price over the Option Price, multiplied by (ii) the
--
number of shares of Common Stock covered by the vested portion of the
Performance Option. Unless the Board otherwise determines at the time of
grant, in the event of a Change of Control, a proportionate share of any
Performance Options that have not vested and become exercisable on or prior
to the date of such Change of Control shall vest and become exercisable as
of such date, such proportionate share to equal the product of (i) the
-
percentage obtained by dividing (x) the cumulative EBITDA achieved by
-
Holding as of the last day of the calendar quarter ending coincident with
or immediately prior to the date of the Change of Control by (y) the EBITDA
-
target specified in the Option Agreement, multiplied by (ii) the total
--
number of Shares subject to such Performance Options.
10
<PAGE>
(c) Timing of Option Cancellation Payments. The cash payment
--------------------------------------
described in paragraphs (a) and (b) above shall be payable in full, as soon
as reasonably practicable, but in no event later than, 30 days following
the Change in Control, unless provided otherwise by the Board in the Award
Agreement evidencing such Options. Notwithstanding the foregoing
provisions of this Section 9.1, payment of the amount calculated in
accordance with this Section 9.1 shall, if so determined by the Board (as
constituted immediately prior to the Change in Control), be made in shares
of the common stock of the New Employer having an aggregate fair market
value equal to such amount and shall be payable in full, as soon as
reasonably practicable, but in no event later than 30 days, following the
Change in Control. For purposes hereof, the fair market value of a share
of common stock of the New Employer shall be determined by the Board (as
constituted immediately prior to the consummation of the transaction
constituting the Change in Control), in good faith, on the basis of the
factors described in the definition of the term "Fair Market Value," as
applied to the business, operations and financial results of the New
Employer and its subsidiaries and applicable affiliates.
9.2. Alternative Options. Notwithstanding Section 9.1, no
-------------------
cancellation, termination, acceleration of exercisability or vesting or
settlement or other payment shall occur with respect to any Option, if the Board
(as constituted immediately prior to the consummation of the transaction
constituting the Change in Control) reasonably determines, in good faith, prior
to the Change in Control that the Options shall be honored or assumed, or new
rights substituted therefor (such honored, assumed or substituted Option being
hereinafter referred to as an "Alternative Option") by the New Employer,
------------------
provided that any Alternative Options must:
- --------
(a) provide the Participant with rights and entitlements
substantially equivalent to or better than the rights and entitlements
applicable under the terms of the Options immediately prior to the
consummation of the transaction constituting the Change in Control,
including, but not limited to, an identical or better exercise and vesting
schedule and identical or better timing and methods of exercise or payment;
(b) have substantially equivalent economic value to the Options
(determined at the time of the Change in Control); and
(c) have terms and conditions which provide that in the event that
the Participant's employment is terminated by the New Employer for any
reason other than for Cause or by the Participant for Good Reason within
two years following a Change in Control (i) any conditions on the
-
Participant's rights under, or any restrictions on transfer or
exercisability applicable to, each such Alternative Option shall be waived
or shall lapse, as the case may be or (ii) the Participant shall have the
--
right to surrender such Alternative Option within 30 days following such
termination in exchange for a payment in cash equal to the excess of the
fair market value of the common stock subject to the Alternative Option
over the price, if any, that the Participant would be required to pay to
exercise such Alternative Option.
11
<PAGE>
9.3 Certain Take-Along Rights Prior to a Public Offering. Unless
----------------------------------------------------
otherwise determined by the Board at time of grant, the Board shall provide in
each Subscription Agreement evidencing Incentive Awards granted hereunder that,
upon certain transactions constituting a Change in Control, the Participant will
be required to sell shares of Common Stock then owned by him or her, for a cash
payment per share of Common Stock equal to the Change in Control Price, and upon
such additional terms and conditions as are set forth in such Subscription
Agreement.
Section 10. Amendment, Modification, and
-----------------------------------------
Termination of the Plan
-----------------------
The Board at any time may terminate or suspend the Plan, and from time
to time may amend or modify the Plan. No amendment, modification, termination
or suspension of the Plan shall in any manner adversely affect any Incentive
Award theretofore granted under the Plan, without the consent of the Participant
holding such Incentive Award. Shareholder approval of any such amendment,
modification, termination or suspension shall be obtained to the extent mandated
by applicable law, or if otherwise deemed appropriate by the Board.
Section 11. Miscellaneous Provisions
-------------------------------------
11.1. Nontransferability of Awards. No Options granted under the Plan
----------------------------
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution or
as expressly provided in an Award Agreement. All rights with respect to any
Option granted to a Participant under the Plan shall be exercisable during his
or her lifetime only by such Participant. Restrictions, if any, on the transfer
of Common Stock purchased pursuant to Section 7.1 of the Plan or upon exercise
of any Options shall be set forth in the applicable Award Agreement evidencing
such Incentive Award, including without limitations, restrictions described in
Section 8.4 herein.
11.2. Beneficiary Designation. Each Participant under the Plan may
-----------------------
from time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
or by whom any right under the Plan is to be exercised in case of his or her
death. Each designation will revoke all prior designations by the same
Participant, shall be in a form prescribed by the Board and will be effective
only when filed by the Participant in writing with the Board during his or her
lifetime. In the absence of any such designation, benefits remaining unpaid or
Options or Deferred Stock Units outstanding at the Participant's death shall be
paid to or exercised by the Participant's surviving spouse, if any, or otherwise
to or by the Participant's estate.
11.3. No Guarantee of Employment or Participation. Nothing in the
-------------------------------------------
Plan shall interfere with or limit in any way the right of any member of the
CDRJ Group to terminate any Participant's employment at any time and for any
reason, nor confer upon any Participant any right to continue in the employ of
any member of the CDRJ Group.
12
<PAGE>
No Employee shall have a right to be selected as a Participant, or, having been
so selected, to receive any Incentive Awards under the Plan.
11.4. Tax Withholding. A member of the CDRJ Group shall have the
---------------
power to withhold, or require a Participant to remit to such member promptly
upon notification of the amount due, an amount determined by such member to be
sufficient to satisfy all Federal, state, local and foreign withholding tax
requirements in respect of any Incentive Award and the Company may (or may cause
another member of the CDRJ Group to) defer payment of cash or issuance or
delivery of Common Stock until such requirements are satisfied. The Board may
permit or require a Participant to satisfy the Participant's tax withholding
obligation hereunder in such other manner, subject to such conditions, as the
Board shall determine.
11.5. Indemnification. Each person who is or shall have been a
---------------
member of the Compensation Committee or the Board or the Holding Board shall be
indemnified and held harmless by the Company to the fullest extent permitted by
law against and from any loss, cost, liability or expense (including any related
attorney's fees and advances thereof) in connection with, based upon or arising
or resulting from any claim, action, suit or proceeding to which such person may
be made a party or in which such person may be involved by reason of any action
taken or failure to act under or in connection with the Plan or any Award
Agreement and from and against any and all amounts paid by such person in
settlement thereof, with the Company's approval, or paid by such person in
satisfaction of any judgment in any such action, suit or proceeding against such
person, provided he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of indemnification
shall not be exclusive and shall be independent of any other rights of
indemnification to which such persons may be entitled under the Company's
Certification of Incorporation or By-laws, by Holding's Deed of Association or
other organizational documents, by contract, as a matter of law or otherwise.
11.6. No Limitation on Compensation. Nothing in the Plan shall be
-----------------------------
construed to limit the right of the Company to establish other plans or to pay
compensation to its employees in cash or property, in a manner which is not
expressly authorized under the Plan.
11.7. Requirements of Law. The granting of Incentive Awards and the
-------------------
issuance of shares of Common Stock shall be subject to all applicable laws,
rules and regulations, and to such approvals by any governmental agencies or
national or foreign securities exchanges as may be appropriate or required, as
determined by the Board. Notwithstanding any other provision of the Plan or any
Award Agreement, no Incentive Awards shall be granted under the Plan, and no
shares of Common Stock shall be issued upon exercise of, or otherwise in
connection with, any Incentive Award granted under the Plan, if such grant or
issuance would result in a violation of applicable law, including the federal
securities laws and any applicable state or foreign securities laws.
11.8. GOVERNING LAW. THE PLAN, AND ALL AGREEMENTS HEREUNDER, SHALL
-------------
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS WHICH WOULD REQUIRE
APPLICATION OF
13
<PAGE>
THE LAW OF ANOTHER JURISDICTION, EXCEPT TO THE EXTENT THAT THE CORPORATE LAW OF
THE STATE OF DELAWARE SPECIFICALLY AND MANDATORILY APPLIES.
11.9. No Impact On Benefits. Incentive Awards granted under the
---------------------
Plan are not compensation for purposes of calculating an Employee's rights under
any employee benefit plan, except to the extent provided in any such plan.
11.10. Freedom of Action. Subject to Section 10, nothing in the Plan
-----------------
or any Award Agreement shall be construed as limiting or preventing the Company
or Holding or any Subsidiary thereof from taking any action with respect to the
operation or conduct of its business that it deems appropriate or in its best
interest.
11.11. Term of Plan. The Plan shall be effective as of the Effective
------------
Date. The Plan shall expire on the tenth anniversary of the Effective Date
(except as to Incentive Awards outstanding on that date), unless sooner
terminated pursuant to Section 10.
11.12. No Right to Particular Assets. Nothing contained in this Plan
-----------------------------
and no action taken pursuant to this Plan shall create or be construed to create
a trust of any kind or any fiduciary relationship between any member of the CDRJ
Group, on the one hand, and any Participant or executor, administrator or other
personal representative or designated beneficiary of such Participant, on the
other hand, or any other persons. Any reserves that may be established by a
member of the CDRJ Group in connection with this Plan shall continue to be held
as part of the general funds of Holding or such Subsidiary, and no individual or
entity other than such member of the CDRJ Group shall have any interest in such
funds until paid to a Participant. To the extent that any Participant or his
executor, administrator or other personal representative, as the case may be,
acquires a right to receive any payment from Holding or any Subsidiary pursuant
to this Plan, such right shall be no greater than the right of an unsecured
general creditor of such member of the CDRJ Group.
11.13. Notices. Each Participant shall be responsible for furnishing
-------
the Board with the current and proper address for the mailing of notices and
delivery of agreements and shares of Common Stock. Any notices required or
permitted to be given shall be deemed given if directed to the person to whom
addressed at such address and mailed by regular United States mail, first-class
and prepaid. If any item mailed to such address is returned as undeliverable to
the addressee, mailing will be suspended until the Participant furnishes the
proper address.
11.14. Severability of Provisions. If any provision of this Plan
--------------------------
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof, and this Plan shall be construed
and enforced as if such provision had not been included.
11.15. Incapacity. Any benefit payable to or for the benefit of a
----------
minor, an incompetent person or other person incapable of receiving such benefit
shall be deemed paid when paid to such person's guardian or to the party
providing or reasonably appearing to provide for the care of such person, and
such payment shall fully discharge the Committee, the Company and other parties
with respect thereto.
14
<PAGE>
11.16. No Rights as Stockholder. No Participant shall have any
------------------------
voting or other rights as a stockholder of Holding with respect to any Common
Stock covered by any Incentive Award until the issuance of a certificate or
certificates to the Participant for such Common Stock. No adjustment shall be
made for dividends or other rights for which the record date is prior to the
issuance of such certificate or certificates.
11.17. Headings and Captions. The headings and captions herein are
---------------------
provided for reference and convenience only, shall not be considered part of
this Plan and shall not be employed in the construction of this Plan.
15
<PAGE>
EXHIBIT 10.6
CONFORMED COPY
STOCK PURCHASE WARRANT dated as of April 30, 1998, by and between
CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme (the "Company") and
-------
CDRJ Acquisition Corporation, a Delaware corporation to be renamed Jafra
Cosmetics International, Inc.("JCI").
---
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, JCI is an indirect wholly-owned subsidiary of the Company;
WHEREAS, the Board of Directors of the Company (the "Board"), in
-----
consultation with the Board of Directors of JCI (the "JCI Board"), has
---------
determined that it is in the best interest of the Company and its shareholders
for JCI to grant options to purchase from JCI an aggregate of up to 88,000
shares of the Company's Class A voting shares, par value $2.00 per share (the
"Common Stock"), to select members of the management of the Company or its
- -------------
Subsidiaries (as defined herein) in order to motivate and align the interests of
such individuals with those of the Company's shareholders, and in connection
therewith, the JCI Board has established the Jafra Cosmetics International, Inc.
Stock Incentive Plan (the "Plan"); and
----
WHEREAS, to enable JCI to obtain the shares of Common Stock to be
delivered pursuant to options granted under the Plan, the Company and JCI
desire to enter into this warrant agreement (the "Warrant" or the "Agreement")
------- ---------
pursuant to which JCI may purchase an aggregate of 88,000 shares of Common Stock
from the Company;
NOW, THEREFORE, to implement the foregoing and in consideration of the
mutual promises, covenants and agreements contained herein, the parties hereto
hereby agree as follows:
1. Exercise of Warrant. (a) This Warrant may be exercised by JCI,
-------------------
in whole or in part, during normal
<PAGE>
business hours on any Business Day, by delivery to the Company of a written form
of subscription acceptable to the Company duly executed by such Holder,
delivered to the Company at its principal office, accompanied by payment, in
cash or readily available funds payable to the order of the Company, in the
amount (such amount referred to herein as the "Exercise Price") equal to (i) the
-------------- -
product of (A) the number of shares of Common Stock to be purchased as specified
-
in such written form of subscription (the "Exercise Shares") and (B) the
--------------- -
Purchase Price (as defined herein), plus any capital or other similar tax
----
imposed in connection with the issuance of the Exercise Shares, and the Company
shall deliver to JCI a certificate or certificates representing the Exercise
Shares bearing such legends as the Company shall determine appropriate. Subject
to Section 2, the cumulative maximum aggregate number of shares of Common Stock
that may be purchased by JCI pursuant to this Warrant is 104,020 shares.
(b) As used herein, the following terms shall have the following
meanings:
"Applicable Share Valuation" shall mean the annual valuation of the
--------------------------
Common Stock performed as of the last day of the last Fiscal Year ending
prior to the determination date by an independent valuation firm chosen by
the Board, except that, in the case of a determination date occurring
during the fourth fiscal quarter of any Fiscal Year beginning with the
fourth quarter of the 1998 Fiscal Year, the term "Applicable Share
Valuation" shall mean the annual valuation of the Common Stock performed as
of the last day of such fourth fiscal quarter by an independent valuation
firm chosen by the Board. Such annual valuations shall be performed as
promptly as practicable following the end of each Fiscal Year, beginning
with the 1998 Fiscal Year.
"Business Day" shall mean any day other than a Saturday or a Sunday or
------------
a day on which commercial
2
<PAGE>
banking institutions in The City of New York are authorized by law to be
closed.
"Purchase Price" shall mean, as of any date of determination, the fair
--------------
market value on such date of a share of Common Stock as determined in good
faith by the Board. In making a determination of fair market value, the
Board shall give due consideration to such factors as it deems appropriate,
including, without limitation, the earnings and certain other financial and
operating information of the Company and its subsidiaries in recent
periods, the potential value of the Company and its subsidiaries as a
whole, the future prospects of the Company and its subsidiaries and the
industries in which they compete, the history and management of the Company
and its subsidiaries, the general condition of the securities markets, the
fair market value of securities of companies engaged in businesses
similar to those of the Company and its subsidiaries and the Applicable
Share Valuation. The determination of fair market value will not give
effect to any restrictions on transfer of the shares of Common Stock or the
fact that such Common Stock would represent a minority interest in the
Company. Notwithstanding the foregoing, following a Public Offering, fair
market value shall mean the average of the high and low trading prices for
a share of Common Stock on the primary national exchange (including Nasdaq)
on which the Common Stock is then traded on the trading day immediately
preceding the date as of which such fair market value is determined.
"Fiscal Year" shall mean a fiscal year of the Company ending December
-----------
31.
"Public Offering" shall mean the first day as of which sales of Common
---------------
Stock are made to the public in the United States pursuant to an
underwritten public offering of the Common Stock led by one or more
underwriters at least one of which is an underwriter of nationally
recognized standing.
3
<PAGE>
2. Adjustment of Number of Shares of Common Stock. The number and
----------------------------------------------
class of shares shall be adjusted by the Board to reflect any Common Stock
dividend, stock split or share combination or any recapitalization, merger,
consolidation, exchange of shares, liquidation, dissolution or reorganization of
the Company if and to the extent such an adjustment is called for under the
Plan.
3. Restrictions on Transfer. This Warrant may not be transferred or
------------------------
assigned except with the prior written consent of the Company.
4. Reservation of Stock, etc. The Company shall at all times reserve
-------------------------
and keep available, solely for issuance and delivery upon exercise of the
Warrant, the number of shares of Common Stock from time to time issuable upon
exercise of the Warrant at the time outstanding. All shares of Common Stock
shall be duly authorized and, when issued upon such exercise and upon receipt of
the Exercise Price, shall be validly issued and, in the case of shares, fully
paid and nonassessable with no liability on the part of the holders thereof.
5. Requirements of Law. The issuance of shares of Common Stock shall
-------------------
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies or national or foreign securities exchanges as may
be appropriate or required, as determined by the Board. Notwithstanding any
other provision herein or in the Plan, no share of Common Stock issued upon
exercise of this Warrant if such issuance would result in a violation of
applicable law, including the federal securities laws and any applicable state
or foreign securities laws.
6. Governing Law. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
-------------
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH
PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION).
4
<PAGE>
7. Amendments and Waivers. This Agreement may be amended, and the
----------------------
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of JCI.
8. Notices. All notices, requests, demands or other communications
-------
provided for hereunder shall be in writing and shall be deemed to have been duly
given to any party (a) when delivered personally (by courier service or
-
otherwise), (b) when delivered by telex and confirmed by receipt of the proper
-
telex answerback, (c) five days after being mailed by first class mail, postage
-
prepaid (registered or certified mail, return receipt requested), (d) when
-
receipt acknowledged, if telecopied, or (e) the next business day after timely
-
delivery to the courier, if sent by overnight air courier guaranteeing next day
delivery, at the following addresses (or to such other address as such party may
have designated to the other in writing):
if to the Company, to the Company at :
3 Boulevard Royal
2449 Luxembourg
Luxembourg
if to JCI, to JCI at:
Jafra Cosmetics International, Inc.
2451 Townsgate Road
Westlake Village, CA 91361
Attention: General Counsel
---------
5
<PAGE>
Copies of any notice or other communication given under the Agreement shall also
be given to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue
New York, New York 10152
Facsimile: (212) 407-5252
Telephone: (212) 407-5200
Attention: Donald J. Gogel
---------
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Facsimile: (212) 909-6836
Telephone: (212) 909-6435
Attention: Paul S. Bird, Esq.
---------
Any party may give any notice or other communication in connection herewith
using any other means (including, but not limited to, personal delivery,
messenger service, facsimile, telex or ordinary mail), but no such notice or
other communication shall be deemed to have been duly given unless and until it
is actually received by the individual for whom it is intended.
9. Term. This Agreement shall be effective as of the date hereof and
----
shall continue in effect thereafter until the date that is six months after the
tenth anniversary of the date hereof.
10. Severability. If any provision of this Agreement is inoperative
------------
or unenforceable for any reason, such circumstances shall not have the effect of
rendering the provision in question inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatsoever. The
invalidity of any one or more phrases, sentences, clauses, Sec-
6
<PAGE>
tions or subsections of this Agreement shall not affect the remaining portions
of this Agreement.
11. Headings. The headings contained in this Agreement are for
--------
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
12. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original and all of which
together constitute one and the same instrument.
7
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf as of the date
first written above.
CDRJ INVESTMENTS (LUX) S.A.
By: /s/ David A. Novak
--------------------------------
Name: David A. Novak
Title: Secretary
JAFRA COSMETICS INTERNATIONAL, INC.
By: /s/ David A. Novak
--------------------------------
Name: David A. Novak
Title: Secretary
<PAGE>
EXHIBIT 10.7
CONFORMED COPY
REGISTRATION AND PARTICIPATION AGREEMENT
----------------------------------------
REGISTRATION AND PARTICIPATION AGREEMENT, dated as of April 30, 1998,
among CDRJ Investments (LUX) S.A., a Luxembourg societe anonyme (the "Company"),
-------
and Clayton, Dubilier & Rice Fund V Limited Partnership, a Cayman Islands
exempted limited partnership (together with any successor investment vehicle
managed by Clayton, Dubilier & Rice, Inc., the "CD&R Fund") and the other
---------
undersigned parties hereto.
1. Background. (a) The Company is party to an Acquisition Agreement,
----------
dated as of January 26, 1998, as amended from time to time (the "Acquisition
-----------
Agreement"), with The Gillette Company, a Delaware corporation ("Gillette"),
- --------- --------
pursuant to which the Company and its subsidiaries have agreed to acquire the
worldwide Jafra cosmetics business from Gillette (the "Acquisition").
-----------
(b) In connection with the Acquisition, the Company is or will be
party to (i) a Stock Subscription Agreement, dated as of the date hereof (the
-
"Fund Stock Subscription Agreement"), between the Company and the CD&R Fund,
---------------------------------
pursuant to which the Company has agreed to issue 769,600 shares of its Common
Stock (as hereinafter defined) to the CD&R Fund, (ii) separate Management Stock
--
Subscription Agreements, dated as of the date hereof (the "Management Stock
----------------
Subscription Agreements"), between the Company and certain senior executives or
- -----------------------
key employees of Jafra Cosmetics International, Inc., a Delaware corporation and
an indirect wholly owned subsidiary of the Company ("JCI"), or of one of its
---
subsidiaries or affiliates listed on the signature page hereof (the "Management
----------
Purchasers") pursuant to which the Company has agreed to issue up to an
- ----------
aggregate of 44,000 shares of its Common Stock, (iii) a Capital Call Agreement,
---
dated as of the date hereof, pursuant to which the Company has agreed to issue
and sell up to 30,400 additional shares of its Common Stock to the CD&R Fund
under the terms specified therein (the "Capital Call Agreement").
----------------------
(c) In connection with the Acquisition, JCI is or will be a party to
separate Management Stock Option Agreements, dated as of the date hereof (the
"Management Stock Option Agreements"), between JCI and each Management Purchaser
- -----------------------------------
covering options to acquire from JCI up to an aggregate of 88,000 shares of
Common Stock.
<PAGE>
(d) The Company may in the future issue or sell shares of Common Stock
to certain directors, executives and key employees of JCI or one of its
subsidiaries or affiliates (the "Subsequent Management Purchasers") and
--------------------------------
additional shares of Common Stock to certain Individual Investors or other
purchasers ("Subsequent Purchasers"), in each case, pursuant to appropriate
---------------------
forms of stock subscription agreements (the "Subsequent Stock Subscription
-----------------------------
Agreements"), or the Company or JCI may grant options or other rights to
- ----------
purchase additional shares of Common Stock to Management Purchasers, Subsequent
Management Purchasers or Subsequent Purchasers pursuant to appropriate forms of
stock option agreements, plans or arrangements (the "Subsequent Stock Option
-----------------------
Agreements").
- ----------
(e) The Management Purchasers, the Subsequent Management Purchasers,
the Subsequent Purchasers and any trusts holding shares of Common Stock or
options to purchase shares of Common Stock for the benefit of relatives of any
Management Purchaser, Subsequent Management Purchaser or Subsequent Purchaser
who is an employee or director of the Company or one of its subsidiaries are
referred to herein collectively as the "Management Investors." The Fund Stock
--------------------
Subscription Agreement, the Capital Call Agreement, the Management Stock
Subscription Agreements, the Subsequent Stock Subscription Agreements, the
Management Stock Option Agreements and the Subsequent Stock Option Agreements
are referred to herein collectively as the "Stock Subscription Agreements."
-----------------------------
(f) This Agreement shall become effective as of the date hereof with
respect to any Registrable Securities (as hereinafter defined) upon the issuance
or sale of Common Stock to any party pursuant to any Stock Subscription
Agreement that provides such Common Stock shall be Registrable Securities, it
being understood that, with respect to Registrable Securities to be issued in
the future, any Stock Subscription Agreement will provide that the shares of
Common Stock sold thereunder are entitled to rights and subject to the
obligations created hereunder, provided that such issuance or sale shall have
--------
been consented to in writing by the Board of Directors of the Company (the
"Board").
- ------
2
<PAGE>
2. Definitions. For purposes of this Agreement, the following terms
-----------
have the following respective meanings:
"Acquisition": See Section 1(a).
-----------
"Acquisition Agreement": See Section 1(a).
---------------------
"Affiliate": With respect to any Person, any other Person directly or
---------
indirectly Controlling, Controlled by or under common Control with such first
Person, provided that any director or member of management or other employee of
--------
the Company or any of its subsidiaries shall not be deemed to be an Affiliate of
the CD&R Fund.
"Board": See Section 1(f).
-----
"Business Day": A day other than a Saturday, Sunday or other day on
------------
which commercial banks in New York City are authorized or required to close.
"Capital Call Agreement": See Section 1(b).
----------------------
"CD&R": Clayton, Dubilier & Rice, Inc., a Delaware corporation.
----
"CD&R Fund": See the introduction to this Agreement.
---------
"Common Stock": The common stock, par value $2.00 per share of the
------------
Company.
"Company": See the introduction to this Agreement.
-------
"Control": The power to direct the affairs of a Person by reason of
-------
ownership of voting stock, by control or otherwise.
"Excess Number": See Section 4(b).
-------------
"Exchange Act": The Securities Exchange Act of 1934, as amended, or
------------
any successor Federal statute, and the rules and regulations thereunder which
shall be in effect at the time. Any reference to a particular section thereof
shall include a reference to the corresponding section, if any, of any successor
Federal statute, and the rules and regulations thereunder.
3
<PAGE>
"Fund Stock Subscription Agreement": See
---------------------------------
Section 1(b).
"Gillette": See Section 1(a)
--------
"Individual Investors": Directors or senior executives of
--------------------
corporations in which entities managed or sponsored by Clayton, Dubilier & Rice,
Inc. have or have had investments or other individuals designated by CD&R as
"friends of the firm".
"Management Investors": See Section 1(e).
--------------------
"Management Purchasers": See Section 1(b).
--------------------
"Management Stock Option Agreement": See Section 1(c).
---------------------------------
"Management Stock Subscription Agreements": See Section 1(b).
----------------------------------------
"NASDAQ": The NASD Automated Quotation System.
------
"Person": Any natural person, firm, partnership, association,
------
corporation, company, trust, business trust, governmental entity or other entity
and any successor (by merger or otherwise) of such entity.
"Public Market": A "Public Market" for the Company's Common Stock
-------------
shall be deemed to have been established at such time as 30% of the Common Stock
(on a fully diluted basis) has been sold to the public pursuant to an effective
registration statement under the Securities Act or pursuant to Rule 144.
"Public Offering": An underwritten public offering of Common Stock
---------------
led by at least one underwriter of nationally recognized standing.
"Qualifying Number": 38,142 shares of Common Stock (excluding any
-----------------
sales or transfers by the CD&R Fund to Management Investors and Individual
Investors)
"Qualifying Sale": See Section 4(b).
---------------
"Registrable Securities": (a) Any shares of Common Stock issued
---------------------- -
pursuant to any Stock Subscription Agreement, including shares of Common Stock
delivered by JCI upon exercise of options granted pursuant to the Management
4
<PAGE>
Stock Option Agreements or the Subsequent Stock Option Agreements, if such Stock
Subscription Agreement provides that such Common Stock shall be Registrable
Securities, except for any such Common Stock issued pursuant to an effective
registration statement under the Securities Act on Form S-8, Form S-4, Form S-1
or any successor form to any thereof (unless such Common Stock is held by a
Management Investor who is an Affiliate of the Company), (b) any shares of
-
Common Stock issued pursuant to the terms of, and under the circumstances set
forth in, Section 5, and (c) any securities issued or issuable with respect to
-
any Common Stock referred to in the foregoing clauses (i) upon any conversion or
-
exchange thereof, (ii) by way of stock dividend or stock split, (iii) in
-- ---
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or (iv) otherwise, in all cases subject to the
--
penultimate paragraph of Section 3.3. As to any particular Registrable
Securities, once issued, such securities shall cease to be Registrable
Securities when (A) a registration statement (other than a Special Registration
-
pursuant to which such securities were issued by the Company to a Management
Investor who is an Affiliate of the Company) with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (B) such securities shall have been distributed to the public in
-
reliance upon Rule 144, (C) subject to the relevant provisions of the Company's
-
Articles of Incorporation and the Stock Subscription Agreement pursuant to which
such securities shall have been issued, such securities shall have been
otherwise transferred, new certificates for such securities not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of such securities shall not require registration or
qualification of such securities under the Securities Act or any similar state
law then in force, (D) except for purposes of Sections 4 and 5, such securities
-
have been held, or deemed, by virtue of tacking holding periods as contemplated
by Rule 144, to be held for a period of two years by a Person who is not an
Affiliate of the Company, (E) such securities shall have ceased to be
-
outstanding, (F) except for purposes of Sections 4 and 5, with respect to any
-
such securities acquired by a Management Investor pursuant to the exemption from
the registration requirements of the Securities Act contained in Rule 701 (or
any successor provision) thereunder, at any time following the date the Company
registers a class of equity securities under Section 12 of the Exchange Act so
long as such Management Investor is not
5
<PAGE>
a "affiliate" of the Company within the meaning of such Rule or (G) except for
-
purposes of Sections 4 and 5, the Company shall have registered the Common
Stock under Section 12 of the Exchange Act and such securities are held by a
Person who is not an Affiliate of the Company; provided that (x) for purposes of
-------- -
clauses (D) and (G) above, (1) securities held by a Person who was not an
-
Affiliate of the Company at the time of the event specified in such clauses but
who thereafter becomes an Affiliate of the Company shall be and remain
Registrable Securities for so long as such Person is an Affiliate of the Company
and (2) securities held by a Person who was an Affiliate of the Company at the
-
time of the event specified in such clauses shall remain Registrable Securities
for only so long as such Person remains an Affiliate of the Company and (y) with
-
respect to any securities that were formerly Registrable Securities the Board
may, under such circumstances as it deems appropriate, designate such securities
as Registrable Securities for purposes of this Agreement.
"Registration Expenses": All expenses incident to the Company's
---------------------
performance of its obligations under or compliance with Section 3, including,
but not limited to, all registration and filing fees, all fees and expenses of
complying with securities or blue sky laws, all fees and expenses associated
with listing securities on exchanges or NASDAQ, all fees and other expenses
associated with filings with the NASD (including, if required, the fees and
expenses of any "qualified independent underwriter" and its counsel), all
printing expenses, the fees and disbursements of counsel for the Company and of
its independent public accountants, and the expenses of any special audits made
by such accountants required by or incidental to such performance and compliance
and the fees and disbursements of one law firm (but not more than one) retained
by the holders holding a majority (by number of shares) of the Registrable
Securities but not including any underwriting discounts or commissions or any
transfer taxes payable in respect of the sale of Registrable Securities by the
holders thereof.
"Requisite Percentage of Stockholders": The holder or holders of at
------------------------------------
least (a) as to the initial request under Section 3.1, 50% (by number of shares)
-
of the Registrable Securities held at the time outstanding or (b) as to any
-
other request, 20% (by number of shares) of the Registrable Securities at the
time outstanding.
"Rule 144": Rule 144 (or any successor provision) under the
--------
Securities Act.
6
<PAGE>
"Rule 144A": Rule 144A (or any successor provision) under the
---------
Securities Act.
"Sale Notice": See Section 4(a).
-----------
"Securities Act": The Securities Act of 1933, as amended, or any
--------------
successor Federal statute, and the rules and regulations thereunder which shall
be in effect at the time. Any reference to a particular section thereof shall
include a reference to the corresponding section, if any, of any successor
Federal statute, and the rules and regulations thereunder.
"Securities and Exchange Commission": The Securities and Exchange
----------------------------------
Commission or any other Federal agency at the time administering the Securities
Act or the Exchange Act.
"Special Registration": (a) The registration of shares of equity
-------------------- -
securities and/or options or other rights in respect thereof to be offered to
directors, members of management, employees, consultants or sales agents,
distributors or similar representatives of the Company or its direct or indirect
Subsidiaries or Individual Investors or (b) the registration of equity
-
securities and/or options or other rights in respect thereof solely on Form S-4
or S-8 or any successor form.
"Stock Subscription Agreements": See Section 1(e).
-----------------------------
"Subsequent Management Purchasers": See Section 1(d).
--------------------------------
"Subsequent Purchasers": See Section 1(d).
---------------------
"Subsequent Stock Option Agreements": See Section 1(e).
----------------------------------
"Subsequent Stock Subscription Agreements": See Section 1(d).
----------------------------------------
"Subsidiary": With respect to any Person, any corporation or Person,
----------
a majority of the outstanding voting stock or other equity interests of which is
owned, directly or indirectly, by that Person.
7
<PAGE>
3. Registration.
------------
3.1 Registration on Request.
-----------------------
(a) Requests. Subject to the provisions of Section 3.6, at any time
--------
or from time to time the Requisite Percentage of Stockholders shall have the
right to make one or more written requests that the Company effect the
registration under the Securities Act of all or part of the Registrable
Securities of the holder or holders making such request, which requests shall
specify the intended method of disposition thereof by such holder or holders.
(b) Obligation to Effect Registration. Upon receipt by the Company
---------------------------------
of any request for registration pursuant to Section 3.1(a), the Company will
promptly give written notice of such requested registration to all holders of
Registrable Securities, and thereupon will use its best efforts to effect the
registration under the Securities Act of
(i) the Registrable Securities which the Company has been so
requested to register pursuant to Section 3.1(a), and
(ii) all other Registrable Securities which the Company has been
requested to register by the holders thereof by written request given to
the Company within 30 days after the Company has given such written notice
(which request shall specify the intended method of disposition of such
Registrable Securities),
all to the extent required to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered. Notwithstanding the preceding sentence:
(x) the Company shall not be required to effect a registration
requested pursuant to Section 3.1 if the aggregate number of Registrable
Securities referred to in clauses (i) and (ii) of this Section 3.1(a)
included in such registration shall be less than 20% of the Registrable
Securities at the time outstanding; and
(y) if the Board determines in its good faith judgment, after
consultation with a firm of nationally recognized underwriters, that there
will be an adverse effect on a then contemplated initial public offering of
the Common Stock, the Requisite Percentage of
8
<PAGE>
Stockholders shall be given notice of such fact and shall be deemed to have
withdrawn such request and such registration shall not be deemed to have
been effected or requested pursuant to this Section 3.1.
(c) Registration Statement Form. Each registration requested
---------------------------
pursuant to this Section 3.1 shall be effected by the filing of a registration
statement on Form S-1, Form S-2 or Form S-3 (or any other form which includes
substantially the same information as would be required to be included in a
registration statement on such forms as presently constituted), unless the use
of a different form is (i) required by law or (ii) permitted by law and agreed
- --
to in writing by holders holding at least a majority (by number of shares) of
the Registrable Securities as to which registration has been requested
pursuant to this Section 3.1. At any time after the Company has issued and sold
any shares of its capital stock registered under an effective registration
statement under the Securities Act, or after the Company shall have registered
any class of equity securities pursuant to Section 12 of the Exchange Act, it
will use its best efforts to qualify for registration on Form S-2 or Form S-3
(or any other comparable form hereinafter adopted).
(d) Expenses. The Company will pay all Registration Expenses in
--------
connection with the first three registrations which are effected as requested
under Section 3.1(a). The Registration Expenses in connection with each other
registration, if any, requested under this Section 3.1 shall be apportioned
among the holders whose Registrable Securities are then being registered, on the
basis of the respective amounts (by number of shares) of Registrable Securities
then being registered by them or on their behalf. However, in the case of all
registrations requested under Section 3.1(a), the Company shall pay all amounts
in respect of (i) any allocation of salaries of personnel of the Company and
-
its Subsidiaries or other general overhead expenses of the Company and its
Subsidiaries or other expenses for the preparation of financial statements or
other data normally prepared by the Company and its Subsidiaries in the
ordinary course of its business, (ii) the expenses of any officers' and
--
directors' liability insurance, (iii) the expenses and fees for listing the
---
securities to be registered on each exchange on which similar securities
issued by the Company are then listed or, if no such securities are then listed,
on an exchange selected by the Company and (iv) all fees associated with filings
--
required to be made with the NASD (including, if applicable, the fees and
expenses of any "qualified independent underwriter" and its counsel as
9
<PAGE>
may be required by the rules and regulations of the NASD). Notwithstanding the
provisions of this section 3.1(d) or of Section 3.2, each seller of Registrable
Securities shall pay all Registration Expenses to the extent required to be paid
by such seller by applicable law.
(e) Inclusion of Other Securities. The Company shall not register
-----------------------------
securities (other than Registrable Securities) for sale for the account of any
Person other than the Company in any registration requested pursuant to Section
3.1(a) unless permitted to do so by the written consent of holders holding at
least a majority (by number of shares) of the Registrable Securities proposed to
be sold in such registration.
(f) Effective Registration Statement. A registration requested
--------------------------------
pursuant to Section 3.1(a) will not be deemed to have been effected unless it
has become effective for the period specified in Section 3.3(b).
Notwithstanding the preceding sentence, a registration requested pursuant to
Section 3.1(a) which does not become effective after the Company has filed a
registration statement with respect thereto solely by reason of the refusal to
proceed of the holder or holders of Registrable Securities requesting the
registration shall be deemed to have been effected by the Company at the request
of such holder or holders.
(g) Pro Rata Allocation. If the holders of a majority (by number of
-------------------
shares) of the Registrable Securities for which registration is being requested
pursuant to Section 3.1(a) determine, based on consultation with the managing
underwriters or, in an offering which is not underwritten, with an investment
banker, that the number of securities to be sold in any such offering should be
limited due to market conditions or otherwise, all holders of Registrable
Securities proposing to sell their securities in such registration shall share
pro rata in the number of securities being offered (as determined by the
holders holding a majority (by number of shares) of the Registrable Securities
for which registration is being requested in consultation with the managing
underwriters or investment banker, as the case may be) and registered for their
account, such sharing to be based on the number of Registrable Securities as to
which registration was requested by such holders, respectively.
3.2 Incidental Registration. If the Company at any time proposes to
-----------------------
register any of its equity securities (as defined in the Exchange Act) under the
Securities Act
10
<PAGE>
(other than pursuant to Section 3.1 or pursuant to a Special Registration),
whether or not for sale for its own account, and the registration form to be
used may be used for the registration of Registrable Securities, it will each
such time give prompt written notice to all holders of Registrable Securities
of its intention to do so and of such holders' rights under this Section and,
upon the written request of any holder of Registrable Securities given to the
Company within 30 days after the Company has given any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
such holder and the intended method of disposition thereof), the Company will
use its best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the holders thereof, to the extent required to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered, provided that:
--------
(a) if such registration shall be in connection with the initial
public offering of Common Stock, the Company shall not include any
Registrable Securities in such proposed registration if the Board shall
have determined, after consultation with the managing underwriters for
such offering, that it is not in the best interests of the Company to
include any Registrable Securities in such registration, provided that, if
--------
the Board makes such a determination, the Company shall not include in such
registration any securities not being sold for the account of the Company;
(b) if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register such securities, the Company may,
at its election, give written notice of such determination to each holder
of Registrable Securities or other securities that was previously notified
of such registration and, thereupon, shall not register any Registrable
Securities in connection with such registration (but shall nevertheless
pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of any holder or holders of Registrable Securities
to request that a registration be effected under Section 3.1;
11
<PAGE>
(c) if the Company shall be advised in writing by the managing
underwriters (or, in connection with an offering which is not underwritten,
by an investment banker) (and the Company shall so advise each holder of
Registrable Securities requesting registration of such advice) that in
their or its opinion the number of securities requested to be included in
such registration (whether by the Company, pursuant to this Section 3.2
or pursuant to any other rights granted by the Company to a holder or
holders of its securities to request or demand such registration or
inclusion of any such securities in any such registration) exceeds the
number of such securities which can be sold in such offering,
(i) the Company shall include in such registration the number
(if any) of Registrable Securities so requested to be included which
in the opinion of such underwriters or investment banker, as the case
may be, can be sold and shall not include in such registration any
securities (other than securities being sold by the Company, which
shall have priority in being included in such registration) so
requested to be included other than Registrable Securities unless all
Registrable Securities requested to be so included are included
therein, and
(ii) if in the opinion of such underwriters or investment banker,
as the case may be, some but not all of the Registrable Securities may
be so included, all holders of Registrable Securities requested to be
included therein shall share pro rata in the number of shares of
Registrable Securities included in such public offering on the basis
of the number of Registrable Securities requested to be included
therein by such holders, provided that, in the case of a registration
--------
initially requested or demanded by a holder or holders of securities
other than Registrable Securities, the holders of the Registrable
Securities requested to be included therein and the holders of such
other securities shall share pro rata (based on the number of shares
if the requested or demanded registration is to cover only Common
Stock and, if not based on the proposed offering price of the total
number of securities included in such public offering requested to be
included therein),
12
<PAGE>
and the Company shall so provide in any registration agreement hereinafter
entered into with respect to any of its securities; and
(d) if prior to the effective date of the registration statement
filed in connection with such registration, the Company is informed by
the managing underwriter (or, in connection with an offering which is not
underwritten, by an investment banker) that the price at which such
securities are to be sold is a price below that price which the Requesting
Holders shall have indicated to be acceptable, the Company shall promptly
notify the Requesting Holders of such fact, and each such Requesting Holder
shall have the right to withdraw its request to have its Registrable
Securities included in such registration statement.
The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 3.2.
No registration effected under this Section 3.2 shall relieve the Company from
its obligation to effect registrations upon request under Section 3.1.
3.3 Registration Procedures. If and whenever the Company is required
-----------------------
to use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Sections 3.1 and 3.2, the Company will
promptly:
(a) subject to clauses (x) and (y) of Section 3.1(b), prepare and
file with the Securities and Exchange Commission a registration statement
with respect to such securities, make all required filings with the NASD
and use best efforts to cause such registration statement to become
effective;
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith and such other documents as may be
necessary to keep such registration statement effective and to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time as all
of such securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
registration statement, but in no event for a period of more
13
<PAGE>
than six months after such registration statement be comes effective;
(c) furnish to counsel (if any) selected by the holders of a majority
(by number of shares) of the Registrable Securities covered by such
registration statement copies of all documents proposed to be filed with
the Securities and Exchange Commission in connection with such
registration, which documents will be subject to the review of such
counsel;
(d) furnish to each seller of such securities, without charge, such
number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case, including all exhibits
and documents filed therewith (other than those filed on a confidential
basis), except that the Company shall not be obligated to furnish any
seller of securities with more than two copies of such exhibits and
documents), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and any
summary prospectus) in conformity with the requirements of the Securities
Act, and such other documents, as such seller may reasonably request in
order to facilitate the disposition of the securities owned by such seller;
(e) use its best efforts (x) to register or qualify the securities
-
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as each seller shall request, (y) to
-
keep such registration or qualification in effect for so long as such
registration statement remains in effect and (z) to do any and all other
-
acts and things which may be necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the securities owned
by such seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified, subject itself to taxation
in any jurisdiction wherein it is not so subject, or take any action which
would subject it to general service of process in any jurisdiction wherein
it is not so subject;
14
<PAGE>
(f) in connection with an underwritten public offering only, furnish
to each seller a signed counterpart, addressed to the sellers, of
(i) an opinion of counsel for the Company experienced in
securities law matters, dated the effective date of the registration
statement, and
(ii) a "comfort" letter signed by the independent public
accountants who have issued an audit report on the Company's financial
statements included in the registration statement, subject to such seller
having executed and delivered to the independent public accountants such
certificates and documents as such accountants shall reasonably request and
provided that such accountants shall be permitted by the standards
--------
applicable to certified public accountants to deliver a "comfort" letter
to such seller,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities;
(g)(i) notify each holder of Registrable Securities covered by such
-
registration statement if such registration statement, at the time it or
any amendment thereto became effective, (x) contained an untrue statement
-
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading
upon discovery by the Company of such material misstatement or omission or
(y) upon discovery by the Company of the happening of any event as a result
-
of which the Company believes there would be such a material misstatement
or omission, and, as promptly as practicable, prepare and file with the
Securities and Exchange Commission a post-effective amendment to such
registration statement and use best efforts to cause such post-effective
amendment to become effective such that such registration statement, as
so amended, shall not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, and
15
<PAGE>
(ii) notify each holder of Registrable Securities covered by such
--
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, if the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading
upon discovery by the Company of such material misstatement or omission or
upon discovery by the Company of the happening of any event as a result of
which the Company believes there would be a material misstatement or
omission, and, as promptly as is practicable, prepare and furnish to such
holder a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(h) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement of the Company complying with the provisions of Section
11(a) of the Securities Act and Rule 158 under the Securities Act;
(i) notify each seller of any securities covered by such registration
statement (i) when such registration statement, or any post-effective
-
amendment to such registration statement, shall have become effective, or
any amendment of or supplement to the prospectus used in connection
therewith shall have been filed, (ii) of any request by the Securities and
--
Exchange Commission to amend such registration statement or to amend or
supplement such prospectus or for additional information, (iii) of the
---
issuance by the Securities and Exchange Commission of any stop order
suspending the effectiveness of such registration statement or of any order
preventing or suspending the use of any preliminary prospectus, and (iv)
--
of the suspension of the qualification of such securities for offering or
sale in any jurisdiction, or of the institution of any proceedings for
any of such purposes;
16
<PAGE>
(j) use its best efforts (i) (A) to list such securities on any
- -
securities exchange on which the Common Stock is then listed or, if no
Common Stock is then listed, on an exchange selected by the Company, if
such listing is then permitted under the rules of such exchange or (B) if
-
such listing is not practicable or the Board determines that quotation as a
NASDAQ National Market System security is preferable, to secure designation
of such securities as a NASDAQ "national market system security" within the
meaning of Rule 11Aa2-1 under the Exchange Act and (ii) to provide and
--
cause to be maintained a transfer agent and registrar for such
Registrable Securities not later than the effective date of such
registration statement; and
(k) use every reasonable effort to obtain the lifting of any stop
order that might be issued suspending the effectiveness of such
registration statement or of any order preventing or suspending the use of
any preliminary prospectus, provided that if the Company is unable to
--------
obtain the lifting of any such stop order in connection with a registration
pursuant to Section 3.1(a), the request for registration shall not be
deemed exercised for purposes of determining whether such registration has
been effected for purposes of Section 3.1(a) or (d).
The Company may require each seller of any securities as to which any
registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing and as shall be required by law
in connection therewith. Each such holder agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such holder not materially
misleading.
The Company agrees not to file or make any amendment to any
registration statement with respect to any Registrable Securities, or any
amendment of or supplement to the prospectus used in connection therewith, which
refers to any seller of any securities covered thereby by name, or otherwise
identifies such seller as the holder of any securities of the Company, without
the consent of such seller, such consent not to be unreasonably withheld, except
that no such consent shall be required for any disclosure that is required by
law.
17
<PAGE>
By acquisition of Registrable Securities, each holder of such
Registrable Securities shall be deemed to have agreed that upon receipt of any
notice from the Company pursuant to Section 3.3(g), such holder will promptly
discontinue such holder's disposition of Registrable Securities pursuant to
the registration statement covering such Registrable Securities until such
holder shall have received, in the case of clause (i) of Section 3.3(g), notice
from the Company that such registration statement has been amended, as
contemplated by Section 3.3(g), and, in the case of clause (ii) of Section
3.3(g), copies of the supplemented or amended prospectus contemplated by Section
3.3(g). If so directed by the Company, each holder of Registrable Securities
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, in such holder's possession of the prospectus covering
such Registrable Securities at the time of receipt of such notice. In the event
that the Company shall give any such notice, the period mentioned in Section
3.3(b) shall be extended by the number of days during the period from and
including the date of the giving of such notice to and including the date when
each seller of any Registrable Securities covered by such registration statement
shall have received the copies of the supplemented or amended prospectus
contemplated by Section 3.3(g).
Although shares of Common Stock issuable upon the exercise of options
are included in the definition of Registrable Securities, the Company shall,
in respect of any such Registrable Securities requested to be registered
pursuant hereto, be required to include in any registration statement only
shares of Common Stock issuable upon conversion of or pursuant to such
Registrable Securities and only if the Company has received assurances,
reasonably satisfactory to it, that such options will be exercised promptly
after such registration statement has become effective or the sale to an
underwriter has been consummated so that only Common Stock shall be distributed
to the public under such registration statement.
Notwithstanding any other provision of this Agreement, the parties
hereto acknowledge that the Company shall have no obligation to prepare or file
any registration statement prior to the time that financial information required
to be included therein is available for inclusion therein.
3.4 Underwritten Offerings. The provisions of this Section 3.4 do
----------------------
not establish additional registration
18
<PAGE>
rights but instead set forth procedures applicable, in addition to those set
forth in Sections 3.1 through 3.3, to any registration which is an underwritten
offering.
(a) Underwritten Offerings Exclusive. Whenever a registration
--------------------------------
requested pursuant to Section 3.1 is for an underwritten offering, only
securities which are to be distributed by the underwriters may be included in
the registration.
(b) Underwriting Agreement. If requested by the underwriters for any
----------------------
underwritten offering by holders of Registrable Securities pursuant to a
registration requested under Section 3.1(a), the Company shall enter into an
underwriting agreement with such underwriters for such offering, such
agreement to be reasonably satisfactory in substance and form to the holders of
a majority (by number of shares) of the Registrable Securities to be covered by
such registration and to the underwriters and to contain such representations
and warranties by the Company and such other terms and provisions as are
customarily contained in agreements of this type, including, but not limited to,
indemnities to the effect and to the extent provided in Section 3.7, provisions
for the delivery of officers' certificates, opinions of counsel and accountants'
"comfort" letters and hold-back arrangements. The holders of Registrable
Securities to be distributed by such underwriters shall be parties to such
underwriting agreement and may, at their option, require that any or all of the
representations and warranties by, and the agreements on the part of, the
Company to and for the benefit of such underwriters be made to and for the
benefit of such holders of Registrable Securities and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement shall also be conditions precedent to the obligations of
such holders of Registrable Securities. In the event that any condition to the
obligations under any such underwriting agreement are not met or waived, and
such failure to be met or waived is not attributable to the fault of the selling
stockholders requesting a demand registration pursuant to Section 3.1(a), such
request for registration shall not be deemed exercised for purposes of
determining whether such registration has been effected for purposes of Section
3.1(a) or (d). No holder of Registrable Securities shall be required by the
Company to make any representations or warranties to, or agreements with, the
Company or the underwriters other than as set forth in Sections 3.4(e) and
3.7(b), representations, warranties or agreements regarding such holder and such
holder's intended method of dis-
19
<PAGE>
tribution and any other representations required by applicable law.
(c) Selection of Underwriters. Whenever a registration requested
-------------------------
pursuant to Section 3.1(a) is for an underwritten offering, the Company will
have the right to select the managing underwriters to administer the offering,
which managing underwriters shall be underwriters of nationally recognized
standing. If the Company at any time proposes to register any of its
securities under the Securities Act for sale for its own account and such
securities are to be distributed by or through one or more underwriters, the
Company will have the right to select the managing underwriters to administer
the offering at least one of which shall be an underwriter of nationally
recognized standing.
(d) Incidental Underwritten Offerings. Subject to the provisions of
---------------------------------
the proviso to the first sentence of Section 3.2, if the Company at any time
proposes to register any of its equity securities under the Securities Act
(other than pursuant to Section 3.1 or pursuant to a Special Registration),
whether or not for its own account, and such securities are to be distributed by
or through one or more underwriters, the Company will give prompt written notice
to all holders of Registrable Securities of its intention to do so and, if
requested by any holder of Registrable Securities, will use its best efforts to
arrange for such underwriters to include the Registrable Securities to be
offered and sold by such holder among those to be distributed by such
underwriters. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the Company
and such underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of the underwriters under such
underwriting agreement shall also be conditions precedent to the obligations of
such holders of Registrable Securities. No such holder of Registrable Securities
shall be required by the Company to make any representations or warranties to,
or agreements with, the Company or the underwriters other than as set forth in
Sections 3.4(e) and 3.7(b), representations, warranties or agreements regarding
such holder and such holder's intended method of distribution and any other
representations required by applicable law.
20
<PAGE>
(e) Hold Back Agreements. If and whenever the Company proposes to
--------------------
register any of its equity securities under the Securities Act, whether or not
for its own account (other than pursuant to a Special Registration), or is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act pursuant to Section 3.1 or 3.2, each
holder of Registrable Securities (whether or not such securities have ceased to
be Registrable Securities) agrees by acquisition of such Registrable
Securities not to effect (other than pursuant to such registration) any public
sale or distribution, including, but not limited to, any sale pursuant to Rule
144 or Rule 144A, of any Registrable Securities, any other equity securities of
the Company or any securities convertible into or exchangeable or exercisable
for any equity securities of the Company for 180 days after, and during the 20
days prior to, the effective date of such registration and the Company agrees to
cause each holder of any equity security, or of any security convertible into or
exchangeable or exercisable for any equity security, of the Company purchased
from the Company at any time other than in a Public Offering to enter into a
similar agreement with the Company. The Company further agrees not to effect
(other than pursuant to such registration or pursuant to a Special Registration)
any public sale or distribution, or to file any registration statement
(other than such registration or a Special Registration) covering any, of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the 20 days prior to, and for 180 days
after, the effective date of such registration if required by the managing
underwriter.
3.5 Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, the Company will give the holders of such
Registrable Securities so to be registered and their underwriters, if any, and
their respective counsel and accountants the opportunity to participate in the
preparation of such registration statement, each prospectus included therein
or filed with the Securities and Exchange Commission, and each amendment thereof
or supplement there to, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have issued audit reports on
its financial statements as shall be necessary, in the opinion of such holders'
and such underwriters' respective counsel, to con-
21
<PAGE>
duct a reasonable investigation within the meaning of the Securities Act.
3.6 Other Registrations. If and whenever the Company is required to
-------------------
use its best efforts to effect the registration of any Registrable Securities
under the Securities Act pursuant to Section 3.1 or 3.2, and if such
registration shall not have been withdrawn or abandoned, the Company shall not
be obligated to and shall not file any registration statement with respect to
any of its securities (including Registrable Securities) under the Securities
Act (other than a Special Registration), whether of its own accord or at the
request or demand of any holder or holders of such securities, until a period of
six months shall have elapsed from the effective date of such previous
registration; and the Company shall so provide in any registration rights
agreement with respect to any of its equity securities.
3.7 Indemnification.
---------------
(a) Indemnification by the Company. In the event of any registration
------------------------------
of any Registrable Securities under the Securities Act pursuant to Section 3.1
or 3.2, the Company will and hereby does indemnify and hold harmless each seller
of such securities, its directors, officers, and employees, each other person
who participates as an underwriter, broker or dealer in the offering or sale of
such securities and each other person, if any, who controls such seller or any
such participating person within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any and all losses,
claims, damages or liabilities, joint or several, to which such seller or any
such director, officer, employee, participating person or controlling person
may become subject under the Securities Act or otherwise (including, without
limitation, the reasonable fees and expenses of legal counsel incurred in
connection with any claim for indemnity hereunder), insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
-
statement of a fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein or related thereto,
or any amendent or supplement thereto, or (ii) any omission or alleged
--
omission to state a fact required to be stated in any such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement
22
<PAGE>
necessary to make the statements therein not misleading; and the Company will
reimburse such seller and each such director, officer, employee, participating
person and controlling person for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, liability, action or proceeding, provided that the Company shall not be
--------
liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
seller or participating person expressly for use in the preparation thereof and
provided, further, that the Company shall not be liable in any such case to the
- -------- -------
extent that any such loss, claim, damage, liability or expense arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission in the prospectus, if such untrue statement or alleged untrue
statement or omission or alleged omission is completely corrected in an
amendment or supplement to the prospectus and the seller of Registrable
Securities thereafter fails to deliver such prospectus as so amended or
supplemented prior to or concurrently with the sale of Registrable Securities to
the person asserting such loss, claim, damage, liability or expense after the
Company had furnished such seller with a sufficient number of copies of the same
or if the seller received notice from the Company of the existence of such
untrue statement or alleged untrue statement or omission or alleged omission and
the seller continued to dispose of Registrable Securities prior to the time of
the receipt of either (A) an amended or supplemented prospectus which completely
-
corrected such untrue statement or omission or (B) a notice from the Company
-
that the use of the existing prospectus may be resumed. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such seller or any such director, officer, employee, participating
person or controlling person and shall survive the transfer of such securities
by such seller.
(b) Indemnification by the Sellers. In the event of any registration
------------------------------
of any Registrable Securities under the Securities Act pursuant to Section 3.1
or 3.2, each of the prospective sellers of such securities will indemnify and
hold harmless the Company, each director of the Company, each officer of the
Company who shall sign such registration statement, each other person who
participates as an under-
23
<PAGE>
writer, broker or dealer in the offering or sale of such securities and each
other person, if any, who controls the Company or any such participating person
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any and all losses, claims, damages or liabilities, joint
or several, to which the Company or any such director, officer, employee,
participating person or controlling person may become subject under the
Securities Act or otherwise (including, without limitation, the reasonable fees
and expenses of legal counsel incurred in connection with any claim for
indemnity hereunder), insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a fact contained in, or any
omission or alleged omission to state a fact with respect to such seller
required to be stated in, any registration statement under which such securities
were registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein or related thereto, or any
amendment or supplement thereto, if such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company by such seller expressly for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement; and the seller will reimburse the Company and each such
director, officer, employee, participating person and controlling person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding, provided that the liability of each such seller will be in
--------
proportion to and limited to the net amount received by such seller (after
deducting any underwriting discount and expenses) from the sale of Registrable
Securities pursuant to such registration statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Company or any such director, officer, participating person or controlling
person and shall survive the transfer of such securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
----------------------
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding paragraphs of this Section 3.7, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party hereunder, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
--------
to give
24
<PAGE>
notice as provided therein shall not relieve the indemnifying party of
its obligations under the preceding paragraphs of this Section 3.7. In case any
such action is brought against an indemnified party, the indemnifying party will
be entitled to participate therein and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof, provided that if
--------
such indemnified party and the indemnifying party reasonably determine, based
upon advice of their respective independent counsel, that a conflict of
interest may exist between the indemnified party and the indemnifying party
with respect to such action and that it is advisable for such indemnified party
to be represented by separate counsel, such indemnified party may retain other
counsel, reasonably satisfactory to the indemnifying party, to represent such
indemnified party, and the indemnifying party shall pay all reasonable fees and
expenses of such counsel. No indemnifying party, in the defense of any such
claim or litigation, shall, except with the consent of such indemnified party,
which consent shall not be unreasonably withheld, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that
---------------------
specified in the preceding paragraphs of this Section 3.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
such Registrable Securities under any Federal or state law or regulation of
governmental authority other than the Securities Act.
(e) Other Remedies. If for any reason the foregoing indemnity under
--------------
Section 3.7(a) or (b) is unavailable, or is insufficient to hold harmless an
indemnified party, other than by reason of the exceptions provided therein, then
the indemnifying party and the indemnified party under Section 3.7(a) or (b)
shall contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in such pro-
-
portion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified party on the other or (ii) if the
--
allocation provided by clause (i) above is not permitted by applicable law, or
provides a lesser sum to the indemnified party than the amount hereinafter
calculated, in such pro-
25
<PAGE>
portion as is appropriate to reflect not only the relative fault of the
indemnifying party on the one hand and the indemnified party on the other but
also the relative benefits received by the indemnifying party and the
indemnified party from the offering of Registrable Securities (taking into
account the portion of the proceeds of the offering realized by each such
party) as well as any other relevant equitable considerations. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any party's obligation to
contribute pursuant to this Section 3.7(e) is several (in proportion to the
relative value of their Registrable Securities covered by a registration
statement) and not joint with the obligations of any other party. No party shall
be liable for contribution under this Section 3.7(e) except to the extent and
under such circumstances as such party would have been liable to indemnify
under this Section 3.7 if such indemnification were enforceable under
applicable law.
(f) Officers and Directors. As used in this Section 3.7, the terms
----------------------
"officers" and "directors" shall include the partners and members of the holders
of Registrable Securities which are partnerships or limited liability companies,
as the case may be.
(g) Indemnification Payments. The indemnification and contribution
------------------------
required by this Section 3.7 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred; provided that in
--------
the event it is ultimately determined that any amounts so paid were not subject
to indemnification or contribution hereunder, the recipient thereof shall
promptly return such amounts to payor thereof.
4. Participation Rights. So long as any Registrable Securities
--------------------
remain outstanding and a Public Market has not been established with respect to
the Common Stock, the CD&R Fund hereby agrees not to make any sale or transfer
of Common Stock owned by the CD&R Fund which would constitute a
26
<PAGE>
Qualifying Sale (as defined below), except pursuant to the following provisions
of this Section 4:
(a) Procedures for Qualifying Sales. At least 30 days prior to
-------------------------------
making any Qualifying Sale, the CD&R Fund will deliver a written notice (the
"Sale Notice") to the Company and the other holders of Registrable Securities.
------------
The Sale Notice will fully disclose the identity of the prospective transferee
and the terms and conditions of the proposed Qualifying Sale, including the
number of shares of Common Stock that the prospective transferee is willing to
purchase and the intended consummation date of such Qualifying Sale. The CD&R
Fund agrees not to consummate any Qualifying Sale until at least 30 days after
the related Sale Notice has been given to each holder of Registrable Securities,
unless the CD&R Fund shall have received a notice from each holder of
Registrable Securities indicating whether or not such holder has elected to
participate in such Qualifying Sale and the number of shares of Common Stock to
be sold by each such holder so electing to participate has been finally
determined pursuant hereto prior to the expiration of such 30-day period. Each
holder of Registrable Securities may elect to participate in the contemplated
Qualifying Sale by giving written notice to the CD&R Fund and the Company within
30 days after the CD&R Fund has given the related Sale Notice to such holder.
If a holder of Registrable Securities elects to participate, such holder will be
entitled to sell in the contemplated Qualifying Sale, at the same price and on
the same terms and conditions as set forth in the related Sale Notice, an amount
of Registrable Securities equal to the product of (i) the quotient determined
-
by dividing (A) the percentage of Registrable Securities held by such holder of
-
Registrable Securities so electing to participate at the time he so elects by
(B) the aggregate percentage of Registrable Securities represented by the
-
Registrable Securities then held by the CD&R Fund and all holders of Registrable
Securities so electing to participate and (ii) the number of shares of
--
Registrable Securities such transferee has agreed to purchase in the
contemplated sale (or in the case of a "Qualifying Sale" within the meaning of
clause (ii) of Section 4(b), the Excess Number of shares which such transferee
has agreed to purchase), unless all such holders otherwise agree themselves to a
different allocation. If such right to participate in a Qualifying Sale shall
not have been exercised prior to the expiration of the 30-day period, then at
any time during the 90 days following the expiration of the 30-day period,
subject to extension for not more than an additional 60 days to the extent
reasonably required to comply with applicable laws in
27
<PAGE>
connection with such purchase, the CD&R Fund may sell to the prospective
transferee the number of shares of Common Stock and at the price and on the
terms and conditions indicated in the Sale Notice. Upon receipt of a Sale
Notice, the Company will provide the CD&R Fund with a current list of holders of
Registrable Securities and their addresses.
(b) Qualifying Sale Defined. The term "Qualifying Sale" shall mean
----------------------- ----------------
(i) any sale or transfer of Common Stock proposed to be made by the CD&R Fund at
-
any time after the CD&R Fund has sold or transferred in the aggregate at least
the Qualifying Number of the shares of Common Stock or (ii) in the event that
--
prior to the sale or transfer by the CD&R Fund of an aggregate of the Qualifying
Number of shares of Common Stock, the CD&R Fund proposes to sell or transfer a
number of shares of Common Stock which when combined with any prior sales or
transfers of such shares by the CD&R Fund exceeds the Qualifying Number, the
sale or transfer of a number of shares (the "Excess Number") equal to the excess
-------------
of (A) the sum of any shares previously sold or transferred by the CD&R Fund and
-
the aggregate number of shares proposed to be sold or transferred in such
contemplated sale, over (B) the Qualifying Number of shares. In determining
-
whether there is a "Qualifying Sale," equitable adjustments shall be made to
reflect any stock split, stock dividend, stock combination, recapitalization
or similar transaction.
(c) Exclusion from Qualifying Sale. The obligation of the CD&R Fund
------------------------------
and the rights of the holders of Registrable Securities pursuant to this Section
4 will not apply to any sale or transfer by the CD&R Fund pursuant to a
distribution to the public (whether pursuant to a registered Public Offering or
pursuant to Rule 144 or otherwise (but not pursuant to Rule 144A under the
Securities Act or any successor provision)). Any shares referred to, or covered
by any sale, transfer or distribution referred to, in the preceding sentence
shall not be included in the computation of "Qualifying Sale."
5. Miscellaneous.
-------------
5.1 (a) Rule 144. If the Company shall have filed a registration
--------
statement pursuant to Section 12 of the Exchange Act or a registration statement
pursuant to the Securities Act relating to any class of equity securities (other
than a registration statement pursuant to a Special Registration), the Company
covenants that it will file the reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations adopted
28
<PAGE>
by the Securities and Exchange Commission thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available such information as necessary to
permit sales pursuant to Rule 144), and will take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell shares of Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144, as such rule may be amended from
-
time to time, or (b) any successor rule or regulation hereafter adopted by the
-
Securities and Exchange Commission.
(b) Legend on Stock Certificates. In addition to such other legends
----------------------------
as may be required by the Company's Certificate of Incorporation or any Stock
Subscription Agreement pursuant to which Registrable Securities are issued, each
certificate or certificates representing Registrable Securities shall bear the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE
BENEFITS OF AND ARE BOUND BY THE OBLIGATIONS SET FORTH IN A REGISTRATION
AND PARTICIPATION AGREEMENT, DATED AS OF APRIL 30, 1998, AND ANY
AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS THERETO, AMONG THE COMPANY AND
CERTAIN STOCKHOLDERS OF THE COMPANY AND NEITHER THIS CERTIFICATE NOR
THE SHARES REPRESENTED BY IT ARE ASSIGNABLE OR OTHERWISE TRANSFERABLE
EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH REGISTRATION AND
PARTICIPATION AGREEMENT, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
HOLDBACK PROVISIONS CONTAINED IN SECTION 3.4 OF THE REGISTRATION AND
PARTICIPATION AGREEMENT AND IN THE COMPANY'S ARTICLES OF INCORPORATION,
WHICH PROVISIONS PROHIBIT ANY TRANSFER OF SUCH SHARES DURING THE 20 DAYS
PRIOR TO AND THE 180 DAYS AFTER THE EFFECTIVE DATE OF ANY REGISTRATION
STATEMENT (SUBJECT TO CERTAIN LIMITED EXCEPTIONS) FILED BY THE COMPANY FOR
ANY OF THE SHARES OF THE COMPANY, WITHOUT REGARD TO THE APPLICABILITY OF
RULE 144 OR RULE 144A UNDER THE SECURITIES ACT."
29
<PAGE>
The Company agrees that it will not issue new certificates for shares formerly
representing Registrable Securities without a legend unless (a) such shares have
-
been sold to the public pursuant to an effective registration statement under
the Securities Act or Rule 144 or (b) the requesting holder shall have delivered
-
to the Company an opinion of counsel in form and substance satisfactory to the
Company that no such legend is required under applicable securities or other
similar laws.
5.2 Amendments and Waivers. This Agreement may be amended, and the
----------------------
Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company shall have obtained
the written consent to such amendment, action or omission to act, of the holder
or holders of at least a majority of the shares of Registrable Securities. Each
holder of any Registrable Securities at the time or thereafter outstanding
shall be bound by any consent authorized by this Section 5.2, whether or not
such Registrable Securities shall have been marked to indicate such consent.
5.3 Nominees for Beneficial Owners. In the event that any
------------------------------
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election and unless notice is otherwise
given to the Company by the record owner, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
5.4 Successors, Assigns and Transferees. This Agreement shall be
-----------------------------------
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of, or are binding upon the parties hereto other than the Company
shall also be for the benefit of, binding upon and enforceable by any subsequent
holder of any Registrable Securities, subject to the provisions respecting the
minimum numbers or percentages of shares of Registrable Securities required in
order to be
30
<PAGE>
entitled to certain rights, or to take certain actions, contained herein.
5.5 Notices. All notices, requests, demands or other communications
-------
provided for hereunder shall be in writing and shall be deemed to have been duly
given to any party (a) when delivered personally (by courier service or
-
otherwise), (b) when delivered by telex and confirmed by receipt of the proper
-
telex answerback, (c) five days after being mailed by first class mail, postage
-
prepaid (registered or certified mail, return receipt requested), (d) when
-
receipt acknowledged, if telecopied, or (e) the next business day after timely
-
delivery to the courier, if sent by overnight air courier guaranteeing next day
delivery, in each case to the applicable address set forth beneath its name on
the schedules hereto, or to such other address as such party may have designated
to the Company in writing, or if to any other holder of Registrable Securities
at the address of such holder in the stock record books of the Company, and if
to the Company or the CD&R Fund to the following addresses:
(i) if to the Company, to:
3 Boulevard Royal
2449 Luxembourg
Luxembourg
with a copy to:
Jafra Cosmetics International, Inc.
2451 Townsgate Road
Westlake Village, CA 91361
Attention: General Counsel
---------
(ii) if to the CD&R Fund, to:
Clayton, Dubilier & Rice
Fund V Limited Partnership
1403 Foulk Road, Suite 106
Wilmington, DE 19803
Attention: General Partner
---------
or at such other address or addresses as the Company or the CD&R Fund, as the
case may be, may have designated in writing
31
<PAGE>
to each holder of Registrable Securities at the time outstanding. Copies of any
notice or other communication given under the Agreement shall also be given to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue
New York, New York 10152
Facsimile: (212) 407-5252
Telephone: (212) 407-5200
Attention: Donald J. Gogel
---------
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Facsimile: (212) 909-6836
Telephone: (212) 909-6435
Attention: Paul S. Bird, Esq.
---------
Copies of any notice or other communication given under the Agreement given to
any Management Investor shall also be given to:
Stephan G. Bachelder & Associates, P.A.
22 Free Street
Portland, Maine 04101
Attention: Stephan G. Bachelder, Esq.
---------
Any party may give any notice or other communication in connection herewith
using any other means (including, but not limited to, personal delivery,
messenger service, facsimile, telex or ordinary mail), but no such notice or
other communication shall be deemed to have been duly given unless and until
it is actually received by the individual for whom it is intended.
5.6 No Inconsistent Agreements. The Company will not hereafter enter
--------------------------
into any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Registrable Securities by this Agreement.
5.7 Remedies; Attorneys' Fees. Each holder of Registrable
-------------------------
Securities, in addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of any provision of
32
<PAGE>
this Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate. In any action or proceeding
brought to enforce any provision of this Agreement, the successful party shall
be entitled to recover reasonable attorneys' fees in addition to its costs and
expenses and other available remedy.
5.8. Stock Splits, etc. Each party hereto agrees that it will vote to
-----------------
effect a stock split (forward or reverse, as the case may be) with respect to
any Registrable Securities in connection with any registration of such
Registrable Securities hereunder, or otherwise, if the managing underwriter
shall advise the Company in writing (or, in connection with an offering that is
not underwritten, if an investment banker shall advise the Company in writing)
that in their or its opinion such a stock split would facilitate or increase the
likelihood of success of the offering. Each party hereto agrees that any number
of shares of Common Stock referred to in this Agreement shall be equitably
adjusted to reflect any stock split, stock dividend, stock combination, re-
capitalization or similar transaction.
5.9. Term. This Agreement shall be effective as of the date hereof
----
and shall continue in effect thereafter until the earliest of (a) its
-
termination by the consent of the parties hereto or their respective successors
in interest, (b) the date on which no Registrable Securities remain outstanding
-
and (c) the dissolution, liquidation or winding up of the Company.
-
5.10. Severability. If any provision of this Agreement is inoperative
------------
or unenforceable for any reason, such circumstances shall not have the effect of
rendering the provision in question inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatsoever.
The invalidity of any one or more phrases, sentences, clauses, Sections or sub-
sections of this Agreement shall not affect the remaining portions of this
Agreement.
5.11. Headings. The headings contained in this Agreement are for
--------
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
5.12. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original and all of which
together constitute one and the same instrument.
33
<PAGE>
5.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL
-------------
RESPECTS, INCLUDING, BUT NOT LIMITED TO, AS TO VALIDITY, INTERPRETATION AND
EFFECT, BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO
PRINCIPLES OF CONFLICTS OF LAWS WHICH WOULD REQUIRE APPLICATION OF THE LAW OF
ANOTHER JURISDICTION.
5.14. No Third Party Beneficiaries. Except as provided in Sections
----------------------------
1(d), 3.7 and 5.4, nothing in this Agreement shall confer any rights upon any
Person other than the parties hereto and each such party's respective heirs,
successors and permitted assigns.
5.15. Consent to Jurisdiction. Each party irrevocably submits to the
-----------------------
exclusive jurisdiction of (a) the Supreme Court of the State of New York, New
-
York County, and (b) the United States District Court for the Southern District
-
of New York, for the purposes of any suit, action or other proceeding arising
out of this Agreement or any transaction contemplated hereby (and agrees not to
commence any such suit, action or proceeding except in such courts). Each party
further agrees that service of any process, summons, notice or document by U.S.
registered mail to such party's respective address set forth above shall be
effective service of process for any such suit, action or proceeding. Each
party irrevocably and unconditionally waives any objection to the laying of
venue of any such suit, action or proceeding in (i) the Supreme Court of the
-
State of New York, New York County, and (ii) the United States District Court
--
for the Southern District of New York, that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
5.16. Waiver of Jury Trial. Each party hereby waives, to the fullest
--------------------
extent permitted by applicable law, any right it may have to a trial by jury in
respect of any suit, action or proceeding arising out of this Agreement or any
transaction contemplated hereby. Each party (a) certifies that no
-
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it and the other
-
parties have been induced to enter into the Agreement by, among other things,
the mutual waivers and certifications in this Section 5.16.
5.17. Entire Agreement. This Agreement constitutes the entire
----------------
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof.
34
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf as of the date
first written above.
CDRJ INVESTMENTS (LUX) S.A.
By: /s/ David A. Novak
--------------------------
Name: David A. Novak
Title: Secretary and Director
CLAYTON, DUBILIER & RICE
FUND V LIMITED PARTNERSHIP
By: CD&R Associates V
Limited Partnership,
the general partner
By: CD&R Investment Associates II,
Inc., its managing general partner
By: /s/ Donald J. Gogel
------------------------
Name: Donald J. Gogel
Title: President, Assistant
Secretary and Assistant
Treasurer
<PAGE>
EXHIBIT 12.1
Jafra Cosmetics
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Six Months Four Months Two Months
Ended Ended Ended
Year ended December 31, June 30, April 30, June 30,
1993 1994 1995 1996 1997 1997 1998 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before
extraordinary item
and income tax
benefit (expense) A 50.5 31.4 38.9 10.0 20.3 8.6 7.0 (0.2)
--------------------------------------------------------------------------------------------------------
Fixed Charges:
Interest including
amortization of debt
issuance costs 0.9 1.0 0.6 0.5 0.5 0.2 0.2 2.7
Interest portion of
rent expense 1.2 2.8 1.2 1.6 1.2 0.3 0.2 0.1
--------------------------------------------------------------------------------------------------------
Total Fixed Charges B 2.1 3.8 1.8 2.1 1.7 0.5 0.4 2.8
--------------------------------------------------------------------------------------------------------
Earnings,
as defined C = (A+B) 52.6 35.2 40.7 12.1 22.0 9.1 7.4 2.6
Ratio of earnings
for fixed charges C/B 25.0 9.3 22.6 5.8 12.9 18.2 18.5 (i)
--------------------------------------------------------------------------------------------------------
</TABLE>
(i)For the two months ended June 30, 1998, earnings before income taxes and
fixed charges were insufficient to cover fixed charges by .2.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF CDRJ INVESTMENTS (LUX) S.A.
<TABLE>
<C> <S>
1. CDRJ North Atlantic (Lux) S.A.R.L. (Luxembourg)
2. Jafra Cosmetics International, Inc. (Delaware)
3. Jafra Cosmetics Handelsgesellschaft mbH (Austria)
4. Jafra Cosmetics A.G. (Switzerland)
5. Jafra Cosmetics International B.V. (The Netherlands)
6. Jafra Cosmetics S.p.A. (Italy)
7. CDRJ German Holding Company GmbH (Germany)
8. Jafra Cosmetics GmbH (Germany)
9. Jafra Cosmetics S.R.L. (Argentina)
10. Jafra Cosmetics Venezuela, S.A. (Venezuela)
11. Jafra Cosmetics International, S.A. de C.V. (Mexico)
12. Jafra Poland Sp. z o.o (Poland)
13. Jafra Cosmetics Colombia, S.A. (Colombia)
14. Consultoria Jafra, S.A. de C.V. (Mexico)
15. Distribuidora Venus, S.A. de C.V. (Mexico)
16. Dirsamex, S.A. de C.V. (Mexico)
17. Reday, S.A. de C.V. (Mexico)
18. Qualifax, S.A. de C.V. (Mexico)
19. Jafra Cosmetics, S. de R.L. de C.V. (Mexico)
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement on Form S-4 of our
report dated August 25, 1998 on the combined balance sheet of CDRJ Investments
(Lux) S.A. as of April 28, 1998 appearing in the Prospectus, which is part of
this Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
New York, NY
September 4, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Jafra Cosmetics International:
We consent to the inclusion in this registration statement on Form S-4 of
our report dated February 27, 1998, on our audit of the combined financial
statements of Jafra Cosmetics International (as defined in note 1 thereto), as
of December 31, 1997 and 1996 and for each of the years in the three-year
period ended December 31, 1997. We also consent to the reference to our firm
under the heading "Experts" in the prospectus which is part of this
registration statement.
KPMG Peat Marwick LLP
New York, New York
September 4, 1998
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
_________
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
</TABLE>
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
(JAFRA COSMETICS INTERNATIONAL)
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3998453
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
(2451 TOWNSGATE ROAD
WESTLAKE VILLAGE, CA 91361)
(Address of principal executive offices) (Zip Code)
(11 3/4% SENIOR SUBORDINATED NOTES DUE 2008)
(Title of indenture securities)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C.,
Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to
commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No. 1
to the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc. (File
No. 22-17940) and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange Commission
as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file
with the Securities and Exchange Commission as Exhibit 4 to the
Statement of Eligibility and Qualification of Trustee (Form T-1)
filed with the Registration Statement of Eastern Edison Company
(File No. 33-37823) and is incorporated herein by reference thereto.
1
<PAGE>
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the trustee, State Street Bank and Trust Company, a corporation organized and
existing under the laws of The Commonwealth of Massachusetts, has duly caused
this statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Boston and The Commonwealth of
Massachusetts, on the {AUGUST 27, 1998}.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Steven Cimalore
NAME: STEVEN CIMALORE
TITLE: VICE PRESIDENT
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by {JAFRA
COSMETICS INTERNATIONAL} of its {11 3/4% SENIOR SUBORDINATED NOTES DUE 2008},
we hereby consent that reports of examination by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Steven Cimalore
NAME: STEVEN CIMALORE
TITLE: VICE PRESIDENT
DATED: AUGUST 27, 1998
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business March 31, 1998,
--------------
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
Cash and balances due from depository institutions:
<S> <C>
Noninterest-bearing balances and currency and coin...................................................... 1,144,309
Interest-bearing balances............................................................................... 9,914,704
Securities................................................................................................... 10,062,052
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary..................................................................... 8,073,970
Loans and lease financing receivables:
Loans and leases, net of unearned income ............ 6,433,627
Allowance for loan and lease losses.................. 88,820
Allocated transfer risk reserve...................... 0
Loans and leases, net of unearned income and allowances................................................. 6,344,807
Assets held in trading accounts.............................................................................. 1, 117,547
Premises and fixed assets.................................................................................... 453,576
Other real estate owned...................................................................................... 100
Investments in unconsolidated subsidiaries................................................................... 44,985
Customers' liability to this bank on acceptances outstanding................................................. 66,149
Intangible assets............................................................................................ 263,249
Other assets................................................................................................. 1,066,572
----------
Total assets................................................................................................. 38,552,020
==========
LIABILITIES
Deposits:
In domestic offices..................................................................................... 9,266,492
Noninterest-bearing....................... 6,824,432
Interest-bearing.......................... 2,442,060
In foreign offices and Edge subsidiary.................................................................. 14,385,048
Noninterest-bearing....................... 75,909
Interest-bearing.......................... 14,309,139
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary..................................................................... 9,949,994
Demand notes issued to the U.S. Treasury and Trading Liabilities............................................. 171,783
Trading liabilities........................................................................................ 1,078,189
Other borrowed money......................................................................................... 406,583
Subordinated notes and debentures............................................................................ 0
Bank's liability on acceptances executed and outstanding..................................................... 66,149
Other liabilities............................................................................................ 878,947
Total liabilities............................................................................................ 36,203,185
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................................................ 0
Common stock................................................................................................. 29,931
Surplus...................................................................................................... 450,003
Undivided profits and capital reserves/Net unrealized holding gains (losses)................................. 1,857,021
Net unrealized holding gains (losses) on available-for-sale securities....................................... 18,136
Cumulative foreign currency translation adjustments.......................................................... (6,256)
Total equity capital......................................................................................... 2,348,835
----------
Total liabilities and equity capital........................................................................ 38,552,020
----------
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<NAME> CDRJ INVESTMENTS(LUX)S.A
<CIK> 0001068906
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 2-MOS 4-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998 DEC-31-1997
<PERIOD-START> MAY-01-1998 JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 APR-30-1998 DEC-31-1997
<CASH> 18,371 0 10,231
<SECURITIES> 0 0 0
<RECEIVABLES> 20,975 0 29,355
<ALLOWANCES> 2,013 0 2,057
<INVENTORY> 38,637 0 38,028
<CURRENT-ASSETS> 88,676 0 118,639
<PP&E> 56,978 0 70,210
<DEPRECIATION> 799 0 26,528
<TOTAL-ASSETS> 277,287 0 175,250
<CURRENT-LIABILITIES> 54,371 0 96,026
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 1,579 0 49,567
<OTHER-SE> 76,614 0 27,737
<TOTAL-LIABILITY-AND-EQUITY> 277,287 0 175,250
<SALES> 41,008 77,282 229,524
<TOTAL-REVENUES> 41,008 77,282 229,524
<CGS> 11,792 20,322 59,129
<TOTAL-COSTS> 37,385 71,841 208,559
<OTHER-EXPENSES> 1,140 (1,480) (1,006)
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 2,707 (78) (306)
<INCOME-PRETAX> (224) 6,999 20,265
<INCOME-TAX> 357 2,899 4,816
<INCOME-CONTINUING> (582) 4,100 15,449
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (582) 4,100 15,449
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
