PURCHASE AGREEMENT
by and between
IVAX CORPORATION
and
XXXXXX, INC.
June 16, 1998
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE
SECTION 1.1 Purchase and Sale...............................................1
SECTION 1.2 Purchase Price..................................................2
SECTION 1.3 Closing.........................................................2
SECTION 1.4 Purchase Price Adjustment.......................................3
SECTION 1.5 Letter of Credit................................................5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 2.1 Organization....................................................6
SECTION 2.2 Capitalization..................................................7
SECTION 2.3 Ownership of Stock..............................................8
SECTION 2.4 Authorization; Validity of Agreement............................8
SECTION 2.5 Consents and Approvals; No Violations...........................8
SECTION 2.6 Financial Statements............................................9
SECTION 2.7 No Undisclosed Liabilities......................................9
SECTION 2.8 Absence of Certain Changes.....................................10
SECTION 2.9 Employee Benefit Plans; ERISA..................................10
SECTION 2.10 Litigation....................................................13
SECTION 2.11 No Default; Compliance with Applicable Laws...................13
SECTION 2.12 Taxes.........................................................14
SECTION 2.13 Title to Assets...............................................16
SECTION 2.14 Real Property.................................................16
SECTION 2.15 Company Intellectual Property.................................17
SECTION 2.16 Contracts.....................................................19
SECTION 2.17 Environmental Matters.........................................20
SECTION 2.18 Brokers or Finders............................................21
SECTION 2.19 Employees; Labor Relations....................................21
SECTION 2.20 Affiliate Transactions........................................21
SECTION 2.21 Substantial Customers and Suppliers...........................22
SECTION 2.22 Accounts Receivable...........................................22
SECTION 2.23 Inventory.....................................................22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 3.1 Organization...................................................23
SECTION 3.2 Authorization; Validity of Agreement...........................23
SECTION 3.3 Consents and Approvals; No Violations..........................24
SECTION 3.4 Acquisition for Investment.....................................24
SECTION 3.5 Financing......................................................24
SECTION 3.6 Brokers or Finders.............................................24
SECTION 3.7 Investigation by Buyer.........................................25
SECTION 3.8 Capital Adequacy; Solvency.....................................26
ARTICLE IV COVENANTS
SECTION 4.1 Interim Operations of Seller...................................26
SECTION 4.2 Access to Information..........................................28
SECTION 4.3 Tax Matters....................................................29
SECTION 4.4 Employee Matters...............................................33
SECTION 4.5 Publicity......................................................34
SECTION 4.6 Approvals and Consents; Cooperation; Notification..............35
SECTION 4.7 Non-Competition................................................36
SECTION 4.8 Use of "IVAX" Name.............................................38
SECTION 4.9 Affiliate Transactions.........................................38
SECTION 4.10 Further Assurances............................................38
SECTION 4.11 Post-Closing Purchase Transactions............................39
ARTICLE V INDEMNIFICATION
SECTION 5.1 Indemnification by Seller......................................43
SECTION 5.2 Indemnification by Buyer.......................................43
SECTION 5.3 Survival of Representations and Warranties.....................44
SECTION 5.4 Notice and Opportunity to Defend...............................44
SECTION 5.5 Adjustment for Insurance and Taxes.............................45
SECTION 5.6 Mitigation of Loss. ..........................................45
SECTION 5.7 Subrogation. .................................................46
SECTION 5.8 Tax Indemnification............................................46
SECTION 5.9 Set-Off. .....................................................46
SECTION 5.10 Exclusive Remedy. ...........................................46
ARTICLE VI CONDITIONS
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Closing....47
SECTION 6.2 Conditions to the Obligations of Buyer.........................47
SECTION 6.3 Conditions to the Obligations of Seller........................48
ARTICLE VII TERMINATION
SECTION 7.1 Termination....................................................49
SECTION 7.2 Procedure and Effect of Termination............................50
ARTICLE VIII MISCELLANEOUS
SECTION 8.1 Governing Laws and Consent to Jurisdiction.....................50
SECTION 8.2 Amendment and Modification.....................................51
SECTION 8.3 Notices........................................................51
SECTION 8.4 Interpretation.................................................52
SECTION 8.5 Counterparts...................................................53
SECTION 8.6 Entire Agreement; Third-Party Beneficiaries....................53
SECTION 8.7 Severability...................................................54
SECTION 8.8 Service of Process.............................................54
SECTION 8.9 Specific Performance...........................................54
SECTION 8.10 Assignment....................................................54
SECTION 8.11 Expenses......................................................54
SECTION 8.12 Waivers.......................................................55
SECTION 8.13 No Double Recovery............................................55
Page
Annexes
Index of Defined Terms Annex A
Procedures for Calculating Working Capital Annex B
Index to Disclosure Schedule
Title Section
Organization................................................................2.1
Capitalization..............................................................2.2
Consents and Approvals; No Violations.......................................2.5
No Undisclosed Liabilities..................................................2.7
Absence of Certain Changes..................................................2.8
Employee Benefit Plans; ERISA...............................................2.9
Litigation.................................................................2.10
No Default; Compliance with Applicable Law.................................2.11
Taxes......................................................................2.12
Real Property..............................................................2.14
Company Intellectual Property..............................................2.15
Contracts .................................................................2.16
Environmental Matters......................................................2.17
Employees; Labor Relations.................................................2.19
Affiliate Transactions.....................................................2.20
Substantial Customers and Suppliers........................................2.21
Accounts Receivable........................................................2.22
Inventory..................................................................2.23
General Disclosure..........................................................3.7
Employee Matters............................................................4.4
Affiliate Transactions......................................................4.9
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of June 16, 1998 (this
"Agreement"), by and between IVAX Corporation, a Florida corporation ("Seller"),
and Xxxxxx, Inc., a Delaware corporation ("Buyer").
WHEREAS, Seller is the owner of all of the outstanding shares
of capital stock (the "Shares") of Xxxxxxx Products Co., Inc., a Florida
corporation and a wholly-owned subsidiary of Seller (the "Company");
WHEREAS, Buyer has granted Seller the right to arrange for an
unaffiliated third party to purchase the Dermablend Business (as defined herein)
following the Closing (as defined herein);
WHEREAS, Buyer has granted Seller the right to purchase or
arrange for the purchase of, and Seller, if requested by Buyer, agrees to
purchase or arrange for the purchase of, the National Cosmetics Business (as
defined herein) and the Iman Business (as defined herein) following the Closing;
and
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, all of the Shares, subject to the terms and conditions
of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties, intending to be legally bound hereby, agree as
follows:
ARTICLE 1
PURCHASE AND SALE
SECTION 1.1 Purchase and Sale.
Upon the terms and subject to the conditions set forth in this Agreement, at the
Closing Seller shall sell, assign, transfer and deliver to Buyer, and Buyer
shall purchase from Seller, the Shares, free and clear of all options, pledges,
security interests, liens or other encumbrances or restrictions on voting or
transfer ("Encumbrances"), other than restrictions imposed by federal or state
securities laws.
SECTION 1.2 Purchase Price
(1) On the Closing Date (as defined herein) and subject to the terms and
conditions set forth in this Agreement in consideration of the sale, assignment,
transfer and delivery of the Shares, Buyer shall pay to Seller (i) $85 million
by wire transfer of immediately available funds to an account or accounts
designated by Seller (the "Purchase Price") provided, however, for purposes of
this Agreement, after the Closing Date the term "Purchase Price" will refer to
an amount equal to $85 million reduced by the funds received by Buyer in
accordance with Section 4.11.
(2) In addition, Buyer will cause the Company promptly to pay to Seller all net
proceeds received by the Company in connection with the settlement or final
adjudication of the litigation and other proceedings involving Xxxxxxx Products
Co., Inc. v. Pro-Line Corporation, Docket No. 94 C 3555 (the "Pro-Line
Litigation"). Buyer will cause the Company to allow Seller to assume complete
control of the Pro-Line Litigation and to cause the Company not to interfere
with Seller's prosecution of the Pro-Line Litigation on behalf of the Company.
Seller shall bear the costs of prosecuting the Pro-Line Litigation. Seller shall
not have any obligation to become a substituted or additional party to the
litigation. Buyer will cause the Company to cause such of its personnel as may
be reasonably requested by Seller, including, without limitation, Adu Darkwa, to
be available for consultation, testimony, acting as a Company representative at
trial on the matter and related matters, and shall cooperate in other ways as
Seller reasonably requests, in connection with the conduct of the Pro-Line
Litigation. Seller will reimburse Buyer for the reasonable out-of-pocket costs
of providing such personnel and cooperation. Seller will provide updates on the
status of the Pro-Line Litigation to Buyer as and when reasonably requested.
Buyer will cause the Company to agree to any settlement or voluntary dismissal
of any part of the Pro-Line Litigation proposed by Seller, provided that such
settlement does not impose any costs or any ongoing obligations or restrictions
on the Company and its Subsidiaries. Buyer acknowledges and agrees that only
Seller will have the right, subject to the preceding sentence, to agree to any
settlement or dismissal of the Pro-Line Litigation.
SECTION 1.3 Closing
(1) The sale and purchase of the Shares contemplated by this Agreement shall
take place at a closing (the "Closing") to be held at the offices of Skadden,
Arps, Slate, Xxxxxxx & Xxxx (Illinois) at 9:00 a.m. Chicago time on a date not
later than the second business day following the satisfaction of the condition
set forth in Section 6.1(b) (but in no event earlier than August 15, 1998 or
such earlier date selected by Seller) or at such other place or at such other
time or on such other date as Seller and Buyer mutually agree upon in writing
(the day on which the Closing takes place being the "Closing Date").
(2) At the Closing, Seller shall deliver or cause to be delivered to Buyer (i)
stock certificates evidencing the Shares duly endorsed in blank or accompanied
by stock powers duly executed in blank and (ii) all other previously undelivered
certificates and other documents required to be delivered by Seller to Buyer at
or prior to the Closing Date in connection with the transactions contemplated
hereby.
(3) At the Closing, Buyer shall deliver to Seller (i) the Purchase Price by wire
transfer in immediately available funds to an account or accounts designated by
Seller and (ii) all other previously undelivered certificates and other
documents required to be delivered by Buyer to Seller at or prior to the Closing
Date in connection with the transactions contemplated hereby.
SECTION 1.4 Purchase Price Adjustment.
(1) As soon as practicable but not later than 60 days following the Closing
Date, Seller shall prepare and deliver to Buyer a working capital statement of
the Company as of the close of business on the Closing Date (the "Closing
Statement") setting forth the current assets minus the current liabilities of
the Company (the "Working Capital") on the basis described in Annex B,
accompanied by a report from Xxxxxx Xxxxxxxx LLP; provided, however, if the
transactions contemplated in Section 4.11(a) or (b) occur, the Closing Statement
will be prepared as if the Company did not own the Dermablend Business or the
National Cosmetics Business and the Iman Business as of the Closing Date, as the
case may be; provided further that if Buyer retains the Dermablend Business and,
pursuant to Section 4.11(b), sells the National Cosmetics Business and the Iman
Business, the Dermablend Business will also include the net accounts receivable
(other than the Designated Receivables (as defined in Section 4.11)), bank
overdraft, accounts payable and accrued expenses related to the National
Cosmetics Business and the Iman Business. Seller and its authorized
representatives shall have reasonable access to all relevant books and records
and employees of the Company following the Closing Date to the extent required
to complete preparation of the Closing Statement, including, without limitation,
preparation of any financial reports or schedules needed to complete the Closing
Statement. Seller and Buyer shall split equally the cost of preparing and
delivering the Closing Statement.
(2) After receipt of the Closing Statement, Buyer shall have 15 days to review
it. Buyer and its authorized representatives shall have reasonable access to
Seller's accountants to the extent required to complete their review of the
Closing Statement, including, without limitation, the accountants' work papers
used in preparation thereof. Unless Buyer delivers written notice to Seller on
or prior to the 15th day after receipt of the Closing Statement specifying in
reasonable detail its objections to the Closing Statement on the grounds that
the Closing Statement (i) was not prepared in accordance with this Section 1.4
or (ii) contained arithmetic errors, the parties shall be deemed to have
accepted and agreed to the Closing Statement. If Buyer so notifies Seller of
such an objection to the Closing Statement, the parties shall within 15 days
following the date of such notice (the "Resolution Period") attempt to resolve
their differences.
(3) At the conclusion of the Resolution Period, any amounts remaining in dispute
shall, at the election of either party, be submitted to Price Waterhouse (the
"Neutral Auditor"). The Neutral Auditor shall be engaged within five days after
an election by either party to submit its objections to the Neutral Auditor, and
each party agrees to execute, if requested by the Neutral Auditor, a reasonable
engagement letter. All fees and expenses of the Neutral Auditor shall be borne
equally by Seller and Buyer. The Neutral Auditor shall act as an arbitrator to
determine, based solely on the written presentations by Seller and Buyer made
within 15 days of the Neutral Auditor's engagement or such other reasonable
period of time to which the parties agree, and not by independent review, only
those issues still in dispute. The Neutral Auditor's determination shall be made
within 30 days after Seller's and Buyer's written presentations have been made,
shall be set forth in a written statement delivered to Seller and Buyer and
shall be final, binding, conclusive and nonappealable. The term "Final Closing
Statement" shall mean the definitive Closing Statement agreed to by Seller and
Buyer in accordance with Section 1.4(b) or the definitive Closing Statement
resulting from the determination made by the Neutral Auditor in accordance with
this Section 1.4(c) (in addition to those items theretofore agreed to by Seller
and Buyer).
(4) On a date or dates mutually agreeable to Seller and Buyer within ten days of
the Closing Date, Seller and its accountants will take a physical inventory,
observed by Buyer and/or its representatives. All inventory reflected on the
Closing Statement shall be as of the Closing Date and based upon this physical
inventory. For purposes of the Closing Statement, the inventory shall include
all finished goods, work-in-process, raw materials and promotional materials
calculated in accordance with the procedures set forth in Annex B.
(5) The Purchase Price shall be (i) increased dollar-for-dollar to the extent
the Working Capital as reflected on the Final Closing Statement is greater than
the March Target Amount (as defined below) and (ii) decreased dollar-for-dollar
to the extent the Working Capital as reflected on the Closing Statement is less
than the December Target Amount. There shall be no adjustment to the Purchase
Price pursuant to this Section 1.4(e) if the Working Capital is equal to or
greater than the December Target Amount and less than or equal to the March
Target Amount. The amount of any such change in the Purchase Price pursuant to
this Section 1.4(e) shall be paid by Buyer to Seller, in the case of an
increase, or by Seller to Buyer, in the case of a decrease, plus interest on
such amount from the Closing Date through the date of payment at the Prime Rate,
within five business days after the Closing Statement is agreed to by Seller and
Buyer or is determined by the Neutral Auditor. The "Prime Rate" means the prime
lending rate announced by The Wall Street Journal as in effect from time to
time. Any amount paid pursuant to this Section 1.4(e) will be paid by wire
transfer of immediately available funds to an account or accounts designated by
Buyer or Seller, as the case may be. The "December Target Amount" means $11.95
million and the "March Target Amount" means $12.78 million; provided that (x) if
Buyer sells the National Cosmetics Business and the Iman Business pursuant to
Section 4.11(b) and Buyer retains the Dermablend Business, the December Target
Amount shall be $12.49 million and the March Target Amount shall equal $14.00
million less the amount of the Designated Receivables, if any, (y) if Buyer
sells the Dermablend Business, the National Cosmetics Business and the Iman
Business pursuant to Sections 4.11(a) and (b), the December Target Amount shall
be $10.63 million and the March Target Amount shall be $10.75 million and (z) if
Buyer sells the Dermablend Business pursuant to Section 4.11(a) and Buyer
retains the National Cosmetics Business and the Iman Business, Buyer and Seller
will negotiate in good faith to establish the Target Amount in a manner
consistent with setting of the foregoing amounts.
SECTION 1.5 Letter of Credit. In the event that following the Closing, Seller
publicly announces its intention on or prior to the second anniversary of the
Closing Date to (i) complete a liquidation of Seller or (ii) distribute by way
of extraordinary dividend or stock repurchase all or substantially all of
Seller's assets, Seller shall deliver to Buyer an irrevocable letter of credit
to secure Seller's obligations under this Agreement, in a form reasonably
satisfactory to Buyer, issued by a commercial bank having combined capital and
surplus of at least $100 million in favor of Buyer. Such letter of credit, if
issued on or prior to the end of the eighteenth month after the Closing Date
(the "Cut-Off Date"), shall be in the initial principal amount of 25% of the
Purchase Price, provided that the amount of any such letter of credit
outstanding at the Cut-Off Date will be reduced to equal the dollar value of all
pending claims for indemnification made by Buyer pursuant to Sections 4.3 and
5.1 as of the Cut-Off Date. Any such letter of credit issued after the Cut-Off
Date shall be in the initial principal amount equal to the dollar value of all
then pending claims for indemnification made by Buyer pursuant to Sections 4.3
and 5.1. Any such letter of credit shall have a term of two years and shall be
subject to automatic renewal for successive six-month periods to the extent that
claims for indemnification by Buyer under Section 5.1 remain unresolved. After
the second, but before the sixth anniversary of the Closing Date, if Seller
sells all or substantially all of its assets, Seller shall cause the buyer of
such assets to assume Seller's obligations under this Agreement, in which event
the obligation to issue a letter of credit pursuant to this Section 1.5 will
terminate.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
SECTION 2.1 Organization. Seller, the Company and the Company's Subsidiaries
each is a corporation or other entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not have a Company Material
Adverse Effect (as defined herein). The Company and each of its Subsidiaries are
duly qualified, licensed or admitted to do business and are in good standing in
those jurisdictions specified in Section 2.1 of the written statement delivered
by Seller to Buyer at or prior to the execution of this Agreement (the
"Disclosure Schedule"), which, except as disclosed in Section 2.1 of the
Disclosure Schedule, are the only jurisdictions in which the ownership, use or
leasing of the Company's and its Subsidiaries' properties, or the conduct or
nature of their businesses, may make such qualification, licensing or admission
necessary, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not have a Company Material
Adverse Effect. Before Closing, Seller will have delivered to Buyer a complete
and correct copy of the certificate of incorporation, bylaws, certificate of
formation, operating agreement or similar organizational documents of Seller,
the Company and the Company's Subsidiaries. As used in this Agreement, "Company
Material Adverse Effect" means any material adverse change in, or material
adverse effect on, the business, financial condition or operations of the
Company and its Subsidiaries, taken as a whole; provided, however, that, the
effects of changes that are generally applicable to (i) the industries or
markets in which the Company and its Subsidiaries operate, (ii) the United
States economy or (iii) the United States securities markets shall be excluded
from the determination of Company Material Adverse Effect; provided further,
that any adverse effect on the Company or its Subsidiaries resulting from the
execution and the announcement of this Agreement and the transactions
contemplated hereby shall also be excluded from the determination of Company
Material Adverse Effect. As used in this Agreement, "Subsidiary" means, with
respect to any party, any corporation, partnership or other entity or
organization, whether incorporated or unincorporated, of which (i) such party or
any subsidiary of such party is a general partner (excluding such partnerships
where such party or any subsidiary of such party does not have a majority of the
voting interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
subsidiaries. Section 2.1 of the Disclosure Schedule lists the name of each
Subsidiary and all lines of business in which each Subsidiary is participating
or engaged. Except for interests in the Subsidiaries of the Company and as
disclosed in Section 2.2 of the Disclosure Schedule, neither the Company nor any
of its Subsidiaries owns, directly or indirectly, any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity.
SECTION 2.2 Capitalization. Section 2.2 of the Disclosure Schedule sets forth
the authorized, issued and outstanding capital stock of the Company. All the
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. Section 2.2 of
the Disclosure Schedule lists for each Subsidiary the amount of its authorized
capital stock, the amount of its outstanding capital stock and the record owners
of such outstanding capital stock. All of the outstanding shares of capital
stock of each Subsidiary have been duly authorized and validly issued and are
fully paid and nonassessable. There are no existing (i) options, warrants,
calls, subscriptions or other rights, convertible securities, agreements or
commitments of any character obligating Seller, the Company or its Subsidiaries
to issue, transfer or sell any shares of capital stock or other equity interest
in the Company or its Subsidiaries or securities convertible into or
exchangeable for such shares or equity interests, (ii) contractual obligations
of the Company or its Subsidiaries to repurchase, redeem or otherwise acquire
any capital stock of Seller, the Company or the Company's Subsidiaries or (iii)
voting trusts or similar agreements to which Seller, the Company or its
Subsidiaries is a party with respect to the voting of the capital stock of the
Company or its Subsidiaries.
SECTION 2.3 Ownership of Stock. The Shares are owned beneficially and of record
by Seller, and the shares of each of the Company's Subsidiaries are owned of
record and beneficially by the Company, in each case free and clear of all
Encumbrances, other than restrictions imposed by Federal and state securities
laws. Upon the consummation of the transactions contemplated hereby, Buyer will
acquire title to the Shares, free and clear of all Encumbrances, other than
restrictions imposed by Federal and state securities laws.
SECTION 2.4 Authorization; Validity of Agreement. Seller has full power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Seller of this
Agreement, and the consummation by it of the transactions contemplated hereby,
have been duly authorized by all necessary corporate proceedings, and no other
corporate action on the part of Seller or its stockholders is necessary to
authorize the execution and delivery by Seller of this Agreement and the
consummation by it of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Seller (and assuming due and valid
authorization, execution and delivery hereof by Buyer) is a valid and binding
obligation of Seller enforceable against Seller in accordance with its terms,
except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws, now or hereafter
in effect, affecting creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
SECTION 2.5 Contents and Approvals; No Violations. Except as disclosed in
Section 2.5 of the Disclosure Schedule and except for (a) filings pursuant to
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (b) applicable requirements under corporation or "blue sky" laws of
various states and (c) matters specifically described in this Agreement, neither
the execution and delivery of this Agreement by Seller nor the consummation by
Seller of the transactions contemplated hereby will (i) violate any provision of
the certificate of incorporation, bylaws or other organizational documents of
Seller, the Company or the Company's Subsidiaries, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which Seller, the Company or the Company's Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound, (iii)
violate any order, writ, judgment, injunction, decree, law, statute, rule or
regulation applicable to Seller, the Company, the Company's Subsidiaries or any
of their properties or assets or (iv) require on the part of Seller, the Company
or the Company's Subsidiaries any filing or registration with, notification to,
or authorization, consent or approval of, any court, legislative, executive or
regulatory authority or agency (a "Governmental Entity"), except in the case of
clauses (ii), (iii) or (iv) for such violations, breaches or defaults which, or
filings, registrations, notifications, authorizations, consents or approvals the
failure of which to obtain, would (A) not have a Company Material Adverse Effect
and would not materially adversely affect the ability of Seller to consummate
the transactions contemplated by this Agreement or (B) become applicable as a
result of the business or activities in which Buyer is or proposes to be engaged
or as a result of any acts or omissions by, or the status of any facts
pertaining to, Buyer.
SECTION 2.6 Financial Statements. Seller has delivered to Buyer (i) the audited
consolidated balance sheets (including the related notes) of the Company for the
fiscal years ended December 31, 1997, 1996 and 1995, and the related audited
consolidated statements of income, shareholder's equity and cash flows
(including the notes thereto) for each of the three years in the period ended
December 31, 1997, together with a true and correct copy of the report on such
audited information by Xxxxxx Xxxxxxxx LLP, (ii) management letters to the
Company from such accountants with respect to the results of such audits and
(iii) the unaudited balance sheet of the Company as of March 31, 1998, and the
related unaudited consolidated statement of income for the three-month period
ended March 31, 1998 (the "Unaudited Financial Statements" and together with
(i), the "Financial Statements"). The Financial Statements present fairly, in
all material respects, the financial position of the Company as of the
respective dates or for the respective periods set forth therein in accordance
with United States generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods covered, except that the Unaudited
Financial Statements lack footnotes and are subject to normal year-end
adjustments.
SECTION 2.7 No Undisclosed Liabilities. Except as disclosed in Section 2.7 of
the Disclosure Schedule and except for liabilities and obligations (a) incurred
in the ordinary course of business after December 31, 1997, (b) disclosed in the
Financial Statements or (c) incurred in connection with the transactions
contemplated hereby or otherwise as contemplated by this Agreement, since
December 31, 1997, the Company and its Subsidiaries have not incurred any
liabilities or obligations that would be required to be reflected or reserved
against in a consolidated balance sheet of the Company, prepared in accordance
with GAAP as applied in preparing the audited consolidated balance sheets of the
Company included in the Financial Statements, and that would constitute a
Company Material Adverse Effect.
SECTION 2.8 Absence of certain Changes. Except as disclosed in Section 2.8 of
the Disclosure Schedule or in the Financial Statements and except as
contemplated by this Agreement (including Section 4.1), since December 31, 1997,
the Company has not (i) suffered any change constituting a Company Material
Adverse Effect, (ii) amended its certificate of incorporation or bylaws or other
organizational documents, (iii) split, combined or reclassified the Shares, (iv)
materially changed its accounting principles, practices or methods, except as
required by GAAP or applicable law or (v) entered into any transaction or
activity which would require the prior written consent of Buyer pursuant to
Section 4.1(b)-(m) if entered into after the date hereof.
SECTION 2.9 Employee Benefit Plans; ERISA.
(1) Section 2.9(a) of the Disclosure Schedule contains a complete list and
description of each of the material Benefit Plans. Neither the Company nor any
of its Subsidiaries has scheduled or agreed upon future material increases of
benefit levels (or creations of new material benefits) with respect to any
Benefit Plan.
(2) Neither the Company nor any of its Subsidiaries maintains or is obligated to
provide benefits under any life, medical or health plan (other than as
incidental benefit under a Qualified Plan) which provides benefits to retirees
or other terminated employees, excluding benefit continuation rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(3) None of the Company, any of its Subsidiaries, any ERISA Affiliate or any
other corporation or organization controlled by or under common control with any
of the foregoing within the meaning of Section 4001 of ERISA has at any time
within the past six years (i) sponsored, maintained or contributed to any
Defined Benefit Plan or (ii) contributed to any "multiemployer plan," as that
term is defined in Section 4001 ERISA.
(4) Each of the Benefit Plans is, and its administration and operation has been,
in all material respects in compliance with, and there is no outstanding claim
or notice that any such Benefit Plan is not in compliance with, all applicable
laws and orders, including, without limitation, the requirements of ERISA and
the Code, except for such failures to be in compliance which would not have a
Company Material Adverse Effect. Each Qualified Plan has received a
determination letter from the Internal Revenue Service stating that it is so
qualified.
(5) All contributions and other payments required to be made by Seller, the
Company or any Subsidiary to any Benefit Plan with respect to any period ending
before or upon the Closing Date have been made or reserves adequate for such
contributions or other payments have been or will be set aside therefor and have
been or will be reflected in financial statements of Seller in accordance with
GAAP.
(6) To the knowledge of Seller, no event has occurred, and there exists no
condition or set of circumstances in connection with any Benefit Plan, under
which Buyer, the Company or any Subsidiary, directly or indirectly (through any
indemnification agreement or otherwise), could reasonably be expected to be
subject to any risk of material liability pursuant to Section 409 of ERISA,
Section 502(i) of ERISA, Title IV of ERISA or Section 4975 of the Code.
(7) No transaction contemplated by this Agreement will result in material
liability to the PBGC under Section 302(c)(11), 4062, 4063, 4064 or 4069 of
ERISA with respect to Buyer, the Company, any Subsidiary or any corporation or
organization controlled by or under common control with any of the foregoing
within the meaning of Section 4001 of ERISA, and no event or condition exists or
has existed in respect of any Benefit Plan which could reasonably be expected to
result in any such material liability with respect to the Buyer, the Company,
any of its Subsidiaries or any such corporation or organization.
(8) Except as disclosed in Section 2.9 of the Disclosure Schedule, no benefit
under any Benefit Plan, including, without limitation, any severance or
parachute payment plan or agreement, will be established or become triggered,
accelerated, vested, funded or payable, directly or indirectly, by reason of any
transaction contemplated by or under this Agreement, either alone or upon the
occurrence of any additional or subsequent events.
(9) There are no pending or, to the knowledge of Seller, threatened claims by or
on behalf of any Benefit Plan, by any person covered thereby, or otherwise,
which allege violations of law which could reasonably be expected to result in
material liability on the part of Buyer, the Company, any Subsidiary or any such
Benefit Plan.
(10) Except as set forth in Section 2.9(j) of the Disclosure Schedule, no
spin-off of assets and liabilities or other similar division or transfer of
rights will be required with respect to a Benefit Plan as a result of
transactions contemplated by this Agreement.
(11)For purposes of this Agreement, the following terms shall have the following
meanings:
(1) "Benefit Plan" means any Plan established by the Company or any of its
Subsidiaries or Affiliates of any of the foregoing, to which the
Company or any of its Subsidiaries contributes or has contributed, or
under which any employee, former employee or director of the Company or
any of its Subsidiaries or any beneficiary thereof is covered, is
eligible for coverage or has benefit rights.
(2) "Defined Benefit Plan" means each Benefit Plan which is subject to Part
------- ------- ----
3 of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
(3) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
(4) "ERISA Affiliate" means any person or entity who is in the same
controlled group of corporations or who is under common control with
Seller or, before the Closing, the Company or any of its Subsidiaries
(within the meaning of Section 414 of the Code).
(5) "PBGC" means the Pension Benefit Guaranty Corporation established under
----
ERISA.
(6) "Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, cafeteria,
life, health, accident, disability or other insurance, severance,
separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including, but not
limited to, any "employee benefit plan" within the meaning of Section
3(3) of ERISA.
(7) "Qualified Plan" means each Benefit Plan which is intended to qualify
--------- ----
under Section 401 of the Code.
SECTION 2.10 Litigation
(1) Except as disclosed in Section 2.10 of the Disclosure Schedule, there is no
action, suit, proceeding (other than any action, suit or proceeding resulting
from or arising out of this Agreement or the transactions contemplated hereby)
or, to the knowledge of Seller, investigation pending or, to the knowledge of
Seller, action, suit, proceeding or investigation threatened, involving the
Company or its Subsidiaries by or before any Governmental Entity or by any third
party that, individually or in the aggregate, is reasonably likely to have a
Company Material Adverse Effect.
(2) Except as disclosed in Section 2.10 of the Disclosure Schedule, the Company
is not subject to any continuing order of, consent decree, settlement agreement,
or other similar written agreement with any Governmental Entity, or any
judgment, order, writ, injunction, decree, or award of any Governmental Entity,
court, or arbitrator.
SECTION 2.11 No Default; Compliance with Applicable Laws.
(1) Except as disclosed in Section 2.11 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries is in default or violation of any term,
condition or provision of (i) its certificates of incorporation, bylaws or
similar organizational documents, (ii) any Material Agreement (as defined
herein) or (iii) any applicable law (including statutes, laws, rules,
regulations, judgments, decrees, orders or arbitration awards) or licenses,
permits, consents, approvals and authorizations of any Governmental Entity
("Permits"), excluding defaults or violations which would not reasonably be
expected to have a Company Material Adverse Effect or which become applicable as
a result of the business or activities in which Buyer is or proposes to be
engaged or as a result of any acts or omissions by, or the status of any facts
pertaining to, Buyer.
(2) The Company and its Subsidiaries have all material Permits necessary to
conduct their businesses in the manner and in the areas in which they are
presently being conducted. All such Permits are valid and in full force and
effect, except where the failure to have such Permits or the invalidity or
ineffectiveness thereof would not, individually or in the aggregate, have a
Company Material Adverse Effect.
SECTION 2.12 Taxes
(1) Except as disclosed in Section 2.12 of the Disclosure Schedule, the Company
and each of its Subsidiaries has (i) timely filed or caused to be filed all Tax
Returns (as defined herein) required to be filed by it other than those Tax
Returns the failure of which to file would not have a Company Material Adverse
Effect and (ii) paid all material Taxes (as defined herein) shown to be due on
such Tax Returns other than such Taxes that are being contested in good faith by
the Company and its Subsidiaries.
(2) Except as disclosed in Section 2.12 of the Disclosure Schedule, none of
Seller, the Company or any of the Company's Subsidiaries has received written
notice of any ongoing federal, state, local or foreign audits or examinations of
any Tax Return of the Company or any of its Subsidiaries.
(3) Except as disclosed in Section 2.12 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries has waived any statute of limitations in
respect of income taxes or agreed to any extension of time with respect to the
assessment of any Taxes.
(4) Except as disclosed in Section 2.12 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries is a party to any agreement providing for
the allocation or sharing of Taxes.
(5) Except as disclosed in Section 2.12 of the Disclosure Schedule, the Company
and its Subsidiaries have complied with all applicable laws, rules and
regulations relating to the withholding of Taxes and payment of withheld taxes
(including withholding and reporting requirements under Code xx.xx. 1441 through
1464, 3401 through 3406, 6041 and 6049 and similar provisions under any other
laws) and have, within the time and in the manner prescribed by law, withheld
from employee wages and paid over to the proper governmental authorities all
required amounts.
(6) Except as disclosed in Section 2.12 of the Disclosure Schedule, no
deficiency for Taxes has been asserted in writing against the Company and its
Subsidiaries that has not been resolved and paid in full or is being contested
in good faith.
(7) Except as disclosed in Section 2.12 of the Disclosure Schedule, no power of
attorney currently in force has been granted by or on behalf of the Company or
any of its Subsidiaries concerning any Tax matter.
(8) Except as disclosed in Section 2.12 of the Disclosure Schedule, none of
Seller, the Company or any of the Company's Subsidiaries has received any
written ruling of a taxing authority relating to Taxes of the Company or any of
its Subsidiaries or any other written and legally binding agreement with a
taxing authority relating to any Taxes that would have continuing effect after
the Closing.
(9) Except as disclosed in Section 2.12 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries has filed a consent pursuant to Code ss.
341(f) or agreed to have Code ss. 341(f)(2) apply to any disposition of a
subsection (f) asset.
(10) Except as disclosed in Section 2.12 of the Disclosure Schedule, no property
of the Company or any of its Subsidiaries is property that is or will be
required to be treated as being owned by another person pursuant to the
provisions of Code ss. 168(f)(8) (as in effect prior to its amendment by the Tax
Reform Act of 1986) or is "tax-exempt use property" within the meaning of Code
ss. 168.
(11) Except as disclosed in Section 2.12 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries is required to include in income any
adjustment pursuant to Code ss. 481(a) by reason of a voluntary change in
accounting method initiated by or on behalf of the Company or any of its
Subsidiaries, and the Internal Revenue Service has not proposed an adjustment or
change in accounting method.
(12) Except as disclosed in Section 2.12 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries is a party to any agreement, contract or
arrangement that would result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Code ss. 280G as a result
of the transactions contemplated by this Agreement.
(13) "Taxes" shall mean any and all taxes, charges, fees, levies or other
similar assessments, including, without limitation, income, gross receipts,
excise, real or personal property, sales, withholding, social security,
occupation, use, service, service use, value added, license, net worth, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by any taxing
authority (whether domestic or foreign including, without limitation, any
federal, state, local or foreign government or any subdivision or taxing agency
thereof (including a United States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest, penalties or additional amounts attributable to, or imposed upon,
or with respect to, any such taxes, charges, fees, levies or other assessments
and any out-of-pocket expenses incurred in connection with the determination,
settlement or litigation of any Tax liability. "Tax Return" shall mean any
report, return, document, declaration or other information or filing required to
be supplied to any taxing authority or jurisdiction (foreign or domestic) with
respect to Taxes. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
SECTION 2.13 Title to Assets. On December 31, 1997 the Company and its
Subsidiaries had and, except with respect to assets disposed of since December
31, 1997, in the ordinary course of business, the Company and its Subsidiaries
have, good and valid title to, or a valid leasehold interest in, all material
tangible properties and assets (other than real property) owned or used by the
Company and its Subsidiaries and reflected on the balance sheet of the Company
dated as of December 31, 1997 included in the Financial Statements (the "Balance
Sheet"), or which would have been reflected on the Balance Sheet if acquired
prior to December 31, 1997, free and clear of all Encumbrances of any nature
except for (i) Encumbrances that secure indebtedness or obligations which are
properly reflected on the Balance Sheet (all of which shall be released and
dissolved at or prior to the Closing), (ii) liens for Taxes not yet payable or
any Taxes being contested in good faith and reserved for on the Balance Sheet,
(iii) liens arising as a matter of law in the ordinary course of business,
provided that the obligations secured by such liens are not delinquent or are
being contested in good faith and (iv) such imperfections of title and
Encumbrances, if any, as do not, individually or in the aggregate, materially
interfere with the present use of any of the Company's or its Subsidiaries'
properties and assets subject thereto (the "Permitted Encumbrances"). All such
material tangible property and assets used in the operation of the Company and
its Subsidiaries are, in all material respects, in good operating condition and
repair, wear and tear excepted in light of the age of such material tangible
property.
SECTION 2.14 Real Property
(1) With respect to each parcel of real property owned by the Company and its
Subsidiaries, the common address of which is included in Section 2.14 of the
Disclosure Schedule, and except for matters which would not have a Company
Material Adverse Effect, (i) the identified owner has good and valid title to
the parcel of real property, free and clear of any Encumbrance, easement,
covenant, or other restriction, except for installments of special assessments
not yet delinquent, recorded easements, covenants, conditions and other
restrictions, and utility easements, building restrictions, zoning restrictions,
and other easements and restrictions existing generally with respect to
properties of a similar character, (ii) there are no leases, subleases,
licenses, concessions, or other agreements granting any party the right of use
or occupancy of any portion of the parcel of real property and (iii) there are
no outstanding options or rights of first refusal to purchase the parcel of real
property or any portion thereof or interest therein.
(2) Except as set forth in Sections 2.14(b) and 2.11 of the Disclosure Schedule,
with respect to each parcel of real property owned by the Company and its
Subsidiaries, neither the Company nor any of its Subsidiaries has received any
written notice from any governmental entity, and Seller does not have any
knowledge, that any of its real property, buildings, structures, facilities,
fixtures or other improvements, or the use thereof, contravenes or violates any
building, zoning or administrative law (whether or not permitted on the basis of
prior nonconforming use, waiver or variance), except where such violation would
not have a Company Material Adverse Effect. The improvements located on each
parcel of real property owned by the Company and its Subsidiaries are adequate
and suitable for the purposes for which they are presently being used (ordinary
wear and tear excepted in light of the age of such improvements) and, to the
knowledge of Seller, there are no condemnation or appropriation proceedings
pending or threatened against any of such real property or the improvements
thereon.
(3) Seller has delivered to Buyer correct and complete copies of the leases and
subleases for all real property leased or subleased to any of the Company and
its Subsidiaries. Each such lease or sublease is legal, valid, binding,
enforceable and in full force and effect, except where the illegality,
invalidity, nonbinding nature, unenforceability or ineffectiveness would not
have a Company Material Adverse Effect.
SECTION 2.15 Company Intellectual Property
(1) Section 2.15(a) of the Disclosure Schedule sets forth a list of all
registrations and applications for copyrights, patents, trademarks and service
marks and, to the Company's knowledge, unregistered copyrights, patents,
trademarks and service marks ("Intellectual Property Rights"), owned by the
Company or any of its Subsidiaries that individually are material to the
business of the Company or any of its Subsidiaries (collectively, along with the
Intellectual Property Rights licensed to the Company or Subsidiaries from third
parties the "Company Intellectual Property Rights"), specifying as to each item
owned by the Company or any Subsidiary, as applicable: (i) the nature of such
Intellectual Property Right; (ii) the jurisdictions by or in which such
Intellectual Property Right has been issued or registered or an application for
issuance or registration thereof has been filed; and (iv) the registration or
application numbers for each such Intellectual Property Right.
(2) Section 2.15(b) of the Disclosure Schedule sets forth a list of all material
licenses, sublicenses and other agreements to which the Company or any of its
Subsidiaries is a party and pursuant to which the Company or any of its
Subsidiaries is permitted to use any Intellectual Property Rights owned or
controlled by a third party (excluding off-the-shelf software licenses) or any
person is authorized to use any Company Intellectual Property Right, including
(i) the identity of all parties thereto and (ii) a description of the nature and
subject matter thereof.
(3) Except as set forth in Section 2.15(a), (b) or (c) of the Disclosure
Schedule (i) the Company and its Subsidiaries own or have the right to use all
Company Intellectual Property Rights, as well as, to the Company's knowledge,
any trade secrets and inventions, in each case material to the operations of the
Company and its Subsidiaries, free and clear of any Encumbrances (other than
Permitted Encumbrances) or, with respect to items of Intellectual Property owned
by the Company or any of its Subsidiaries, to the Company's knowledge, any other
claim of ownership or, right to use by or of any other person, except pursuant
to the license agreements set forth in Section 2.15(b) of the Disclosure
Schedule and (ii) to the Company's knowledge, each Company Intellectual Property
Right owned by the Company which is the subject of a registration is in full
force and effect and to the Company's knowledge, is valid and enforceable. To
the knowledge of Seller, neither the Company nor any of its Subsidiaries is, or
has received any written notice that it is, in default under any license or
agreement pursuant to which it uses any Company Intellectual Property Rights,
except for defaults which are not reasonably expected to have a Company Material
Adverse Effect.
(4) Except as set forth in Section 2.15(d) of the Disclosure Schedule or except
for actions or claims which would not have a Company Material Adverse Effect:
neither the Company nor any of its Subsidiaries is a defendant in any action,
suit, investigation or proceeding relating to, or otherwise has been notified
of, any alleged claim of infringement by the Company or any of its Subsidiaries
of any third party's Intellectual Property Right, and Seller has no knowledge of
any other such infringement by the Company or any of its Subsidiaries, and there
is no outstanding claim or suit brought by the Company or its Subsidiaries for,
and Seller has no knowledge of, any continuing infringement by any other person
of any Company Intellectual Property Rights. Except as set forth in Section
2.15(c) of the Disclosure Schedule, no Company Intellectual Property Right owned
by the Company or any Subsidiary is subject to any outstanding judgment,
injunction, order, decree or agreement restricting the use or transfer thereof
by the Company or any of its Subsidiaries or restricting the licensing thereof
by the Company or any of its Subsidiaries to any person, except as may be
contained in the license agreements set forth in Sections 2.15(a) and (b) of the
Disclosure Schedule and under other non-material licenses.
(5) To the Company's knowledge and except as may be determined in connection
with the claims set forth in Section 2.15(c) of the Disclosure Schedule, none of
the products manufactured, nor any process or know-how used, by the Company or
any of its Subsidiaries infringes any Intellectual Property Right of any other
person, except for infringements which would not have a Company Material Adverse
Effect.
SECTION 2.16 Contracts. Section 2.16 of the Disclosure Schedule contains a true
and complete list of all Material Agreements. Except as set forth in Section
2.16 of the Disclosure Schedule, each Material Agreement is in full force and
effect, is a valid and enforceable agreement of the Company and its Subsidiary
and, to the knowledge of Seller, the other parties thereto in accordance with
its terms. As used in this Agreement, "Material Agreement" means each agreement,
arrangement, instrument, bond, commitment, franchise, indemnity, indenture,
lease, license or understanding to which the Company or any of its Subsidiaries
is a party or to which the Company, any of its Subsidiaries or any of their
respective properties is subject that (i) obligates the Company or any of its
Subsidiaries to pay an amount in excess of $100,000 in any twelve-month period
beginning after December 31, 1997 other than purchase orders entered into in the
ordinary course of business, (ii) provides for the extension of credit
(excluding trade credit issued in the ordinary course of business), (iii)
provides for a guaranty by the Company or any of its Subsidiaries of obligations
of others in excess of $100,000, (iv) constitutes an employment agreement or
personal service contract not terminable on less than sixty (60) days' notice
without penalty, (v) expressly limits, in any material respect, the ability of
the Company or any of its Subsidiaries to engage in any line of business,
compete with any person or expand the nature or geographic scope of its
business, (vi) includes a partnership, joint venture or shareholders'
arrangement, (vii) relates to the future dispositions or acquisitions of assets
or properties other than in the ordinary and usual course of business consistent
with past practice, or any merger or business combination, (viii) includes any
collective bargaining or similar labor agreement or (ix) includes arrangements
with distributors, dealers, manufacturer's representatives, sales agencies or
franchisees not terminable on less than sixty (60) days' notice without penalty.
SECTION 2.17 Environmental Matters
(1) Except as set forth in Section 2.17 of the Disclosure Schedule, Seller and
the Company have not, as of the date hereof, received any written notice
alleging the violation of, or liability under, any applicable Environmental
Laws, which violation or liability would be reasonably likely to result in a
Company Material Adverse Effect and, to the knowledge of Seller, (i) the Company
and its Subsidiaries are in compliance with all Environmental Laws, (ii) the
Company and its Subsidiaries have obtained and are in compliance with all
Permits received pursuant to applicable Environmental Laws with respect to the
business as currently conducted, (iii) no hazardous waste or Hazardous Substance
has been stored, treated or disposed of by the Company or its Subsidiaries on
the real estate owned or leased by the Company or its Subsidiaries except in
compliance with applicable Environmental Laws, (iv) the Company and its
Subsidiaries have lawfully disposed of their hazardous waste with respect to the
operations of their businesses and (v) there have been no "Releases" (as such
term is defined in the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss. 9601, et seq.) of Hazardous Substances at any of
the real estate owned or operated by the Company or its Subsidiaries, except, in
each case referred to in clauses (i) through (v) above, where such failure to
comply with applicable Environmental Laws and Permits or to obtain Permits or to
store, treat or dispose of hazardous waste or hazardous substances would not
have a Company Material Adverse Effect.
(2) For purposes of this Agreement, the term "Environmental Laws" means all
foreign, federal, state and local laws, regulations, rules and ordinances
relating to pollution or protection of the environment, including, without
limitation, laws relating to Releases or threatened Releases of Hazardous
Substances into the environment (including, without limitation, ambient air,
surface water, groundwater, land, surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
Release, transport or handling of Hazardous Substances and all laws and
regulations with regard to record keeping, notification, disclosure and
reporting requirements respecting Hazardous Substances, and all laws relating to
endangered or threatened species of fish, wildlife and plants and the management
or use of natural resources. The term "Hazardous Substances" means any toxic,
hazardous, radioactive, caustic, or dangerous substances, pesticides, wastes,
pollutants or contaminants, or any other substances that are defined as any of
the above by or regulated as such under, any Environmental Law, including,
without limitation, petroleum and asbestos.
(3) The representations and warranties set forth in this Section 2.17 shall be
the sole and exclusive representations and warranties with respect to
environmental matters made by Seller in this Agreement.
SECTION 2.18 Brokers or Finders. Seller represents, as to itself and the
Company, that, except for X.X. Xxxxxxx & Sons, Inc., no agent, broker,
investment banker, financial advisor or other firm or person is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement.
Seller acknowledges that it is responsible for the payment of the fees of X.X.
Xxxxxxx & Sons, Inc. in connection with the transactions contemplated by this
Agreement.
SECTION 2.19 Employees; Labor Relations. Seller has delivered to Buyer prior of
this Agreement a list identifying each employee of the Company and its
Subsidiaries with yearly base salary in excess of $50,000, the position and rate
of compensation of each such employee and copies of contracts entered into
between the Company and its Subsidiaries and such employee, if any. Except as
disclosed in Section 2.19 of the Disclosure Schedule, (a) to the knowledge of
Seller, there are no threatened or contemplated attempts to organize for
collective bargaining purposes any of the employees of the Company and its
Subsidiaries and (b) no unfair labor practice complaint or sex, age, race or
other discrimination claim has been brought since January 1, 1997 against the
Company and its Subsidiaries with respect to the conduct of their businesses
before the National Labor Relations Board, the Equal Employment Opportunity
Commission or any other Governmental Entity. Since January 1, 1997, the Company
and its Subsidiaries have complied in all material respects with all applicable
laws relating to the employment of labor, including those relating to wages,
hours and collective bargaining.
SECTION 2.20 Affiliate Transactions. Except as disclosed in Section 2.20 of the
Disclosure Schedule, (a) there are no intercompany liabilities between the
Company or any of its Subsidiaries, on the one hand, and Seller or any officer,
director or Affiliate of Seller (other than the Company and its Subsidiaries),
on the other; (b) neither Seller nor any such officer, director or Affiliate
provides or causes to be provided any assets, services or facilities to the
Company or any of its Subsidiaries; (c) neither the Company nor any of its
Subsidiaries provides or causes to be provided any assets, services or
facilities to Seller or any such officer, director or Affiliate; and (iv)
neither the Company nor any of its Subsidiaries beneficially owns, directly or
indirectly, any debt or equity securities issued by Seller or any such officer,
director or Affiliate. Except as disclosed in Section 2.20 of the Disclosure
Schedule, since December 31, 1997, all settlements of intercompany liabilities
between the Company or any Subsidiary, on the one hand, and Seller or any such
officer, director or Affiliate, on the other, have been made, and all
allocations of intercompany expenses have been applied, in the ordinary and
usual course of business consistent with past practice.
SECTION 2.21 Substantial Customers and Suppliers. Section 2.21 of the Disclosure
lists the ten largest customers of the Company and its Subsidiaries, on the
basis of revenues for goods sold or services provided for the year ended
December 31, 1997 and the four month period ended April 30, 1998. Section 2.21
of the Disclosure Schedule lists the ten largest suppliers of the Company and
its Subsidiaries, on the basis of cost of goods or services purchased for the
year ended December 31, 1997 and the four month period ended April 30, 1998. As
of the date hereof, except as disclosed on Section 2.21 of the Disclosure
Schedule, since April 30, 1998, neither the Company nor any of its Subsidiaries
has received written notice that there has been or will be any material change
in the business relationship of the Company with any of such customers or
suppliers.
SECTION 2.22 Accounts Receivable. Except as set forth in Section 2.22 of the
Disclosure Schedule, the accounts and notes receivable of the Company and its
Subsidiaries reflected on the Financial Statements, and all accounts and notes
receivable arising subsequent to December 31, 1997, (i) arose from bona fide
sales transactions in the ordinary and usual course of business and are payable
on ordinary trade terms, (ii) are legal, valid and binding obligations of the
respective debtors enforceable in accordance with their terms (provided that
such representation is not intended to be a representation as to collectability
and in no way guarantees the collectability of such accounts and notes
receivable), (iii) are not subject to any valid set-off or counterclaim (other
than rights of return in the ordinary course of business) and (iv) as of the
date hereof, are not the subject of any actions or proceedings brought by or on
behalf of the Company or any of its Subsidiaries (other than as fully reserved
in the Closing Balance Sheet or arising in the ordinary course of business).
SECTION 2.23 Inventory. Except as set forth on Section 2.23 of the Disclosure
Schedule, no clearance or extraordinary sale of inventory has been conducted
since December 31, 1997. The Company and its Subsidiaries have not committed to
acquire inventory for sale which is not of a quantity usable in the ordinary and
usual course of the business within a reasonable period of time and consistent
with past practices. Section 2.23 of the Disclosure Schedule sets forth a
complete list of the addresses of the warehouses and other facilities in which
the inventory is located as of the date hereof.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
SECTION 3.1 Organization. Buyer is a corporation or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority would not have
a Buyer Material Adverse Effect. As used in this Agreement, "Buyer Material
Adverse Effect" means any material adverse change in, or material adverse effect
on, the business, financial condition or operations of Buyer and its
Subsidiaries, taken as a whole; provided, however, that the effects of changes
that are generally applicable to (i) the industries or markets in which Buyer
and its Subsidiaries operate, (ii) the United States economy, or (iii) the
United States securities markets shall be excluded from the determination of
Buyer Material Adverse Effect; and provided, further, that any adverse effect on
Buyer and its Subsidiaries resulting from the execution and the announcement of
this Agreement and the transactions contemplated hereby shall also be excluded
from the determination of Buyer Material Adverse Effect.
SECTION 3.2 Authorization; Validity of Agreement. Buyer has full power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Buyer of this
Agreement, and the consummation by it of the transactions contemplated hereby,
have been duly authorized by all necessary corporate proceedings, and no other
corporate action on the part of Buyer is necessary to authorize the execution
and delivery by Buyer of this Agreement and the consummation by it of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Buyer (and assuming due and valid authorization, execution and
delivery hereof by Seller) is a valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws, now or hereafter in effect, affecting
creditors' rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
SECTION 3.3 Consents and Approvals; No Violations. Except for (a) filings
pursuant to the HSR Act and (b) matters specifically described in this
Agreement, neither the execution and delivery of this Agreement by Buyer nor the
consummation by Buyer of the transactions contemplated hereby will (i) violate
any provision of the articles of incorporation, bylaws or other organizational
documents of Buyer, (ii) result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which Buyer or any of
its Subsidiaries is a party or by which any of them or any of their properties
or assets may be bound, (iii) violate any order, writ, judgment, injunction,
decree, law, statute, rule or regulation applicable to Buyer, any of its
Subsidiaries or any of their properties or assets or (iv) require on the part of
Buyer any filing or registration with, notification to, or authorization,
consent or approval of, any Governmental Entity; except in the case of clauses
(ii), (iii) or (iv) for such violations, breaches or defaults which, or filings,
registrations, notifications, authorizations, consents or approvals the failure
of which to obtain, would not have a Buyer Material Adverse Effect and would not
materially adversely affect the ability of Buyer to consummate the transactions
contemplated by this Agreement.
SECTION 3.4 Acquisition for Investment. Buyer is acquiring the Shares solely for
its own account and not with a view to any distribution or other disposition of
such Shares. The Shares will not be transferred except in a transaction
registered or exempt from registration under the Securities Act of 1933, as
amended.
SECTION 3.5 Financing. Buyer has available existing credit facilities (including
an acquisition line of credit and a revolving credit facility) which, together
with Buyer's cash on hand as of the Closing Date, will be sufficient to enable
Buyer to pay the full amount of the Purchase Price at the Closing.
SECTION 3.6 Brokers or Finders. Buyer represents, as to itself, its Subsidiaries
and its Affiliates, that other than PaineWebber Incorporated (whose fee Buyer
will pay), no agent, broker, investment banker, financial advisor or other firm
or person is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement. As used in this Agreement, the term
"Affiliate(s)" shall have the meaning set forth in Rule l2b-2 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
SECTION 3.7 Investigation by Buyer. In entering into this Agreement, Buyer:
(1) acknowledges that, except for the specific representations and warranties of
Seller contained in Article II, none of Seller, the Company, the Company's
Subsidiaries or any of their respective directors, officers, employees,
Affiliates, controlling persons, agents, advisors or representatives, makes or
shall be deemed to have made any representation or warranty, either express or
implied, as to the accuracy or completeness of any of the information
(including, without limitation, any estimates, projections, forecasts or other
forward-looking information) provided or otherwise made available to Buyer or
any of its directors, officers, employees, Affiliates, controlling persons,
agents, advisors or representatives (including, without limitation, in any
management presentations, information or offering memorandum, supplemental
information or other materials or information with respect to any of the above).
With respect to any such estimate, projection or forecast delivered by or on
behalf of Seller to Buyer, Buyer acknowledges that (A) there are uncertainties
inherent in attempting to make such projections and forecasts, (B) it is
familiar with such uncertainties, (C) it is taking full responsibility for
making its own evaluation of the adequacy and accuracy of all such projections
and forecasts so furnished to it, (D) it is not acting in reliance on any such
projection or forecast so furnished to it and (E) it shall have no claim against
any such person with respect to any such projection or forecast; and
(2) agrees, to the fullest extent permitted by law, that Seller and its
directors, officers, employees, Affiliates, controlling persons, agents,
advisors or representatives shall not have any liability or responsibility
whatsoever to Buyer or any of its directors, officers, employees, Affiliates,
controlling persons, agents, advisors or representatives on any basis
(including, without limitation, in contract or tort, under federal or state
securities laws or otherwise) based upon any information provided or otherwise
made available, or statements made, (or omissions to so provide, make available
or state) to Buyer or any of its directors, officers, employees, Affiliates,
controlling persons, agents, advisors or representatives, including, without
limitation, in respect of the specific representations and warranties of Seller
set forth in Article II, except as and only to the extent expressly set forth
herein with respect to such representations and warranties and subject to the
limitations and restrictions contained herein and in the Disclosure Schedule
(including Section 3.7 thereof).
SECTION 3.8 Capital Adequacy; Solvency. Buyer represents that immediately after
the sale of the Shares and the other transactions contemplated herein, Buyer
(and any successor corporation) will have a positive net worth (calculated in
accordance with GAAP) and will not be insolvent (as defined under the federal
Bankruptcy Code (the "Bankruptcy Code") and in equity) and that the sale of the
Shares and other transactions contemplated hereby and any borrowing by Buyer in
connection with such transactions will not have the effect of hindering,
delaying or defrauding any creditors of Buyer (or any successor corporation).
Buyer further represents that (A) upon consummation of the sale of the Shares
and within the meaning of Sections 544 and 548 of the Bankruptcy Code and
comparable state statutes, the Company (and any successor corporations) will not
(i) be insolvent or rendered insolvent, (ii) have an unreasonably small capital
with respect to the business or transactions engaged in or to be engaged in,
(iii) incur debts that would be beyond the ability of Buyer or any successor
corporation's ability to pay as such debts mature, and (B) the Purchase Price is
a reasonably equivalent value in exchange for the Shares.
ARTICLE 4
COVENANTS
SECTION 4.1 Interim Operations of Seller. Seller covenants and agrees that,
except (i) as contemplated by this Agreement, (ii) entering into new
warehousing/distribution arrangements to replace the agreement with Cosmetic
Essence, Inc., provided that Seller has consulted with Buyer as to the terms
with respect to such new arrangements prior to entering into any definitive
agreement related thereto and that any such definitive agreement (A) has an
initial term of 24 months or less and (B) is on terms no less favorable in the
aggregate in any material respect than the current arrangement, based on 1997
sales volume and product mix, (iii) the continuation of the Affiliate
transactions in Section 2.20 of the Disclosure Schedule, (iv) that Seller will
have the right to delay payment of accounts payable by an amount not in excess
of (A) $120,000, if Seller and/or its designees elect to purchase, and Buyer
sells, the Dermablend Business, the National Cosmetics Business and the Iman
Business pursuant to Sections 4.11 (a) and (b) or (B) $1,500,000, if Buyer
retains the Dermablend Business but Seller and/or its designees elect to
purchase, and Buyer sells, the National Cosmetics Business and the Iman Business
pursuant to Section 4.11(b) or (v) with the prior written consent of Buyer,
after the date hereof and prior to the Closing Date, Seller will cause:
(1) the Company and its Subsidiaries to conduct their businesses in the ordinary
and usual course of business;
(2) the Company and its Subsidiaries not to amend their certificates of
incorporation or bylaws or similar organizational documents;
(3) the Company not to (i) split, combine or reclassify the Shares, (ii)
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to the Shares, (iii) issue or sell any additional
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, the Shares or
(iv) redeem, purchase or otherwise acquire directly or indirectly any of its
capital stock;
(4) the Company and its Subsidiaries not to (i) adopt any new employee benefit
plan (including any stock option, stock benefit or stock purchase plan) or amend
any existing employee benefit plan in any material respect, except as may be
required by applicable law or (ii) materially increase any compensation or enter
into or amend any employment, severance, termination or similar agreement with
any of its present or future officers or directors;
(5) the Company and its Subsidiaries not to, except as may be required or
contemplated by this Agreement or in the ordinary and usual course of business,
acquire, sell, lease or dispose of any assets which in the aggregate are
material to the Company and its Subsidiaries taken as a whole;
(6) the Company and its Subsidiaries not to (i) incur or assume any long-term or
short-term debt or issue any debt securities except for borrowings under
existing lines of credit in the ordinary course of business consistent with past
practice, (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the material
obligations of any other person except in the ordinary and usual course of
business consistent with past practice in an amount not material to the Company
and its Subsidiaries taken as a whole, (iii) make any material loans, advances
or capital contributions to, or investments in, any other person other than in
the ordinary and usual course of business consistent with past practice, (iv)
pledge or otherwise encumber the Shares or (v) mortgage or pledge any of its
material assets, tangible or intangible, or create any material Encumbrance of
any kind with respect to any such asset;
(7) the Company and its Subsidiaries not to acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof or any equity interest therein;
(8) the Company and its Subsidiaries not to authorize any new capital
expenditure of capitalized items which, individually, is in excess of $50,000
or, in the aggregate, are in excess of $250,000;
(9) the Company and its Subsidiaries not to enter into or amend any contract,
agreement, commitment or arrangement providing for the taking of any action
which would be prohibited hereunder;
(10) the Company and its Subsidiaries not to adopt plan of complete or partial
liquidation or resolutions providing for or authorizing such liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization;
(11) the Company not to materially change any of the accounting policies used by
it in preparing the Financial Statements unless required by GAAP or applicable
law;
(12) the Company and its Subsidiaries not to settle or compromise any claim
(including arbitration) or litigation, which after insurance reimbursement is
material to the Company taken as a whole, without the prior written consent of
Buyer, which consent will not be unreasonably withheld;
(13) the Company and its Subsidiaries not to enter into any transaction with
Seller or any officer, director or Affiliate (other than the Company or any of
its Subsidiaries) of Seller (i) outside the ordinary and usual course of
business consistent with past practice or (ii) other than on an arm's-length
basis, other than pursuant to any arrangement disclosed in Section 2.20 of the
Disclosure Schedule; and
(14) the Company and its Subsidiaries not to authorize or enter into an
agreement to do any of the foregoing.
SECTION 4.2 Access to Information. Seller shall cause the Company to afford
Buyer's officers, employees, accountants, counsel and other authorized
representatives full and complete access during normal business hours throughout
the period prior to the Closing Date or the date of termination of this
Agreement, to its and its offices, properties, contracts, commitments, tax and
accounting work papers, books and records (including but not limited to Tax
Returns) and any material report, schedule or other document filed or received
by it during such period pursuant to the requirements of Federal or state
securities laws and to use all reasonable efforts to cause its representatives
to furnish promptly to Buyer such additional material financial and operating
data and other information as to its businesses and properties as Buyer or its
duly authorized representatives may from time to time reasonably request;
provided, however, that nothing herein shall require Seller or the Company to
disclose any information to Buyer if such disclosure (i) would cause significant
competitive harm to Seller, the Company, the Company's Subsidiaries or their
Affiliates if the transactions contemplated by this Agreement were not
consummated or (ii) would violate applicable laws or regulations or the
provisions of any confidentiality agreement to which Seller, the Company, the
Company's Subsidiaries or their Affiliates is a party. Buyer will hold any such
information which is nonpublic in confidence in accordance with the provisions
of the Confidentiality Agreement between Seller and Buyer, dated as of October
28, 1997 (the "Confidentiality Agreement").
SECTION 4.3 Tax Matters.
(1) Code 338(h)(10) Election. Seller and Buyer shall jointly make all
available elections described in Code ss. 338(h)(10) and any corresponding
elections under applicable state and local tax laws (the "Elections") for the
Company and its Subsidiaries. Seller and Buyer agree to report the transactions
under this Agreement consistently with the Elections. Buyer will prepare all
forms required to be filed in connection with the Elections ("Code ss. 338
Forms"), and Buyer and Seller shall each execute an Internal Revenue Service
Form 8023 for the Company and each of its Subsidiaries at Closing. All Code ss.
338 Forms shall be filed by the party required to file such forms under
applicable law. Each party shall promptly execute and deliver to the other party
all documentation reasonably requested by such other party, including the
completed Code ss. 338 Forms. Within 150 days after the Closing, Buyer will
compute the Modified Aggregate Deemed Sale Price ("MADSP") of the assets of the
Company and its Subsidiaries (pursuant to applicable Treasury Regulations) and
will notify Seller of its allocation of the MADSP among the assets. After
receipt of Buyer's calculation of the MADSP, Seller shall have 30 days to review
such calculation. Unless Seller delivers written notice to Buyer on or prior to
the thirtieth day after receipt of the MADSP calculation specifying in
reasonable detail its objection to the MADSP calculation, such calculation shall
be deemed final and binding between Buyer and Seller. In the event Seller has
provided a timely notice of objections to the MADSP calculation with which Buyer
does not agree, the Neutral Auditor shall resolve such dispute in accordance
with the provisions of Section 1.4(c) subject to Section 4.11(f). Buyer and
Seller each agrees to act in accordance with these allocations in any relevant
Tax Returns. Notwithstanding anything to the contrary contained in this Section
4.3, all income Taxes imposed as a result of the transactions contemplated by
this Agreement, including as result of the Elections, shall be the
responsibility of Seller.
(2) Seller Indemnification. Seller shall be liable for, and shall indemnify and
hold Buyer harmless against, all Taxes of the Company, including income Taxes
imposed on the Company as a result of the Elections, payable for any taxable
year or taxable period ending on or before the Closing Date (other than Taxes
imposed as a result of actions outside the ordinary course of business occurring
after the Closing on the Closing Date). To appropriately apportion any income
Taxes relating to any taxable year or period beginning before and ending after
the Closing Date by a closing of the Company's books as of the end of the day on
the Closing Date, the parties shall apportion such income Taxes to the portion
of the taxable period ending on or before the Closing Date by a closing of the
Company's books at the end of the day on the Closing Date except that (i)
exemptions, allowances or deductions that are calculated on a time basis, such
as the deduction for depreciation, shall be apportioned on a time basis and (ii)
all Taxes relating to actions outside the ordinary course of business occurring
after the Closing on the Closing Date (other than income Taxes imposed as a
result of the Elections) shall be apportioned to the period ending after the
Closing Date. To appropriately apportion any non-income Taxes relating to any
taxable year beginning before and ending after the Closing Date, the parties
shall apportion such non-income Taxes to the portion of the taxable period
ending on or before the Closing Date as follows: (x) ad valorem Taxes
(including, without limitation, real and personal property Taxes) shall be
accrued on a daily basis over the period for which such Taxes are levied, or if
it cannot be determined over the period such Taxes are being levied, over the
fiscal period of the relevant taxing authority, in each case irrespective of the
lien or assessment date of such Taxes, (y) all Taxes relating to actions outside
the ordinary course of business occurring on or after the Closing on the Closing
Date (other than income Taxes imposed as a result of the Elections) shall be
apportioned to the period ending after the Closing Date and (z) franchise and
other privilege Taxes not measured by income shall be accrued on a daily basis
over the period to which the privilege relates. Seller's obligations under this
paragraph shall not be limited or affected by any disclosures made by Seller in
or pursuant to Article II.
(3) Buyer and Company Indemnification. Except as otherwise provided in (b)
above, Buyer and the Company shall be liable for, and shall indemnify and hold
Seller and any of its Affiliates harmless against, any and all Taxes imposed on
the Company relating or apportioned to any taxable year or portion thereof
ending after the Closing Date, including, without limitation, Taxes imposed as a
result of actions outside the ordinary course of business occurring after the
Closing on the Closing Date (other than income Taxes imposed as a result of the
Elections).
(4) Tax Sharing Agreement. Any Tax sharing agreements, settlement agreements,
arrangements, policies or guidelines, formal or informal, express or implied,
that may exist between the Company or any of its Subsidiaries on the one hand,
and Seller or any other affiliate of Seller, on the other hand (a "Tax Sharing
Agreement"), shall terminate as of the Closing Date and, except as specifically
provided herein, any obligation to make payments under any Tax Sharing Agreement
shall be cancelled as of the Closing Date. Seller shall not amend any Tax
Sharing Agreement prior to its termination pursuant to this Section 4.3(d).
(5) Pre-Closing Taxes. Seller shall cause the Company and its Subsidiaries, and
the Company and its Subsidiaries shall consent, to join for all taxable periods
ending on or before the Closing Date in Seller's consolidated federal income Tax
Return and in any required state or local consolidated or combined income or
franchise Tax Returns that include the Company and its Subsidiaries
("Pre-Closing Consolidated Tax Returns"). Seller's Consolidated Group shall
timely prepare and file all Pre-Closing Consolidated Tax Returns that include
the Company and its Subsidiaries. Seller's Consolidated Group shall timely
prepare and file (or cause to be so prepared and filed) all Tax Returns required
by law, other than Pre-Closing Consolidated Tax Returns, covering the Company
and its Subsidiaries for all taxable periods ending on or before the Closing
Date ("Pre-Closing Separate Tax Returns"; together with Pre-Closing Consolidated
Tax Returns, "Pre-Closing Tax Returns"). Seller shall prepare all Tax Returns in
accordance with the Tax accruals on the books and records of the Company and its
Subsidiaries. Seller will not amend any Pre-Closing Tax Returns without the
consent of Buyer (which consent shall not be unreasonably withheld) if such
amended Tax Return would affect the amount of Taxes for which Buyer is liable
under this Agreement. Seller's Consolidated Group shall timely pay or cause to
be paid all Taxes related to Pre-Closing Tax Returns.
(6) Transfer Taxes. Buyer shall pay all sales, use, transfer, real property
transfer, recording, gains, stock transfer and other similar Taxes and fees
("Transfer Taxes") arising out of or in connection with the transactions
effected pursuant to this Agreement, and shall indemnify, defend, and hold
harmless Seller and the Company and its Subsidiaries on an after-Tax basis with
respect to all Transfer Taxes. Buyer shall file all necessary documentation and
Tax Returns with respect to such Transfer Taxes.
(7) Tax Returns for Stub Period. To the extent that the taxable period for any
Tax of the Company or any of its Subsidiaries does not end on the Closing Date,
Seller and Buyer will, to the extent permitted by applicable law, elect with the
relevant state and local taxing authorities to close the taxable period of the
Company and its Subsidiaries on the Closing Date. In any case where applicable
law does not permit the Company or any of its Subsidiaries to close its taxable
year on the Closing Date, Buyer will cause to be prepared and duly filed all Tax
Returns relating to Taxes of the Company and its Subsidiaries for any taxable
period that includes and ends after the Closing Date. At least 30 days prior to
the due date of any such Tax Return Buyer shall provide copies of such Tax
Return to Seller for Seller's review and approval, which approval shall not be
unreasonably withheld. The Taxes shown as due on such Tax Returns shall be
apportioned between Seller and Buyer in accordance with Section 4.3(b).
(8) Refunds or Credits. Buyer or the Company shall promptly pay to Seller any
refunds or credits (including interest thereon) relating to Taxes for which
Seller may be liable under this Section 4.3. For purposes of this Section
4.3(h), the terms "refund" and "credit" shall include a reduction in Taxes and
the use of an overpayment of Taxes as an audit or other Tax offset. Receipt of a
refund shall occur upon the filing of a Tax Return or an adjustment thereto
using such reduction, overpayment or offset, or upon the receipt of cash. Upon
the reasonable request of Seller, Buyer shall prepare and file, or cause to be
prepared and filed, all claims for refunds relating to such Taxes; provided,
however, that Buyer shall not be required to file such claims for refund to the
extent such claims for refund would have a Company Material Adverse Effect in
future periods or to the extent the claims for refund relate to a carryback of
an item. Buyer shall be entitled to all other refunds and credits of Taxes;
provided, however, Buyer will not allow the amendment of any Tax Return relating
to any Taxes for a period (or portion thereof) ending on or prior to the Closing
Date or the carryback of an item to a period ending prior to Closing without
Seller's consent.
(9) Mutual Cooperation. As soon as practicable, but in any event within 15 days
after either Seller's or Buyer's request, as the case may be, Buyer shall
deliver to Seller or Seller shall deliver to Buyer, as the case may be, such
information and other data relating to the Tax Returns and Taxes of the Company
(and shall provide such other assistance as may reasonably be requested), to
cause the completion and filing of all Tax Returns or to respond to audits by or
litigation with any taxing authorities with respect to any Tax Returns or
taxable periods or to otherwise enable Seller, Buyer or the Company to satisfy
their accounting or Tax requirements. For a period of five years from and after
the Closing, Buyer and Seller shall, and shall cause their Affiliates to,
maintain and make available to the other party, on such other party's reasonable
request, copies of any and all information, books and records referred to in
this Section 4.3(i). After such five-year period, Buyer or Seller may dispose of
such information, books and records, provided that prior to such disposition,
Buyer or Seller shall give the other party the opportunity to take possession of
such information, books and records.
(10) Contests. Whenever any taxing authority asserts a claim, makes an
assessment, or otherwise disputes the amount of Taxes for which Seller is or may
be liable under this Agreement, Buyer shall, if informed of such an assertion,
promptly inform Seller within 5 business days, and Seller shall have the right
to control any resulting proceedings and to determine whether and when to settle
any such claim, assessment or dispute to the extent such proceedings or
determinations affect the amount of Taxes for which Seller may be liable under
the Agreement, provided that Seller shall have agreed in writing to assume all
costs and expenses of any such contest and shall have recognized its obligation
to indemnify Buyer under this Agreement for any such Taxes. Whenever any taxing
authority asserts a claim, makes an assessment or otherwise disputes the amount
of Taxes for which Buyer is liable under this Agreement, Buyer shall have the
right to control any resulting proceedings and to determine whether and when to
settle any such claim, assessment or dispute, except to the extent such
proceedings affect the amount of Taxes for which Seller are liable under this
Agreement.
SECTION 4.4 Employee Matters
(1) As of the Closing Date, Buyer shall cause the Company and its Subsidiaries
to continue to employ all persons who, immediately prior to the Closing Date,
were employees (the "Company Employees") of the Company or its Subsidiaries on
terms no less favorable in the aggregate (including with respect to position,
duties, responsibilities, location, compensation, incentives and Benefit Plans,
(as defined herein)) than those in effect on the date hereof with respect to
such Company Employees. Buyer agrees that, for a period of at least two years
following the Closing, Buyer shall provide the Company Employees with employee
benefits that are generally comparable in the aggregate than those provided to
the Company Employees immediately prior to the date hereof. With respect to any
employee benefits that are provided to the Company Employees under any of
Buyer's employee benefit plans, programs, policies and arrangements, including
vacation policies ("Buyer Plans"), service accrued by the Company Employees
during employment with Seller, the Company and the Company's Subsidiaries prior
to the Closing Date shall be recognized for all purposes, except to the extent
necessary to prevent duplication of benefits. Without limiting the generality of
the foregoing, Buyer agrees to maintain the Company's general severance policy
as described in Section 4.4(a) of the Disclosure Schedule for a period of one
year following the Closing Date.
(2) Buyer agrees to assume and honor, and cause the Company and its Subsidiaries
to assume and honor, without modification, the employment, severance, retention,
other incentive agreements and arrangements, as amended through the date hereof
(each, an "Employee Arrangement") for the benefit of the employees of the
Company or its Subsidiaries as described in Section 4.4(b) of the Disclosure
Schedule. Seller shall indemnify Buyer for any severance payments the Company
owes to any Company employee other than as described in Section 4.4(b) of the
Disclosure Schedule or to any former Company employees whose employment with the
Company terminates prior to the Closing to the extent any such amounts are not
accrued for on the Final Closing Statement.
(3) Buyer shall cause each Buyer Plan to waive any (i) pre-existing condition
restriction which was waived under the terms of any analogous Benefit Plan
immediately prior to the Closing and (ii) waiting period limitation which would
otherwise be applicable to a Company Employee on or after the Closing to the
extent such Company Employee had satisfied any similar waiting period limitation
under an analogous Benefit Plan prior to the Closing. The Company Employees
shall also be given credit for any deductible or co-payment amounts paid in
respect of the Benefit Plan year in which the Closing occurs, to the extent
that, following the Closing, they participate in any Buyer Plan for which
deductibles or co-payments are required. For purposes of this Agreement,
"Company Employees" shall include those Company Employees who, as of immediately
prior to the Closing Date, are on lay-off, disability or leave of absence, paid
or unpaid.
SECTION 4.5 Publicity. The initial press releases with respect to the execution
of this Agreement shall be reasonably acceptable to Buyer and Seller.
Thereafter, so long as this Agreement is in effect, neither Buyer nor Seller nor
any of their respective Affiliates shall issue or cause the publication of any
press release with respect to the transactions contemplated hereby or this
Agreement without the prior agreement of the other party, except as may be
required by law or by any listing agreement with a national securities exchange.
SECTION 4.6 Approvals and Consents; Cooperation; Notification
(1) The parties shall use all reasonable efforts and cooperate with each other
to obtain as promptly as practicable all Permits and third-party consents
necessary or advisable to consummate the transactions contemplated by this
Agreement. Each party shall keep the other apprised of the status of matters
relating to completion of the transactions contemplated hereby. Buyer and Seller
shall have the right to review in advance, and shall consult with the other on,
in each case subject to applicable laws relating to the exchange of information,
all the information relating to Seller, the Company, the Company's Subsidiaries
or Buyer, as the case may be, and any of their respective Affiliates, which
appears in any filing made with, or written materials submitted to, any third
party or any Governmental Entity in connection with the transactions
contemplated by this Agreement, provided, however, that nothing contained herein
shall be deemed to provide any party with a right to review any information
provided to any Governmental Entity on a confidential basis in connection with
the transactions contemplated hereby. The party responsible for any such filing
shall promptly deliver to the other party evidence of the filing of all
applications, filings, registrations and notifications relating thereto (except
for any confidential portions thereof) and any supplement, amendment or item of
additional information in connection therewith (except for any confidential
portions thereof). The party responsible for a filing shall also promptly
deliver to the other parties a copy of each material notice, order, opinion and
other item or correspondence received by such filing party from any Governmental
Entity in respect of any such application (except for any confidential portions
thereof).
(2) Seller and Buyer shall take all actions necessary to file as soon as
practicable all notifications, filings and other documents required to obtain
all governmental authorizations, approvals, consents or waivers, including,
without limitation, under the HSR Act, and to respond as promptly as practicable
to any inquiries received from the Federal Trade Commission, the Antitrust
Division of the Department of Justice and any other Governmental Entity for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any state attorney
general or other Governmental Entity in connection therewith. Without limiting
the generality of the foregoing, the parties agree to file any applications
required under the HSR Act within three business days after the date hereof.
(3) Buyer and Seller shall promptly advise each other upon receiving any
communication from any Governmental Entity whose consent or approval is required
for consummation of the transactions contemplated by this Agreement which causes
such party to believe that there is a reasonable likelihood that any requisite
regulatory approval will not be obtained or that the receipt of any such
approval will be materially delayed.
(4) Seller shall give prompt notice to Buyer of the occurrence of any Company
Material Adverse Effect, and Buyer shall give prompt notice to Seller of the
occurrence of any Buyer Material Adverse Effect. Seller and Buyer each shall
give prompt notice to the other of the occurrence or failure to occur of an
event that would, or with the lapse of time would, cause any condition to the
consummation of the transactions contemplated hereby not to be satisfied.
SECTION 4.7 Non-Competition.
(1) Seller agrees that neither Seller nor any of its Affiliates shall, directly
or indirectly, at any time within the four year period immediately following the
Closing Date:
(1) engage for its own account or the account of others, or have any
ownership, management, employment, agency, consultancy or other
interest in, or provide financing to, any person or entity that engages
in the sale, distribution, packaging, manufacture or marketing of any
(i) Afrocentric hair care products, (ii) in the event that Seller or
its designees do not acquire the National Cosmetics Business after the
Closing, ethnic cosmetics or (iii) in the event that Seller or its
designees do not acquire the Dermablend Business after the Closing,
corrective cosmetics (other than corrective cosmetics sold through the
medical channels) (the "Prohibited Activities"), or assist any other
person or entity to do so, except that Seller and its Affiliates may
(x) own, directly or indirectly, solely as an investment, securities of
any entity engaged in the Prohibited Activities that are publicly
traded if Seller and its Affiliates do not, directly or indirectly,
beneficially own, collectively, five percent (5%) or more of any class
of securities of such entity or (y) have an ownership interest
otherwise prescribed by this Section 4.7 during such period if such
ownership interest arises as a result of the acquisition of a business
entity not principally engaged in the Prohibited Activities; provided
that Seller or its Affiliate uses commercially reasonable efforts to
sell the competing portion as soon as reasonably practicable;
(2) for its own account or for the account of others, attempt to or assist
any other person or entity in attempting to do any of the following
with respect to the Prohibited Activities: (w) solicit to employ any
director, officer or employees of Buyer or its Affiliates or encourage
any such person to terminate such relationship with Buyer or its
Affiliates, (x) encourage any customer, client, supplier or other
business relationship of Buyer or its Affiliates to terminate or alter
such relationship, whether contractual or otherwise, to the
disadvantage of Buyer or its Affiliates, as the case may be, (y)
encourage any customer or supplier not to enter into a business
relationship with Buyer or its Affiliates or (z) impair or attempt to
impair any relationship, contractual or otherwise, between Buyer or its
Affiliates or any of their customers, suppliers or other business
relationships. As used in this Agreement, the term "solicit to employ"
shall not include general solicitations not specifically directed
toward employees of Buyer or its Affiliates; or
(3) the provisions of clauses (i) and (ii) above will not apply in the
event of a change in control of Seller, including as a result of a
merger resulting in Seller's then-current stockholders owning less than
a majority of the outstanding voting securities of the entity resulting
from such merger, or sale of all or substantially all of the assets or
outstanding voting securities of Seller, if the entity which takes
control of Seller derived, immediately prior to such change in control,
substantial revenues from Prohibited Activities.
(2) The parties agree that damages at law for violation of the provisions of
this Section 4.7 may not be an adequate remedy and that if Seller or its
Affiliates violate any of the provisions thereof, in addition to any other
available rights or remedies, Buyer, its Affiliates and their successors and
assigns, shall be entitled to seek temporary or permanent injunctive relief with
regard to such violation. The parties recognize that laws and public policies of
the jurisdictions may differ as to the validity and enforceability of covenants
similar to those set forth in this Section 4.7. It is the intention of the
parties that the provisions of this Section 4.7 be enforced to the fullest
extent permissible under the laws and policies of each jurisdiction in which
enforcement of this Section 4.7 may be sought, and that the unenforceability (or
the modification to conform to such laws or policies) of any provisions of this
Section 4.7 shall not render unenforceable, or impair, the remainder of the
provisions of this Section 4.7. Accordingly, if any provision of this Section
4.7 shall be determined to be invalid or unenforceable, such invalidity or
unenforceability shall be deemed to apply only with respect to the operation of
such provision in the particular jurisdiction in which such determination is
made and not with respect to any other provision or jurisdiction.
SECTION 4.8 Use of "IVAX" Name. Buyer agrees and agrees to cause the Company or
its Subsidiaries not to use the "IVAX" name, trademark (including the "double
equilateral triangle design"), tradename or logo (including the hourglass logo)
at any time after the Closing Date.
SECTION 4.9 Affiliate Transactions. Except as set forth in Section 4.9 of the
Disclosure Schedule, immediately prior to the Closing, all indebtedness and
other amounts owing under any arrangement between Seller or any officer,
director or Affiliate (other than the Company or any of its Subsidiaries) of
Seller, on the one hand, and the Company or any of its Subsidiaries, on the
other, will be paid in full, and Seller will terminate and will cause any such
officer, director or Affiliate to terminate each such arrangement with the
Company or any of its Subsidiaries.
SECTION 4.10 Further Assurances
(1) Prior to Closing, each party agrees to use all reasonable efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations or as
reasonably requested by the other party to consummate and make effective the
transactions contemplated by this Agreement. At any time or from time to time
after the Closing, Seller shall execute and deliver to Buyer such other
documents and instruments, provide such materials and information, and take such
other action as Buyer may reasonably request to make effective the transactions
contemplated by this Agreement.
(2) Seller shall use all reasonable efforts to assist Buyer, Deloitte & Touche
LLP and Xxxxxx Xxxxxxxx LLP, at Buyer's cost and expense, in the preparation of
historical financial statements of the Company and its Subsidiaries which Buyer
may be required to file in a current report on Form 8-K pursuant to the
requirements of the Exchange Act including, without limitation, the unaudited
balance sheet of the Company as of March 31, 1997 and the related unaudited
statements of income and cash flow for the three-month period ended March 31,
1997, the statement of cash flow for the three-month period ended March 31,
1998, and the unaudited balance sheets of the Company as of June 30, 1998 and
1997 and the related unaudited statements of income and cash flow for the three-
and six-month periods ended June 30, 1998 and 1997.
(3) After the Closing Date, Buyer shall execute and deliver to Seller such other
documents and instruments, provide such materials and information, and take such
other action as Seller or its designees may reasonably request to make effective
the transactions contemplated in Section 4.11.
SECTION 4.11 Post-Closing Purchase Transactions
(1) Seller or its designees shall have an option to arrange for a third party
not affiliated with Seller, including without limitation, a trust or similar
escrow agent, (the "Third Party Purchaser") to purchase the Dermablend Business
from Buyer for a payment to Buyer of $15 million (it being understood that any
amount paid by the Third Party Purchaser exceeding $15 million will be paid to
Seller), provided that the Seller has delivered written notice to Buyer of its
election to arrange for the purchase the Dermablend Business at least two
business days prior to the Closing Date. Following the delivery of such written
notice, the Third Party Purchaser shall purchase, and Buyer will sell, the
Dermablend Business on the Closing Date immediately following the Closing. At
such closing, either the Third Party Purchaser or Seller on behalf of the Third
Party Purchaser will deliver to Buyer $15 million by cashier's check or wire
transfer of immediately available funds to an account designated by Buyer in
exchange for the transfer of the Dermablend Business, free and clear of all
Encumbrances created by Buyer. The Dermablend Business may be transferred, at
Seller's election, either in the form of (i) the transfer of all of the stock of
Xxxxx Xxxxxxx Inc. if the Dermablend Business is transferred together with the
National Cosmetics Business; (ii) an asset sale by Xxxxx Xxxxxxx Inc.; (iii) a
transfer by Xxxxx Xxxxxxx Inc. of all of the membership interests of a new
limited liability company (a "LLC") that may be formed prior to Closing pursuant
to Section 4.11(c) or (iv) such other form of transfer reasonably acceptable to
Buyer.
The "Dermablend Business" means all the rights, title and
interest to all of the assets (including contracts and leases) used or held for
use in connection with the operation of the business of selling corrective
cosmetics under the brand name "Dermablend," including, without limitation, all
associated intellectual property used primarily in such business to the extent
not material to the Company's business to be retained by Buyer, and all
associated liabilities, provided that if Buyer retains the Dermablend Business
and, pursuant to Section 4.11(b), sells the National Cosmetics Business and the
Iman Business, the Dermablend Business will also include the net accounts
receivable (other than the Designated Receivables (as defined below)), bank
overdraft, accounts payable and accrued expenses related to the National
Cosmetics Business and the Iman Business as of the Closing Date.
(2) Buyer shall have the option to require Seller or its designees to purchase,
and Seller or its designees shall have the option to purchase, the National
Cosmetics Business (as defined) and the Iman Business (as defined) together and
not separately provided that either party has delivered written notice to the
other party of its election to have Seller or its designees purchase the
National Cosmetics Business and the Iman Business at least two business days
prior to Closing. Following the delivery of such written notice by either party,
Seller or its designees shall purchase, and Buyer will sell to Seller or its
designees, the National Cosmetics and Iman Businesses on the Closing Date
immediately following the Closing. At such closing, Seller or its designees, as
the case may be, shall deliver to Buyer $1 by check in exchange for the transfer
of the National Cosmetics Business and Iman Business, in each case free and
clear of all Encumbrances created by Buyer. The National Cosmetics Business may
be transferred, at Seller's election, either in the form of (i) the transfer of
all of the stock of Xxxxx Xxxxxxx Inc. if the National Cosmetics Business is
transferred together with the Dermablend Business; (ii) an asset sale by Xxxxx
Xxxxxxx Inc.; (iii) a transfer by Xxxxx Xxxxxxx Inc. of all of the membership
interests of a new LLC that may be formed prior to Closing pursuant to Section
4.11(c) or (iv) such other form of transfer reasonably acceptable to Buyer. The
Iman Business may be transferred, at Seller's election, in the form of (i) the
transfer of all of the stock of Xxxxx Xxxxxxx Inc. if the Iman Business is both
contributed to Xxxxx Xxxxxxx Inc. and the Iman Business is transferred together
with the Dermablend Business; (ii) an asset sale by the Company; (iii) a
transfer by the Company of all of the membership interests of a new LLC that may
be formed prior to Closing pursuant to Section 4.11(c) or (iv) such other form
of transfer reasonably acceptable to Buyer. Notwithstanding the foregoing, if
the National Cosmetics Business and the Iman Business are transferred together
with the Dermablend Business, to the extent practicable, such transfer will be
accomplished by (x) a transfer of the Iman Business to Xxxxx Xxxxxxx Inc.
followed by (y) a transfer of all of the stock of Xxxxx Xxxxxxx Inc., subject to
there being no adverse tax or economic consequences (with adverse tax
consequences meaning taxes incremental to those incurred by using another method
of structuring such transfers) to Buyer or Seller or their affiliates therefrom.
The "National Cosmetics Business" means all the rights, title
and interest to all of the assets (including contracts and leases) used or held
for use in connection with the operation of the business of selling ethnic
cosmetics under the brand names "Xxxxx Xxxxxxx","Xxxxx XxXxxxx" and "Xx-Xxxx",
all associated intellectual property used primarily in such business to the
extent not material to the Company's business to be retained by Buyer, provided
that if Buyer retains the Dermablend Business and, pursuant to Section 4.11(b),
sells the National Cosmetics Business and the Iman Business, the net accounts
receivable (other than the Designated Receivables), bank overdraft, accounts
payable and accrued expenses related to the National Cosmetics Business will be
retained by the Buyer as part of the Dermablend Business. The "Iman Business"
means all the rights, title and interest to all of the assets (including
contracts and leases) used or held for use in connection with the operation of
the business of selling cosmetics under the "IMAN" brand name, all associated
intellectual property used primarily in such business to the extent not material
to the Company's business to be retained by Buyer and all associated
liabilities, provided that if Buyer retains the Dermablend Business and,
pursuant to Section 4.11(b), sells the National Cosmetics Business and the Iman
Business, the net accounts receivable (other than the Designated Receivables),
bank overdraft, accounts payable and accrued expenses related to the Iman
Business will be retained by the Buyer as part of the Dermablend Business.
The "Designated Receivables" means a group of net receivables
of the National Cosmetics Business and/or the Iman Business with aggregate net
value of not more than $1,500,000 which, prior to Closing, will be specifically
designated by Seller in a manner reasonably acceptable to Buyer according to
customer, invoice number or other means of identification and which may be
purchased by Seller or its designees for $1.00 if Buyer retains the Dermablend
Business and, pursuant to Section 4.11(b), sells the National Cosmetics Business
and the Iman Business. If the Designated Receivables include accounts receivable
from customers that also owe to Buyer accounts receivable retained by Buyer
after the Closing, Buyer will control the collections from such customers
pursuant to the transition service agreement contemplated by Section 4.11(c).
Seller agrees that the Designated Receivables will be selected in a manner so
that weighted average age of the Designated Receivables will not be less, in any
material respect, from the weighted average age of the accounts receivable
retained by Buyer after the Closing Date.
(3) Notwithstanding the provisions of Section 4.1, Seller will have the right
(i) to restructure the Company prior to the Closing to (A) transfer the
Dermablend Business to a new single member LLC to be held by Xxxxx Xxxxxxx Inc.,
(B) transfer the National Cosmetics Business to a new single member LLC to be
held by Xxxxx Xxxxxxx Inc. and (C) transfer the Iman Business to Xxxxx Xxxxxxx
Inc. or to a newly formed LLC to be held by the Company or Xxxxx Xxxxxxx Inc.
and (ii) to take such other steps as may be necessary to facilitate the
transactions contemplated by this Section 4.11, including, without limitation,
entering into reasonable contracts to (x) sell (either directly or by selling
the options described in Sections 4.11(a) and (b)) the National Cosmetics
Business, the Iman Business or the Dermablend Business, (y) provide transition
services to any purchasers of such businesses at cost (including, without
limitation, collection of accounts receivable and trades payable processing
services) and (z) license on a non-exclusive, royalty-free basis certain Company
Intellectual Property Rights to the Buyer and the purchasers of any such
business to allow such entities to continue to use such Company Intellectual
Property Rights in manner consistent with past practice. Buyer agrees to
maintain the legal entity status of each such business as it exists at the
Closing for purposes of completing any sale pursuant to Section 4.11(a) or (b).
(4) If written notice has been delivered pursuant to Section 4.11(a) or (b)
(each referred to as a "Purchase Notice"), then during the period between
Closing and the transfer of the applicable business, Buyer will (i) operate the
business to be transferred to Seller or its designees in the ordinary course of
business, (ii) not take any actions that would be prohibited under Section 4.1
with regard to the Dermablend Business, National Cosmetics Business or Iman
Business as if all reference to the "Company" in Section 4.1 referred to the
applicable business and "Seller" referred to Buyer in Section 4.1, (iii) not
sell, transfer, assign, or take any action that would result in the creation of
an Encumbrance other than Permitted Encumbrances on (A) any of the assets of any
of the Dermablend Business, the National Cosmetics Business and the Iman
Business; (B) the membership interests of any LLC created pursuant to Section
4.11(c) or (C) the stock of Xxxxx Xxxxxxx Inc. and (iv) not take any other
action that will inhibit the transactions contemplated by this Section 4.11 in
any material respect.
(5) Seller and Buyer agree that the transfer documents used to complete the
purchases referred to in Section 4.11(a) and (b) and the transfers referred to
in Section 4.11(c) shall (i) be in forms mutually acceptable to Seller and Buyer
to ensure that such purchases will not result in (A) any adverse tax
consequences for Buyer or Seller or their affiliates (with adverse tax
consequences meaning taxes incremental to those incurred by using another method
of structuring such transfers), (B) the making of any representations or
warranties by Buyer except for customary representations regarding due
authorization to enter into and perform the transaction or (B) the granting of
any indemnities or liabilities to the purchasers of such businesses by the
Company, Buyer, or Buyer's affiliates and (ii) expressly state that the buyers
of the businesses waive any rights that they may have against the Company, Buyer
or Buyer's affiliates arising out of or relating to the condition or operation
of the business, provided that such statement will not render or impair any
rights Seller has against Buyer and its affiliates hereunder.
(6) Notwithstanding the provisions of Section 4.3(a), Buyer and Seller agree
that (i) the amount of MADSP to be allocated to the Dermablend Business shall be
equal to $15 million plus the amount of the liabilities to be assumed by the
purchasers of such business pursuant to Section 4.11(a) and (ii) the amount of
the MADSP to be allocated to the National Cosmetics Business and the Iman
Business shall be equal to an amount of the liabilities to be assumed by the
purchaser of such businesses pursuant to Section 4.11(b).
ARTICLE 5
INDEMNIFICATION
SECTION 5.1 Indemnification by Seller. Subject to the limits set forth in this
Article V, Seller agrees to indemnify, defend and hold Buyer, its officers,
directors, agents and Affiliates, harmless from and in respect of any and all
losses, damages, costs and reasonable expenses (including, without limitation,
reasonable expenses of investigation and defense fees and disbursements of
counsel and other professionals), in each case in excess of $2,500
(collectively, "Losses"), (i) that they may incur arising out of or due to the
inaccuracy of any representation or the breach of any warranty, covenant,
undertaking or other agreement of Seller contained in this Agreement or the
Disclosure Schedule (determined, without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein other than with
respect to the use of such qualifications in Sections 2.5, 2.7 and 2.8, the last
sentence of Section 2.21 and the use of the terms "Material Agreement" and
"Company Intellectual Property Rights" each of which includes materiality
qualifiers); (ii) that arise out of the Pro-Line Litigation; (iii) that arise
out of the operation or condition of the Dermablend Business or relate to the
liabilities of the Dermablend Business, if Buyer has sold such business pursuant
to Section 4.11; (iv) that arise out of the operation or condition of the
National Cosmetics Business or the Iman Business or relate to the liabilities of
the National Cosmetics Business or Iman Business if Buyer has sold such business
pursuant to Section 4.11; and (v) that arise out of the operation or condition
of Xxxxx Xxxxxxx Inc. prior to the Closing or relate to liabilities of Xxxxx
Xxxxxxx Inc. immediately prior to the Closing, if Xxxxx Xxxxxxx Inc. remains a
subsidiary of the Company following the sale of the Dermablend Business, the
National Cosmetics Business and the Iman Business pursuant to Sections 4.11(a)
and (b), except for liabilities arising out of or relating to the operation of
the hair care and Posner businesses retained by Buyer; provided, however, that
the indemnification pursuant to Sections 5.1 (iii), (iv) or (v) will not be
available to the extent such Losses or liabilities arise out of a violation by
Buyer of Section 4.11(d).
SECTION 5.2 Indemnification by Buyer. Subject to the limits set forth in this
Article V, Buyer agrees to indemnify, defend and hold Seller, its officers,
directors, agents and Affiliates, harmless from and in respect of any and all
Losses that they may incur arising out of or due to any inaccuracy of any
representation or the breach of any warranty, covenant, undertaking or other
agreement of Buyer contained in this Agreement (determined without giving effect
to any limitation as to "materiality" or "material adverse effect" set forth
therein).
SECTION 5.3 Survival of Representations and Warranties. The several
representations and warranties of the parties contained in this Agreement or in
any instrument delivered pursuant hereto will survive the Closing Date and will
remain in full force and effect thereafter for a period of eighteen months from
the Closing Date (the "Cut-Off Date"); provided, however, that the
representations and warranties contained in Section 2.12 shall survive the
Closing Date for 90 days following the expiration of all applicable statutes of
limitations (including extensions); provided, further, that such representations
or warranties shall survive (if at all) beyond such period with respect to any
inaccuracy therein or breach thereof, notice of which shall have been duly given
within such applicable period in accordance with Section 5.4. Anything to the
contrary contained herein notwithstanding, neither party shall be entitled to
recover from the other unless and until the total of all claims for indemnity or
damages with respect to any inaccuracy or breach of any such representations or
warranties or breach of any covenants, undertakings or other agreements set
forth in Section 4.1 and whether such claims are brought under this Article V or
otherwise, exceeds three percent (3%) of the Purchase Price and then only for
the amount by which such claims for indemnity or damages exceeds three percent
(3%) of the Purchase Price; provided, however, that no party shall be entitled
to recover from the other more than twenty-five percent (25%) of the Purchase
Price in the aggregate pursuant to this Article V for indemnity or damages with
respect to any inaccuracy or breach of any such representations or warranties or
any breach of the covenants, undertakings or other agreements set forth in
Section 4.1.
SECTION 5.4 Notice and Opportunity to Defend. If an event occurs which a party
asserts is an indemnifiable event pursuant to Section 5.1 or 5.2, the party
seeking indemnification shall promptly notify the other party obligated to
provide indemnification (the "Indemnifying Party"), provided, however, that the
failure to provide prompt notice as provided herein will relieve the
Indemnifying Party of its obligations hereunder only to the extent that such
failure prejudices the Indemnifying Party hereunder. If such event involves (i)
any claim or (ii) the commencement of any action or proceeding by a third
person, the party seeking indemnification will give such Indemnifying Party
prompt written notice of such claim or the commencement of such action or
proceeding, provided, however, that the failure to provide prompt notice as
provided herein will relieve the Indemnifying Party of its obligations hereunder
only to the extent that such failure prejudices the Indemnifying Party
hereunder. In case any such action shall be brought against any party seeking
indemnification and it shall notify the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate therein and, to
the extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such party seeking indemnification, provided that the
Indemnifying Party will be deemed to have waived any right to dispute its
liability under this Agreement with respect to such action to the party seeking
indemnification for such action. After notice from the Indemnifying Party to
such party seeking indemnification of such election so to assume the defense
thereof, the Indemnifying Party shall not be liable to the party seeking
indemnification hereunder for any legal expenses of other counsel or any other
expenses subsequently incurred by such party in connection with the defense
thereof. The party seeking indemnification agrees to cooperate fully with the
Indemnifying Party and its counsel in the defense against any such asserted
liability. The party seeking indemnification shall have the right to participate
at its own expense in the defense of such asserted liability. In no event shall
an Indemnifying Party, or the party being indemnified, be liable for any
settlement effected without its consent which will not be unreasonably withheld.
SECTION 5.5 Adjustment for Insurance and Taxes. The amount which an Indemnifying
Party is required to pay to, for or on behalf of the other party (hereinafter
referred to as an "Indemnitee") pursuant to this Article V and Section 4.3 shall
be adjusted (including, without limitation, retroactively) (i) by any insurance
proceeds actually recovered by or on behalf of such Indemnitee in reduction of
the related indemnifiable loss (the "Indemnifiable Loss") and (ii) to take
account of any Tax benefit realized as a result of any Indemnifiable Loss.
Amounts required to be paid, as so reduced, are hereinafter sometimes called an
"Indemnity Payment." If an Indemnitee has received or has had paid on its behalf
an Indemnity Payment for an Indemnifiable Loss and subsequently receives
insurance proceeds for such Indemnifiable Loss, or realize any Tax benefit as a
result of such Indemnifiable Loss, then the Indemnitee shall promptly (i) notify
the Indemnifying Party of the amount and nature of such proceeds and benefits
and (ii) pay to the Indemnifying Party the amount of such insurance proceeds or
Tax benefit or, if lesser, the amount of the Indemnity Payment.
SECTION 5.6 Mitigation of Loss. Each Indemnitee is obligated to use all
reasonable efforts to mitigate, to the fullest extent practicable, the amount of
any Loss for which it is entitled to seek indemnification hereunder (including,
without limitation, seeking reimbursement for losses pursuant to contractual
rights with vendors). The Indemnifying Party shall not be required to make any
payment to an Indemnitee in respect of such Loss to the extent such Indemnitee
failed to comply with the foregoing obligation. SECTION 1.1
SECTION 5.7 Subrogation. Upon making any Indemnity Payment, the Indemnifying
Party will, to the extent of such payment, be subrogated to all rights of the
Indemnitee against any third party in respect of the Loss to which the payment
relates; provided, however, that until the Indemnitee recovers full payment of
its Loss, any and all claims of the Indemnifying Party against any such third
party on account of such payment are hereby made expressly subordinated and
subjected in right of payment of the Indemnitee's rights against such third
party. Without limiting the generality of any other provision hereof, each such
Indemnitee and Indemnifying Party will duly execute upon request all instruments
reasonably necessary to evidence and perfect the above described subrogation and
subordination rights.
SECTION 5.8 Tax Indemnification. None of the provisions of this Article V, with
the exception of Sections 5.5 and 5.10, shall apply to the claims, obligations,
liabilities, covenants and representations under Section 4.3, which shall be
governed solely by the terms thereof, provided that Buyer may seek indemnity for
Losses under this Article V with respect to a breach of the representations and
warranties of Seller contained in Section 2.12 to the extent such Losses are not
covered by Section 4.3. The terms of Section 4.3 shall supercede the terms of
this Article V where such terms conflict.
SECTION 5.9 Set-Off. Neither Seller nor Buyer shall have any right to set-off
any Losses against any payments to be made by such party or parties pursuant to
this Agreement, except as otherwise expressly provided herein.
SECTION 5.10 Exclusive Remedy. Following the Closing, the indemnities provided
for in Section 4.3 and this Article V shall be the sole and exclusive remedies
of the parties and their respective officers, directors, employees, Affiliates,
agents, representatives, successors and assigns for any breach of or inaccuracy
in any representation or warranty or any breach, nonfulfillment or default in
the performance of any of the covenants or agreements contained in this
Agreement (but not any such covenants or agreements to the extent they are by
their terms to be performed after the Closing Date). The parties shall not be
entitled to a recission of this Agreement or to any further indemnification
rights or claims of any nature whatsoever in respect thereof (whether by
contract, common law, statute, law, regulation or otherwise, including without
limitation, under the Racketeer Influence and Corrupt Organizations Act of 1970,
as amended) all of which the parties hereby waive, provided, however, that
nothing herein is intended to waive any claims for fraud.
ARTICLE 6
CONDITIONS
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Closing. The
obligations of Seller, on the one hand, and Buyer, on the other hand, to
consummate the Closing are subject to the satisfaction (or, if permissible,
waiver by the party for whose benefit such conditions exist) of the following
conditions:
(1) no arbitrator or Governmental Entity shall have issued any order, decree or
ruling, and there shall not be any statute, rule or regulation, restraining,
enjoining or prohibiting the consummation of the material transactions
contemplated by this Agreement, provided that the parties will have used all
reasonable efforts to cause any such order, decree, ruling, statute, rule or
regulation to be vacated or lifted;
(2) any waiting period applicable to the transactions contemplated hereby under
the HSR Act shall have expired or been terminated; and
(3) all authorizations, approvals or consents from any Governmental Entity
required to permit the consummation of the transactions contemplated hereby
shall have been obtained and be in full force and effect, except where the
failure to have obtained any such authorizations, approvals or consents would
not have a Company Material Adverse Effect or a Buyer Material Adverse Effect,
as the case may be.
SECTION 6.2 Conditions to the Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated hereby are subject to the satisfaction
(or waiver by Buyer) of the following conditions:
(1) the representations and warranties of Seller shall be true and accurate as
of the Closing Date as if made at and as of such time (other than those
representations and warranties that address matters only as of a particular date
or only with respect to a specific period of time which need to be true and
accurate only as of such date or with respect to such period), except where the
failure of such representations and warranties to be so true and accurate
(without giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein), would not have a Company Material Adverse
Effect; provided, that a Company Material Adverse Effect relating to the
Dermablend Business, the National Cosmetics Business or the Iman Business will
not be deemed a Company Material Adverse Effect for purposes of this Section
6.2(a) if Buyer is to sell such business pursuant to Sections 4.11(a) or (b), as
applicable.
(2) Seller shall have performed in all material respects the obligations
hereunder required to be performed by it at or prior to the Closing Date;
(3) Buyer shall have received a certificate signed on behalf of Seller by one
executive officer of Seller, dated as of the Closing Date, to the effect that,
the conditions set forth in Section 6.2(a) and Section 6.2(b) have been
satisfied;
(4) all authorizations, approvals or consents from any third party (other than a
Governmental Entity) required to permit the consummation of the transactions
contemplated hereby shall have been obtained and be in full force and effect,
except where the failure to have obtained any such authorizations, approvals or
consents would not have a Company Material Adverse Effect;
(5) if required pursuant to Section 4.11(b), Seller or its designees are
reasonably prepared and able to purchase the National Cosmetics Business and the
Iman Business from Buyer immediately following the Closing; and
(6) any director of the Company or any of its Subsidiaries whose resignation
shall have been requested by Buyer shall have submitted his or her resignation
to Buyer effective as of the Closing Date.
SECTION 6.3 Conditions to the Obligations of Seller. The obligations of Seller
to consummate the transactions contemplated hereby are subject to the
satisfaction (or waiver by Seller) of the following further conditions:
(1) The representations and warranties of Buyer shall be true and accurate as of
the Closing Date as if made at and as of such time (other than those
representations and warranties that address matters only as of a particular date
or only with respect to a specific period of time which need to be true and
accurate only as of such date or with respect to such period), except where the
failure of such representations and warranties to be so true and accurate
(without giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein) would not have a Buyer Material Adverse
Effect;
(2) Buyer shall have performed in all material respects all of the obligations
hereunder required to be performed by Buyer, at or prior to the Closing Date;
and
(3) Seller shall have received a certificate signed on behalf of Buyer by one
executive officer of Buyer, dated as of the Closing Date, to the effect that the
conditions set forth in Section 6.3(a) and Section 6.3(b) have been satisfied.
ARTICLE 7
TERMINATION
SECTION 7.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the Closing Date:
(1) by the mutual consent of Seller and Buyer;
(2) by Seller or Buyer:
(1) if the Closing shall not have occurred on or prior to September 15,
1998 (or October 30, 1998 if the only condition remaining unfilled at
September 15, 1998 is approval by any required Governmental Entity, and
Seller and Buyer are continuing to seek to obtain such approval);
provided, however, that the right to terminate this Agreement under
this Section 7.1(b)(i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur on or
prior to such date; or
(2) if any Governmental Entity shall have issued an order, decree or ruling
or taken any other action (which order, decree, ruling or other action
the parties shall use their best efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the
material transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and
non-appealable;
(3) by Seller if Buyer (x) breaches or fails in any material respect to perform
or comply with any of its material covenants and agreements contained herein or
(y) breaches its representations and warranties in any material respect and such
breach would have a Buyer Material Adverse Effect, in each case such that the
conditions set forth in Section 6.1 or Section 6.3 would not be satisfied;
provided, however, that if any such breach is curable by Buyer through the
exercise of Buyer's best efforts and for so long as Buyer shall so use its best
efforts to cure such breach, Seller may not terminate this Agreement pursuant to
this Section 7.1(c); or
(4) by Buyer if Seller (x) breaches or fails in any material respect to perform
or comply with any of their material covenants and agreements contained herein
or (y) breaches its representations and warranties in any material respect and
such breach would have a Company Material Adverse Effect, in each case such that
the conditions set forth in Section 6.1 or Section 6.2 would not be satisfied;
provided, however, that if any such breach is curable by Seller through the
exercise of Seller's best efforts and for so long as Seller shall so use its
best efforts to cure such breach, Buyer may not terminate this Agreement
pursuant to this Section 7.1(d).
SECTION 7.2 Procedure and Effect of Termination. In the event of the termination
and abandonment of this Agreement by Seller or Buyer pursuant to Section 7.1,
written notice thereof shall forthwith be given to the other party. If the
transactions contemplated by this Agreement are terminated as provided herein:
(1) each party will return all documents, work papers and other material of any
other party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party furnishing the same;
(2) all confidential information received by either party with respect to the
business of any other party or its subsidiaries or Affiliates shall be treated
in accordance with the provisions of the Confidentiality Agreement, which shall
survive the termination of this Agreement; and
(3) neither party will have any liability under this Agreement to the other
except (i) as stated in subparagraphs (a) and (b) of this Section 7.2, (ii) for
any willful breach of any provision of this Agreement and (iii) as provided in
the Confidentiality Agreement.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 Governing Laws and Consent to Jurisdiction. The laws of the state of
Illinois (irrespective of its choice of law principles) shall govern all issues
concerning the validity of this Agreement, the construction of its terms, and
the interpretation and enforcement of the rights and duties of the parties. Each
party irrevocably submits to the exclusive jurisdiction of the federal courts of
the United States of America for the Northern District of Illinois located in
Chicago (and the Federal courts having jurisdiction over appeals therefrom) in
respect of the transactions contemplated by this Agreement, the other agreements
and documents referred to herein and the transactions contemplated by this
Agreement and such other documents and agreements.
SECTION 8.2 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects by
written agreement of the parties at any time prior to the Closing Date with
respect to any of the terms contained herein.
SECTION 8.3 Notices. All notices, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly given (a) when
delivered by hand or by FedEx or a similar overnight courier, (b) five days
after being deposited in any United States Post Office enclosed in a postage
prepaid, registered or certified envelope addressed or (c) when successfully
transmitted by telecopier (with a confirming copy of such communication to be
sent as provided in clause (a) or (b) above), to the receiving party at the
address or telecopier number set forth below (or at such other address or
telecopier number for a party as shall be specified by like notice, provided,
however, that any notice of change of address or telecopier number shall be
effective only upon receipt):
(1) if to Buyer, to:
Xxxxxx, Inc.
x/x Xxxxxxxxxxx Xxxxxxx Xxxxx, X.X.X.
Xxx Xxxxxxxxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
and to:
Xxxxxx Products Company
X.X. Xxx 00000
Xxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
with a copy to:
Milbank, Tweed, Xxxxxx & XxXxxx
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxxx Xxxxxxxx, Esq.
and Xxxxxx X. Xxxxx, Esq.
(2) if Seller, to:
IVAX Corporation
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx, XX 00000
Telephone : (000) 000-0000
Telecopy No: (000) 000-0000
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx (Illinois)
000 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
SECTION 8.4 Interpretation
(1) The words "hereof," "herein" and "herewith" and words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as a
whole and not to any particular provision of this Agreement, and article,
section, paragraph, exhibit and schedule references are to the articles,
sections, paragraphs, exhibits and schedules of this Agreement unless otherwise
specified. The words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa. The phrase "to the knowledge of" or any similar phrase shall mean such
facts and other information which as of the date of determination are actually
known to Xxxxx X. Xxxxxxx, Chief Executive Officer of the Company; Xxxxxx Xxxxx,
Chief Operating Officer of the Company; Xxxxxx Xxxxx, Vice President, Sales and
Marketing of the Company; Xxxxxx Xxxxxxxxx, Vice President, Finance and
Administration of the Company; Xxxxx Xxxxxxx, Vice President, Operations of the
Company; or Xxxxxx X. Xxxxxxx. The phrase "made available" in this Agreement
shall mean that the information referred to has been made available if requested
by the party to whom such information is to be made available. The phrases "the
date of this Agreement," "the date hereof" and terms of similar import, unless
the context otherwise requires, shall be deemed to refer to June 16, 1998. As
used in this Agreement, the term "business day" means a day, other than a
Saturday or a Sunday, on which banking institutions in The City of New York are
required to be open. The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement.
(2) The Disclosure Schedule shall be construed with and as an integral part of
this Agreement as if the same had been set forth verbatim herein. Any matter
disclosed pursuant to the Disclosure Schedule shall be deemed to be disclosed
for all purposes under this Agreement, but such disclosure shall not be deemed
to be an admission or representation as to the materiality of the item so
disclosed.
(3) Headings are for convenience of the parties only and shall be given no
substantive or interpretative effect whatsoever.
SECTION 8.5 Counterparts. This Agreement may be executed in multiple
counterparts, all of which shall together be considered one and the same
agreement.
SECTION 8.6 Entire Agreement; Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein), the
Confidentiality Agreement and the Disclosure Schedule (i) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and (ii),
except as provided herein, are not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
SECTION 8.7 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against its regulatory policy, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
SECTION 8.8 Service of Process. Each party irrevocably consents to the service
of process outside the territorial jurisdiction of the courts referred to in
Section 8.1 in any such action or proceeding by mailing copies thereof by
registered United States mail, postage prepaid, return receipt requested, to its
address as specified in or pursuant to Section 8.3. However, the foregoing shall
not limit the right of a party to effect service of process on the other party
by any other legally available method.
SECTION 8.9 Specific Performance. Each party acknowledges and agrees that in the
event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties will (a) waive, in any action
for specific performance, the defense of adequacy of a remedy at law and (b) be
entitled, in addition to any other remedy to which they may be entitled at law
or in equity, to compel specific performance of this Agreement in any action
instituted in accordance with Section 8.1.
SECTION 8.10 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by either party (whether by operation
of law or otherwise) without the prior written consent of the other party;
provided, however, that (i) Buyer may assign its rights hereunder to any direct
or indirect wholly-owned Subsidiary of Buyer or to any person or entity which
acquires, in one or a series of transactions, all of the assets and properties
of the Company and its Subsidiaries, provided such person or entity agrees to
assume Buyer's obligations hereunder in a form reasonably acceptable to Seller
and (ii) Seller may assign this Agreement to any person or entity that acquires,
in one or a series of transactions, all or substantially all of the assets or
shares of Seller, including through a merger or a share exchange. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective permitted successors and
assigns.
SECTION 8.11 Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with the transactions contemplated hereby, this
Agreement and the consummation of the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the
transactions contemplated hereby is consummated, provided that Buyer shall pay
all fees associated with any filings made under the HSR Act in connection with
the transactions contemplated by this Agreement.
SECTION 8.12 Waivers. Except as otherwise provided in this Agreement, any
failure of either party to comply with any obligation, covenant, agreement or
condition herein may be waived by the party or parties entitled to the benefits
thereof only by a written instrument signed by the party granting such waiver,
but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
SECTION 8.13 No Double Recovery. Notwithstanding anything herein to the
contrary, neither party shall be entitled to indemnification or reimbursement
under any provision of this Agreement for any amount to the extent such party
has been indemnified or reimbursed for such amount under any other provision of
this Agreement or otherwise.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
IVAX CORPORATION
By:
Name: Xxxxx X. Xxxxxxx
Title: Senior VP, Corporate Development
XXXXXX, INC.
By:
Name: Xxxxxxx X. Xxxxx
Title: Chief Executive Officer
ANNEX A
Index of Defined Terms
Defined in
Terms Section
Affiliate(s)........................................................... 3.6
Agreement..............................................................Preamble
Balance Sheet.......................................................... 2.13
Bankruptcy Code........................................................ 3.8
Benefit Plan........................................................... 2.9(k)
business day........................................................... 8.4(a)
Buyer..................................................................Preamble
Buyer Material Adverse Effect.......................................... 3.1
Buyer Plans............................................................ 4.4(a)
Closing................................................................ 1.3(a)
Closing Date........................................................... 1.3(a)
Closing Statement...................................................... 1.4(a)
Code................................................................... 2.12(m)
Code ss. 338 Forms..................................................... 4.3(a)
Company................................................................Preamble
Company Employee(s).................................................... 4.4(a)
Company Intellectual Property Rights................................... 2.15
Company Material Adverse Effect........................................ 2.1
Confidentiality Agreement.............................................. 4.2
Cut-Off Date........................................................... 5.3
December Target Amount................................................. 1.4(c)
Defined Benefit Plan................................................... 2.9(k)
Dermablend Business.................................................... 4.11(a)
Designated Receivables................................................. 4.11(b)
Disclosure Schedule.................................................... 2.1
Elections.............................................................. 4.3(a)
Employee Arrangement................................................... 4.4(b)
Encumbrances........................................................... 1.1
Environmental Laws..................................................... 2.17(b)
ERISA.................................................................. 2.9(k)
ERISA Affiliate........................................................ 2.9(k)
Exchange Act........................................................... 3.6
Final Closing Statement................................................ 1.4(c)
Financial Statements................................................... 2.6
GAAP................................................................... 2.6
Governmental Entity.................................................... 2.5
Defined in
Terms Section
Hazardous Substances................................................... 2.17(b)
HSR Act................................................................ 2.5
Iman Business.......................................................... 4.11(b)
Indemnifiable Loss..................................................... 5.5
Indemnifying Party..................................................... 5.4
Indemnitee............................................................. 5.5
Indemnity Payment...................................................... 5.5
Intellectual Property Rights........................................... 2.15
LLC.................................................................... 4.11(a)
Losses................................................................. 5.1
MADSP.................................................................. 4.3(a)
March Target Amount.................................................... 1.4(e)
Material Agreement..................................................... 2.16
National Cosmetics Business............................................ 4.11(b)
Neutral Auditor........................................................ 1.4(c)
PBGC................................................................... 2.9(k)
Permits................................................................ 2.11(a)
Permitted Encumbrances................................................. 2.13
Plan................................................................... 2.9(k)
Pre-Closing Consolidated Tax Returns................................... 4.3(e)
Pre-Closing Separate Tax Returns....................................... 4.3(e)
Pre-Closing Tax Return................................................. 4.3(e)
Prime Rate............................................................. 1.4(e)
Prohibited Activities.................................................. 4.7(a)
Pro-Line Litigation.................................................... 1.2(a)
Purchase Notice........................................................ 4.11(d)
Purchase Price......................................................... 1.2(a)
Qualified Plan......................................................... 2.9(k)
Releases............................................................... 2.17(a)
Resolution Period...................................................... 1.4(b)
Seller.................................................................Preamble
Shares.................................................................Preamble
Subsidiary............................................................. 2.1
Tax Return............................................................. 2.12(m)
Tax Sharing Agreement.................................................. 4.3(d)
Taxes.................................................................. 2.12(m)
Third Party Purchaser.................................................. 4.11(a)
Transfer Taxes......................................................... 4.3(f)
Unaudited Financial Statements......................................... 2.6
Working Capital........................................................ 1.4(a)
ANNEX B
Procedures for Calculating Working Capital
The Closing Statement will be determined as set forth in this Annex B. To the
extent the procedures set forth herein are insufficient to determine an amount,
or some portion of an amount, for the Closing Statement, then the determination
of such amount, or portion of an amount, will be determined on a basis
consistent with the policies, procedures and methodologies used to prepare the
Financial Statements.
Cash
Amount per bank in account # 0010018800 at South Shore Bank adjusted for
deposits in transit checks outstanding that have not cleared the bank and other
reconciling items occurring through the Closing.
Accounts Receivable, Net
Amounts uncollected as of Closing, for product shipped through the Closing
(irrespective of when such amounts are invoiced), reduced for allowance for
doubtful accounts and reserve for credit memos as determined below.
Allowance for Doubtful
Specific portion of reserve - Provide a reserve of 100% for all
accounts in bankruptcy or sent to a collection agency. Analyze all
accounts greater than 90 days past invoice (other than those accounts
in bankruptcy or sent to a collection agency (or would have been sent
to a collection agency consistent with past practices, even if not
actually sent)) and determine, in a manner consistent with past
practices used to prepare the Financial Statements, a reserve
requirement to cover possible uncollectible amounts.
General portion of reserve - For accounts less than 90 days past
invoice, first reduce the total amount less than 90 days past invoice
for those items already reserved for in the credit memo reserve
analysis (i.e. IBNR, invoices outstanding more than one year and
customer deductions), then provide a reserve of 2% to the adjusted
amount.
Reserve for Credit Memos
Annex B
Procedures for Calculating Working Capital on the Closing Statement
(continued)
Specific portion of reserve - Provide a reserve of 100% on invoices
outstanding for more than one year and on customer deductions taken on
invoices otherwise paid in full (referred to as open debits or customer
deductions outstanding). Analyze all invoices outstanding not covered
by the reserve methodology described in the preceding sentence or by
the reserve methodology described below under "General portion of
reserve" and determine in a manner consistent with past practices used
to prepare the Financial Statements, a reserve requirement to cover
possible uncollectible amounts.
General portion of reserve - For mass market sales outstanding less
than 70 days and for department store sales outstanding less than 48
days (these parameters represent days sales outstanding at December 31,
1997 for each type of receivable) provide a general reserve to cover
claims incurred but not reported ("IBNR") using the reserve percentages
in the following table (these percentages represent 1997 returns
processed as a percent of 1997 sales):
------------------ -------------------------------------------------------------
Type of Credit Memo
------------------ -------------------------------------------------------------
Brand Returns and Demo Co-op Cash
Allowances Salaries Advertising Discounts
------------------ ----------- ----------- ------------------ ------------------
Mass Market 5.79% 0% 2.92% 2.00%
------------------ ----------- ----------- ------------------ ------------------
National Cosmetics 3.00% 11.76% 1.61% 0%
------------------ ----------- ----------- ------------------ ------------------
Dermablend 3.00% 10.83% .73% 0%
------------------ ----------- ----------- ------------------ ------------------
Inventories, Net
Inventories, net will be determined as follows:
I. To the extent reasonably practicable, inventory movements should be halted
(receiving and shipping) as of the Closing Date, in order to avoid any
cut-off problems, and physical count of inventory should be commenced on
the Closing Date and should be completed within the next 10 days. Items
held by a third party and not physically counted should be confirmed in
writing by such third party.
II. Determine Gross Inventory Value by extending inventory quantities on hand
on the Closing Date (including those not subject to a physical count in I
above) by the standard cost at Closing.
The following variances should be capitalized as of Closing Date.
Haircare:
Labor and overhead costs
The average monthly variance between standard and actual for the last
12 months should be computed and be multiplied by the number of months
inventory on hand, determined at December 31, 1997 to 3.67 months. This
amount is reduced by 12% (the amount determined to be E&O as of
December 31, 1997) to derive the final capitalizable amount.
III. The following departments/costs are included to determine the actual labor
and overhead cost pool at the stated capitalization percentages:
Department/costs % to be capitalized
----------------------------------- -- -- -----------
11 - Administration 75%
12 - Product Screening 100%
13 - Product Filling 100%
14 - Product Packing 100%
16 - Compounding 100%
20 - Receiving 100%
25 - Maintenance/Engineering 50%
26 - Operations Analysis 50%
27 - Purchasing 100%
62 - Quality control 100%
Tools & Dies 100%
28 - Security 50%
90 - Housekeeping 50%
91 - Building expense 50%
Freight
Inbound freight is capitalized in inventory based on inventory turnover
as determined at December 31,1997, 3.67 months of inventory.
Purchase price variance
Calculation is based on the variance for the number of months in ending
inventory, determined at 3.67 months.
Cosmetics:
Labor and overhead costs
The variance between standard and actual should be capitalized,
assuming 1 year's worth of labor of overhead included in inventory at
any time, thus capitalization is based on the last 12 months variance.
The following departments/costs are included to determine the actual
labor and overhead cost pool at the stated capitalization percentages:
21 - Purchasing (cosmetics) 100%
26 - Operations analysis 50%
Freight
Inbound freight is capitalizable based on 1 year's worth of freight,
i.e. the last 12 months of freight. The total freight costs are then
written down by E&O reserve as a % of inventory, determined at December
31, 1997 at 57%.
Purchase price variance
Calculation is based on the last 12 months variance between actual and
standard material cost.
IV. Determine the Excess and Obsolete Inventory Reserve ("E&O Reserve") as of
the Closing using the following methodology:
A. Obsolete Inventory Component of E&O Reserve - Identify items on an SKU
basis, where Company management has determined that no sales or usage
activity will occur over the twelve month period starting on the last full
month preceding the Closing Date. Management's determination will be based
as follows:
1. for finished goods that have existed for more than 12 month's, absence of
sales during the last 12 months.
2. for work in process or raw materials, absence of usage during the last 12
months AND absence of sales of the corresponding finished good(s) for the
last 12 months after giving consideration to reasonable substitution.
The Obsolete Inventory Component of E&O Reserve will equal 100% of SKUs
identified in this Section IV.A).
B. Excess Inventory Component of E&O Reserve:
1. For all SKUs except for those identified as obsolete in IV.A above,
calculate, on a SKU basis, the dollar amount of Gross Inventory Value on
the Closing in excess of the Gross Inventory Value sold or used during the
twelve month period preceding the Closing (using full months only). One
hundred percent (100%) of this excess represents the Preliminary Excess
Inventory Component of E&O Reserve.
2. Review all SKUs in the Preliminary Excess Inventory Component of E&O
Reserve calculated in IV.B.1 above to determine whether historical usage is
representative of anticipated usage. Situations where historical usage
would not be representative of anticipated usage would include new SKUs
introduced within 12 months prior to the Closing, discontinued items, or
promotional SKUs for periods prior to the Closing where such promotions are
not expected to recur or will recur only at reduced volumes. Increase or
decrease the Preliminary Excess Inventory Component of E&O Reserve for the
estimated impact of items identified in this section IV.B.2 to determine
the Excess Inventory Component of E&O Reserve.
C. Add the Obsolete Inventory Component of E&O Reserve calculated in IV.B.1 to
the Excess Inventory Component of E&O Reserve calculated in IV.B.2 to
determine the E&O Reserve.
V. Determine Net Inventory Value by reducing Gross Inventory Value by the E&O
Reserve.
Deferred Income Taxes
No calculation of deferred income taxes will be made. Amount per the Closing
Statement will be $0.
Prepaid Expenses and Other Current Assets
Promotional inventories will be determined in the same manner as set forth under
the caption "Inventories, Net." Prepaid expenses and other assets will be
determined based on prepayment according to invoice or contract including all
payments made or accrued through Closing related to the compounding system
Project for the Chicago faculty, allocated on straight-line basis over the
service/contract period, where applicable, determined on a basis consistent with
the Financial Statements.
Display units should not be capitalized.
TCM note receivable related to the sale of certain of the Company's brand names
in 1995 is considered long-term since all expected payments for 1998 have been
received and therefore will not be part of the calculation.
Bank Overdraft
Amount will equal $0.
Accounts Payable
Accounts payable are determined based on outstanding invoices according to
accounts payable detail ledger, and appropriate reconciling items, as of Closing
date.
In addition, account payable should include unvouched invoices for items that
have been received prior to Closing Date, but the invoice has not been obtained
as of Closing Date ("Other Accounts Payable"). The inventory items received
should be based on standard costs for items obtained.
Short term royalties payable should be based on royalty-% according to
underlying contract.
Accrued Expenses
Accrued expenses should be determined as follows:
Description Basis
Accrued bonus Bonus by job code and quota attainment,
accrued ratably where applicable
Vacation/sick accrual Based on IVAX sick/vacation report stating actual
days accrued on an employee by employee basis
Legal accrual Based on last time invoiced and a
computation for periods not yet invoiced,
on historical invoices received, excluding
transaction costs
Accrued freight Based on month's lag, and average weekly expense
to accrue for one month
Other accruals Based on support, estimate for services or goods
obtained as of Closing Date
No amounts will be included for severance, retention or similar items which
Buyer has agreed to pay pursuant to the Purchase Agreement.
Payroll, related payroll taxes and similar items through the Closing will be
either accrued in the Closing Statement and paid by Buyer after the Closing or
excluded from the Closing Statement and paid by Seller after the Closing.
Reserve for Cosmetic Returns
Amount will equal the sum of the reserve for X.X. Xxxxxx Base Business, All
Other Department Stores Base Business and Promotional/Holiday Items and New SKUs
Introduced in 1998 as determined below.
X.X. Penney Base Business - Perform following procedures on a SKU basis:
I.Obtain the "Brand Lot/Line Analysis" report from X.X. Xxxxxx (the "JCP
Report") for the most recent month-end prior to Closing. This report includes,
among other items, year-to-date sales information, product on hand extended at
X.X. Penney selling prices and weeks of product on hand.
II. Exclude from the JCP Report amounts for promotional/holiday items and new
SKUs introduced in 1998.
III. After adjustment as described in II above, multiply the product on hand
extended at X.X. Xxxxxx selling price from the JCP Report by 60% to determine
the Company's estimated selling price of such products to X.X. Penney.
IV. Use the reserve percentages as indicated in following table, applied to the
dollar amount of product at X.X. Xxxxxx (at Company selling price) in each aging
category set forth below, to determine the reserve requirements for X.X. Penney
(these percentages were developed for the 1997 audit by Company management
through a specific review, on a SKUs basis, of estimated sell-through of product
in X.X. Xxxxxx stores).
Reserve Percentage By Brand
-------------------- -----------------------------------------------------------
Aging Category Dermablend Xxxxx Xxxxxxx/ IMAN
(Weeks on Hand) Xxxxx XxXxxxx
-------------------- ------------- -------------------- ------------------------
Less than 16 0% 0% 0%
-------------------- ------------- -------------------- ------------------------
16-32 11% 10% 9%
-------------------- ------------- -------------------- ------------------------
33-52 37% 31% 33%
-------------------- ------------- -------------------- ------------------------
Over 52 61% 56% 53%
-------------------- ------------- -------------------- ------------------------
V. All Other Department Stores Base Business - Perform the following procedures:
Compute the following ratio: All Other Department Stores Base Business reserve
at December 31, 1997 divided by X.X. Penney Base Business reserve at December
31, 1997.
VI. Multiply the ratio determined in I above by the X.X. Xxxxxx Base Business
reserve at Closing (as determined in IV above under X.X. Penney Base Business)
to determine the reserve requirement for All Other Department Stores Base
Business.
Promotional/Holiday Items and New SKUs Introduced in 1998 - This reserve will be
determined based upon a specific review of anticipated sell-through of product
at retail as of the Closing related to promotional/holiday items and new SKUs
introduced in 1998.
