Exhibit 99.2
EXECUTION COPY
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STOCK AND ASSET PURCHASE AGREEMENT
between
XXXXXXX-XXXXX SQUIBB COMPANY
and
THE PROCTER & XXXXXX COMPANY
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Dated as of May 20, 2001
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SALE OF CLAIROL INCORPORATED
and
RELATED STOCK AND ASSETS
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TABLE OF CONTENTS
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ARTICLE I
Purchase and Sale of the Clairol Shares, the International
Shares and the Acquired Assets
SECTION 1.01. Purchase and Sale of the Clairol Shares, the International
Shares and the Acquired Assets..............................2
SECTION 1.02. Assumption of the Assumed Liabilities...........................4
SECTION 1.03. Consents of Third Parties.......................................4
ARTICLE II
Closing; Purchase Price Adjustment
SECTION 2.01. Closing.........................................................5
SECTION 2.02. Purchase Price Adjustment.......................................7
ARTICLE III
Conditions to Closing
SECTION 3.01. Buyer's Obligation.............................................12
SECTION 3.02. Seller's Obligation............................................14
SECTION 3.03. Frustration of Closing Conditions..............................16
ARTICLE IV
Representations and Warranties of Seller
SECTION 4.01. Authority......................................................16
SECTION 4.02. No Conflicts; Consents.........................................17
SECTION 4.03. The Clairol Shares and the International Shares................18
SECTION 4.04. Organization and Standing; Books and Records...................19
SECTION 4.05. Capital Stock of the Company...................................19
SECTION 4.06. Clairol Subsidiaries; Equity Interests.........................20
SECTION 4.07. Financial Statements...........................................21
SECTION 4.08. Taxes..........................................................22
SECTION 4.09. Assets Other than Real Property Interests......................24
SECTION 4.10. Title to Real Property.........................................24
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SECTION 4.11. Intellectual Property..........................................25
SECTION 4.12. Contracts......................................................27
SECTION 4.13. Litigation.....................................................33
SECTION 4.14. Benefit Plans..................................................34
SECTION 4.15. Absence of Changes or Events...................................37
SECTION 4.16. Compliance with Applicable Laws................................37
SECTION 4.17. Employee and Labor Matters.....................................39
SECTION 4.18. Limitations on Representations and Warranties..................40
ARTICLE V
Covenants of Seller
SECTION 5.01. Access.........................................................41
SECTION 5.02. Ordinary Conduct...............................................41
SECTION 5.03. Insurance......................................................44
SECTION 5.04. No Use of Clairol Names........................................44
SECTION 5.05. Intercompany Accounts..........................................45
ARTICLE VI
Representations and Warranties of Buyer
SECTION 6.01. Authority......................................................45
SECTION 6.02. No Conflicts; Consents.........................................45
SECTION 6.03. Securities Act.................................................46
SECTION 6.04. Actions and Proceedings, etc...................................47
SECTION 6.05. Availability of Funds..........................................47
ARTICLE VII
Covenants of Buyer
SECTION 7.01. Confidentiality................................................47
SECTION 7.02. No Additional Representations..................................48
SECTION 7.03. No Use of Certain Names........................................48
SECTION 7.04. Buyer Activity on Closing Date.................................49
SECTION 7.05. Securities Act.................................................49
SECTION 7.06. Guarantees.....................................................49
ARTICLE VIII
Mutual Covenants
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SECTION 8.01. Consents.......................................................50
SECTION 8.02. Cooperation....................................................50
SECTION 8.03. Publicity......................................................51
SECTION 8.04. Best Efforts...................................................51
SECTION 8.05. Antitrust Notification and Other Regulatory Filings............52
SECTION 8.06. Records........................................................53
SECTION 8.07. Support Services...............................................54
SECTION 8.08. Collection of Receivables; Forwarding of Payments..............54
SECTION 8.09 Advisory Committees............................................54
SECTION 8.10. Transitional Relabeling Services...............................55
ARTICLE IX
Employee and Related Matters
SECTION 9.01. Employee Matters...............................................55
SECTION 9.02. Bargaining Unit Employees......................................56
SECTION 9.03. Continuity of Employment.......................................57
SECTION 9.04. Pension Plan...................................................58
SECTION 9.05. Savings and Investment Plan....................................59
SECTION 9.06. Non-Qualified Plans............................................59
SECTION 9.07. Welfare Benefit Plans..........................................60
SECTION 9.08. Severance......................................................62
SECTION 9.09. Vacation Benefits..............................................62
SECTION 9.10. Relocation Benefits............................................62
SECTION 9.11. Expatriates....................................................63
SECTION 9.12. Other Agreements and Benefits..................................63
SECTION 9.13. Annual Bonuses.................................................63
SECTION 9.14. Retention Bonus Arrangements...................................63
SECTION 9.15. International Pension and Savings Plans........................64
ARTICLE X
Further Assurances
SECTION 10.01. Further Assurances............................................64
ARTICLE XI
Indemnification
SECTION 11.01. Tax Indemnification...........................................64
SECTION 11.02. Other Indemnification by Seller...............................66
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SECTION 11.03. Other Indemnification by Buyer................................67
SECTION 11.04. Limitations on Liability; Cooperation.........................68
SECTION 11.05. Losses Net of Insurance, etc..................................68
SECTION 11.06. Termination of Indemnification................................69
SECTION 11.07. Procedures Relating to Indemnification for Third Party
Claims.....................................................69
SECTION 11.08. Procedures Related to Indemnification for Other Claims (Other
than Tax Claims under Section 11.01).......................71
SECTION 11.09. Procedures Relating to Indemnification of Tax Claims..........71
ARTICLE XII
Tax Matters
SECTION 12.01. Responsibility for Preparation and Filing of Tax Returns
and Amendment..............................................72
SECTION 12.02. Cooperation...................................................73
SECTION 12.03. Refunds and Credits...........................................74
SECTION 12.04. Section 338(h)(10)............................................75
SECTION 12.05. Purchase Price Allocations....................................76
SECTION 12.06. Transfer Taxes................................................76
SECTION 12.07. FIRPTA Certificate............................................77
SECTION 12.08. Buyer Activity Post-Closing...................................77
ARTICLE XIII
Termination
SECTION 13.01. Termination...................................................77
SECTION 13.02. Return of Confidential Information............................78
SECTION 13.03. Consequences of Termination...................................78
SECTION 13.04. Payment.......................................................79
ARTICLE XIV
Survival of Representations
SECTION 14.01. Survival of Representations...................................79
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ARTICLE XV
Miscellaneous
SECTION 15.01. Assignment....................................................79
SECTION 15.02. No Third-Party Beneficiaries..................................80
SECTION 15.03. Expenses......................................................80
SECTION 15.04. Attorney Fees.................................................80
SECTION 15.05. Amendments....................................................80
SECTION 15.06. Notices.......................................................80
SECTION 15.07. Interpretation; Exhibits and the Seller Disclosure Schedule;
Definitions...................................................81
SECTION 15.08. Counterparts..................................................89
SECTION 15.09. Entire Agreement..............................................89
SECTION 15.10. Broker and Finder Fees........................................89
SECTION 15.11. Severability..................................................90
SECTION 15.12. Bulk Transfer Laws............................................90
SECTION 15.13. Consent to Jurisdiction.......................................90
SECTION 15.14. Waiver of Jury Trial..........................................91
SECTION 15.15. GOVERNING LAW.................................................91
EXHIBIT A International Stock Selling Entities and International
Subsidiaries
EXHIBIT B-1 U.S. Asset Selling Entities
EXHIBIT B-2 International Asset Selling Entities
EXHIBIT C Form of International Stock Purchase Agreement
EXHIBIT D Form of International Asset Purchase Agreement
EXHIBIT E Allocations
EXHIBIT F-1 CMO Acquired Assets
EXHIBIT F-2 CMO Excluded Assets
EXHIBIT G-1 CMO Assumed Liabilities
EXHIBIT G-2 CMO Excluded Liabilities
EXHIBIT H-1 International Acquired Assets
EXHIBIT H-2 International Excluded Assets
EXHIBIT I-1 International Assumed Liabilities
EXHIBIT I-2 International Excluded Liabilities
EXHIBIT J-1 Other U.S. Acquired Assets
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EXHIBIT J-2 Other U.S. Excluded Assets
EXHIBIT K-1 Other U.S. Assumed Liabilities
EXHIBIT K-2 Other U.S. Excluded Liabilities
EXHIBIT L-1 CMO Transitional Services Agreement
EXHIBIT L-2 GBS Transitional Service Agreement
EXHIBIT L-3 International Transitional Services Agreement
EXHIBIT L-4 Information Management Agreement
EXHIBIT M Employee Benefits
EXHIBIT N Clairol Enhanced Severance/Retention Program
APPENDIX A International Pension and Savings Plans
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EXECUTION COPY
STOCK AND ASSET PURCHASE AGREEMENT dated as of May
20, 2001 (this "AGREEMENT"), between XXXXXXX-XXXXX
SQUIBB COMPANY, a Delaware corporation ("SELLER"), and
THE PROCTER & XXXXXX COMPANY, an Ohio corporation
("BUYER").
Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, all the issued and outstanding shares of Common Stock, par value $10 per
share (the "CLAIROL SHARES"), of Clairol Incorporated, a Delaware corporation
and wholly owned subsidiary of Seller (the "COMPANY").
Buyer also desires to purchase from the subsidiaries of Seller set
forth under the relevant caption in Exhibit A (each, an "INTERNATIONAL STOCK
SELLING ENTITY"), and Seller desires to cause the International Stock Selling
Entities to sell to Buyer and its designated Buyer Subsidiaries, all the issued
and outstanding capital stock owned by Seller and its subsidiaries (the
"INTERNATIONAL SHARES") of each of the subsidiaries of Seller set forth under
the relevant caption in Exhibit A attached hereto (each, an "INTERNATIONAL
CLAIROL SUBSIDIARY").
Seller's customer management organization in the United States (the
"CMO") distributes and sells products of the Company, together with products of
other businesses of Seller and its Affiliates. Buyer and Seller desire that
Buyer acquire all Seller's CMO business and operations and that, following such
acquisition, Buyer provide certain transitional distribution and sales services
to Seller and its Affiliates as contemplated by the CMO Transitional Services
Agreement. Accordingly, Buyer desires to acquire from Seller, and Seller desires
to sell to Buyer, the CMO Acquired Assets. Buyer desires to assume, and Seller
desires to assign, the CMO Assumed Liabilities.
Seller and certain of its subsidiaries set forth in Exhibit B-1
(each, a "U.S. ASSET SELLING ENTITY") hold certain assets of, and provide
certain services to, the Acquired Business. Buyer and Seller desire that Buyer
acquire such assets and certain other assets related to the provision of such
services and assume certain liabilities related thereto. Accordingly, Buyer
desires to acquire from Seller and the U.S. Asset Selling Entities, and Seller
and the U.S. Asset Selling Entities desire to sell to Buyer, the Other U.S.
Acquired Assets. Buyer desires to assume, and
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Seller and the U.S. Asset Selling Entities desire to assign, the Other U.S.
Assumed Liabilities.
Seller and certain of its subsidiaries set forth in Exhibit B-2
(each, an "INTERNATIONAL ASSET SELLING ENTITY") manufacture, market, distribute
or sell the products of the Acquired Business (other than the CMO) or otherwise
have assets or liabilities of the Acquired Business (other than the CMO) in each
of the corresponding countries set forth in Exhibit B-2. Buyer desires to
acquire, or to cause its designated Buyer Subsidiaries to acquire, from Seller
and the Asset Selling Entities, and Seller desires to transfer, and to cause the
Asset Selling Entities to transfer, to Buyer and its designated Buyer
Subsidiaries, the International Acquired Assets. Buyer desires to assume, and
Seller desires to assign, the International Assumed Liabilities.
Buyer desires to hire certain employees associated with the Acquired
Business, as set forth in this Agreement and the Other Transaction Documents.
Section 15.07(c) identifies the Sections of this Agreement in which
capitalized terms used in this Agreement are defined.
Accordingly, Seller and Buyer hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE CLAIROL SHARES, THE INTERNATIONAL
SHARES AND THE ACQUIRED ASSETS
SECTION 1.01. PURCHASE AND SALE OF THE CLAIROL SHARES, THE
INTERNATIONAL SHARES AND THE ACQUIRED ASSETS. (a) On the terms and subject to
the conditions set forth in this Agreement, (i) Seller will sell, transfer and
deliver to Buyer, and Buyer will purchase from Seller, the Clairol Shares, (ii)
Seller will cause the International Stock Selling Entities to sell, transfer and
deliver to Buyer or its designated Buyer Subsidiaries, and Buyer will purchase
or cause such Buyer Subsidiaries to purchase from the International Stock
Selling Entities, the International Shares, (iii) Seller will, and will cause
the U.S. Asset Selling Entities to, sell, convey, transfer, assign and deliver
to Buyer or its designated Buyer Subsidiaries, and Buyer will purchase or cause
such Buyer Subsidiaries to purchase from Seller and the U.S. Asset Selling
Entities,
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the U.S. Acquired Assets and (iv) Seller will, and will cause the International
Asset Selling Entities to, sell, convey, transfer, assign and deliver to Buyer
or its designated Buyer Subsidiaries, and Buyer will purchase or cause such
Buyer Subsidiaries, to purchase from the International Asset Selling Entities,
the International Acquired Assets, for (A) an aggregate purchase price equal to
$4.95 billion (the "PURCHASE PRICE") together with, if the Closing shall occur
after the Six Month Anniversary, interest on the Purchase Price accrued from the
Six Month Anniversary to the Closing Date at the Prime Rate, payable and subject
to adjustment as set forth in Article II, and (B) the assumption of the Assumed
Liabilities. The purchase and sale of the Clairol Shares, the International
Shares, the U.S. Acquired Assets and the International Acquired Assets and the
assumption of the Assumed Liabilities is referred to in this Agreement,
collectively, as the "TRANSACTION".
(b) The purchase and sale of the International Shares with respect
to each International Clairol Subsidiary will be effected pursuant to short-form
stock purchase agreements (each, an "INTERNATIONAL STOCK PURCHASE AGREEMENT") in
substantially the same form as the form of International Stock Purchase
Agreement attached as Exhibit C to this Agreement, except (as Buyer and Seller
shall reasonably agree) for (i) the deletion of provisions which are
inapplicable to such International Clairol Subsidiary, (ii) such changes as may
be necessary to satisfy the requirements of applicable local law, (iii) such
changes as may be reasonably agreed upon by Seller and Buyer regarding employees
and employee benefits matters in order to adapt such agreement to the particular
circumstances of the relevant International Clairol Subsidiary and country or
countries in which it operates, PROVIDED that such changes shall be consistent
with the principles underlying the corresponding provisions of this Agreement
and (iv) such other changes as may be agreed by Seller and Buyer.
(c) The transfer of each International Business Unit (including the
International Acquired Assets and International Assumed Liabilities) will be
effected pursuant to short-form asset purchase agreements (the "INTERNATIONAL
ASSET PURCHASE AGREEMENTS") on a country-by-country basis. Each International
Asset Purchase Agreement shall be in substantially the same form as the form of
International Asset Purchase Agreement attached as Exhibit D, except (as Buyer
and Seller shall reasonably agree) for (i) the deletion of provisions which are
inapplicable to such International Business Unit, (ii) such changes as may be
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necessary to satisfy the requirements of applicable local law, (iii) such
changes as may be reasonably agreed upon by Seller and Buyer regarding employees
and employee benefits matters in order to adapt such agreement to the particular
circumstances of the relevant International Business Unit and country, provided
that such changes shall be consistent with the terms and conditions of, and
principles underlying, the corresponding provisions of this Agreement, and (iv)
such other changes as may be agreed by Seller and Buyer.
(d) Buyer and Seller agree to allocate a portion of the Purchase
Price (as adjusted pursuant to Section 2.02) to the International Shares and the
Acquired Assets in accordance with Exhibit E, and the remainder of the Purchase
Price (as adjusted pursuant to Section 2.02) to the Clairol Shares, in each case
in accordance with Section 12.05. Buyer and Seller shall further agree on the
allocation of the Purchase Price (as adjusted pursuant to Section 2.02) with
respect to the Acquired Assets on a country-by-country or asset-by-asset basis.
A proposed Exhibit E shall be prepared by Seller and delivered to Buyer not
later than 30 days prior to Closing and Buyer and Seller shall reach agreement
on a final Exhibit E no later than 120 days after the Closing Date. If Buyer and
Seller are unable to reach agreement on a final Exhibit E by the end of such
120-day period, either party may refer any items of disagreement to the
Accounting Firm for resolution within 45 days of the receipt of such submission
using procedures comparable to those provided in Section 2.02(a)(iii).
SECTION 1.02. ASSUMPTION OF THE ASSUMED LIABILITIES. On the terms
and subject to the conditions of this Agreement, Buyer shall, on the Closing
Date, assume and shall pay, honor, perform and discharge (or cause to be
assumed, paid, honored, performed and discharged) when due all the U.S. Assumed
Liabilities and the International Assumed Liabilities (collectively, the
"ASSUMED LIABILITIES").
SECTION 1.03. CONSENTS OF THIRD PARTIES. (a) Notwithstanding
anything in this Agreement to the contrary, this Agreement shall not constitute
an agreement to assign any asset or any claim or right or any benefit arising
under or resulting from such asset if an attempted assignment thereof, without
the consent of a third party, would constitute a breach or other contravention
of the rights of such third party, would be ineffective with respect to any
party to an agreement concerning such asset, or would in any way adversely
affect the rights of Seller or
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the Seller Entities or, upon transfer, Buyer or its designated Buyer Subsidiary
under such asset. If any transfer or assignment by Seller or any Seller Entity
to, or any assumption by Buyer or its designated Buyer Subsidiary of, any
interest in, or liability, obligation or commitment under, any asset requires
the consent of a third party, then such assignment or assumption shall be made
subject to such consent being obtained.
(b) If any such consent is not obtained prior to the Closing, Seller
and the Seller Entities, on the one hand, and Buyer and the Buyer Subsidiaries,
on the other hand, shall cooperate (at their own expense) in any lawful and
commercially reasonable arrangement reasonably proposed by Buyer under which (i)
Buyer or its designated Buyer Subsidiary shall obtain (without infringing upon
the legal rights of such third party or outside party or violating any
Applicable Law) the economic claims, rights and benefits (net of the amount of
any related Tax costs imposed on Seller and its Affiliates) under the asset,
claim or right with respect to which the consent has not been obtained in
accordance with this Agreement, and (ii) Buyer shall assume any related economic
burden (including the amount of any related Tax costs imposed on Seller and its
Affiliates) with respect to the asset, claim or right with respect to which the
consent has not been obtained (including any related Assumed Liability).
ARTICLE II
CLOSING; PURCHASE PRICE ADJUSTMENT
SECTION 2.01. CLOSING. (a) Each of the Buyer and Seller are
obligated to consummate the closing (the "CLOSING") of the Transaction on the
earlier of (i) the second business day after the first date on which all the
conditions to the Closing set forth in Article III shall have been satisfied and
(ii) the Twelve Month Anniversary; PROVIDED, HOWEVER, that if on the Twelve
Month Anniversary, (x) any of the conditions set forth in Section 3.01 (other
than the conditions set forth in Sections 3.01(b) and (c)) shall not have been
satisfied (or waived in writing by Buyer), (y) any of the conditions set forth
in Section 3.02 shall not have been satisfied (or waived in writing by Seller)
or (z) any statute, rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction or other similar legal
restraint or prohibition or other order enacted, entered, promulgated, enforced
or issued by any U.S. Governmental Entity shall be
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in effect that prevents the purchase and sale of the Clairol Shares, then the
Closing shall occur no later than the second business day after the satisfaction
of such conditions or the termination of such restraint or prohibition, as
applicable. The Closing shall be held on the Closing Date at 10:00 a.m. at the
offices of Cravath, Swaine & Xxxxx, Xxxxxxxxx Xxxxx, 000 Xxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx. The date on which the Closing shall occur is hereinafter
referred to as the "Closing Date."
(b) At the Closing, Buyer shall deliver to Seller, by wire transfer
to a bank account designated in writing by Seller at least two business days
prior to the Closing Date, immediately available funds in an amount equal to the
sum of (i) the Purchase Price plus or minus (ii) an estimate, prepared by Seller
and delivered to Buyer at least two business days prior to the Closing Date, of
any adjustment to the Purchase Price under Section 2.02(b) plus (iii) any
interest payable to Seller pursuant to Section 1.01(a). The Purchase Price plus
or minus such estimate of any such adjustment under Section 2.02(b) is
hereinafter called the "CLOSING DATE AMOUNT".
(c) Seller shall deliver or cause to be delivered to Buyer
certificates representing the Clairol Shares, duly endorsed in blank or
accompanied by stock powers duly endorsed in blank in proper form for transfer,
with appropriate transfer stamps, if any, affixed.
(d) Seller (acting as agent for the International Stock Selling
Entities) shall deliver or cause to be delivered to Buyer or its designated
Buyer Subsidiary with respect to each International Clairol Subsidiary (i)
certificates representing the International Shares for such International
Clairol Subsidiary, duly endorsed in blank or accompanied by stock powers duly
endorsed in blank in proper form for transfer, with appropriate transfer stamps,
if any, affixed, or other appropriate instruments sufficient to evidence the
transfer of the International Shares under the Applicable Laws of the relevant
jurisdiction, and (ii) an appropriately executed International Stock Purchase
Agreement for each such International Clairol Subsidiary. Buyer shall deliver,
or cause its designated Buyer Subsidiary to deliver, to Seller (acting as agent
for the International Stock Selling Entities) an appropriately executed
International Stock Purchase Agreement for each International Clairol
Subsidiary.
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(e)(i) Seller (acting for itself and as agent for the Asset Selling
Entities) shall deliver or cause to be delivered to Buyer or its designated
Buyer Subsidiary such appropriately executed instruments of sale, assignment,
transfer and conveyance (including its counterpart signature page to each
applicable International Asset Purchase Agreement) in form and substance
reasonably satisfactory to Buyer and Seller and their respective counsel
evidencing and effecting the sale, assignment, and transfer to Buyer or
designated Buyer Subsidiaries of the U.S. Acquired Assets and the International
Acquired Assets (collectively, the "ACQUIRED ASSETS") (it being understood that
such instruments shall not require the Seller or, as the case may be, the Asset
Selling Entities to make any additional representations, warranties or
covenants, expressed or implied, not contained in this Agreement) and (ii) Buyer
shall deliver or cause to be delivered by its applicable Buyer Subsidiaries to
Seller appropriately executed counterparts to such instruments of sale,
assignment, transfer and conveyance (including its counterpart signature page to
each applicable International Asset Purchase Agreement), and appropriately
executed instruments of assumption (it being understood that such instruments
described above shall not require Buyer or, as the case may be, Buyer
Subsidiaries, to make any additional representations, warranties or covenants,
expressed or implied, or assume any additional liabilities, expressed or
implied, not contained in this Agreement) by Buyer or its applicable Buyer
Subsidiaries of the Assumed Liabilities, in form and substance reasonably
satisfactory to Buyer, Seller and their respective counsel. The documents and
instruments referred to in Section 2.01(c), (d) and (e), together with the
International Stock Purchase Agreements and the International Asset Purchase
Agreements, are collectively referred to herein as the "TRANSFER DOCUMENTS".
SECTION 2.02. PURCHASE PRICE ADJUSTMENT. (a) (i) Within 90 days
after the Closing Date, Buyer shall prepare and deliver to Seller a statement
(the "WORKING CAPITAL STATEMENT"), setting forth Working Capital as of the close
of business on the Closing Date ("CLOSING WORKING CAPITAL"). The Working Capital
Statement is hereinafter sometimes referred to as the "STATEMENT". The Statement
shall be accompanied by a certificate of Buyer stating that the Statement has
been prepared in compliance with the applicable requirements of this Section
2.02.
(ii) The Statement shall become final and binding on the parties on
the sixtieth day following receipt thereof by the Seller, unless Seller gives
written notice of its
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disagreement with the Statement (a "NOTICE OF DISAGREEMENT") to Buyer prior to
such date. Any Notice of Disagreement shall (A) specify in reasonable detail the
nature of any disagreement so asserted and (B) only include disagreements based
on mathematical errors or based on Closing Working Capital not being calculated
in accordance with this Section 2.02. If a Notice of Disagreement is received by
Buyer in a timely manner, then the Statement (as revised in accordance with
clause (1) or (2) below) shall become final and binding upon Seller and Buyer,
on the earlier of (1) the date Seller and Buyer resolve in writing any
differences they have with respect to the matters specified in such Notice of
Disagreement and (2) the date all disputed matters specified in such Notice of
Disagreement are finally resolved in writing by the Accounting Firm.
(iii) During the 60-day period following the delivery of a Notice of
Disagreement, Seller and Buyer shall seek in good faith to resolve in writing
any differences which they may have with respect to the matters specified in
such Notice of Disagreement. At the end of such 60-day period, Seller and Buyer
shall submit to an internationally recognized independent accounting firm
mutually agreed upon by Seller and Buyer (the "ACCOUNTING FIRM") for review and
resolution of any and all matters which remain in dispute and which were
properly included in such Notice of Disagreement. The scope of the Accounting
Firm's review shall be limited to only those matters which remain in dispute and
which were properly included in such Notice of Disagreement. Seller and Buyer
shall use reasonable efforts to cause the Accounting Firm to render a decision
resolving the matters submitted to the Accounting Firm within 45 days of the
receipt of such submission. Seller and Buyer agree that judgment may be entered
upon the determination of the Accounting Firm in any court having jurisdiction
over the party against which such determination is to be enforced. The
Accounting Firm's determination shall be accompanied by a certificate of the
Accounting Firm that it reached its decision in accordance with the provisions
of this Section 2.02(a). The cost of any arbitration (including the fees and
expenses of the Accounting Firm) with respect to any Notice of Disagreement
pursuant to this Section 2.02(a) shall be borne by Buyer and Seller in inverse
proportion as they may prevail on matters resolved by the Accounting Firm with
respect to such Notice of Disagreement, which proportionate allocation also
shall be determined by the Accounting Firm at the time the determination of the
Accounting Firm is rendered on the merits of the matter submitted.
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(b) (i) The Purchase Price shall be increased by the amount by which
Closing Working Capital exceeds $164,900,000 (the "W.C. AMOUNT"), and the
Purchase Price shall be decreased by the amount by which Closing Working Capital
is less than the W.C. AMOUNT (the Purchase Price as so increased or decreased
shall hereinafter be referred to as the "ADJUSTED CLOSING DATE AMOUNT"). If the
Closing Date Amount is less than the Adjusted Closing Date Amount, Buyer shall,
and if the Closing Date Amount is greater than the Adjusted Closing Date Amount,
Seller shall, within 10 business days after the Working Capital Statement
becomes final and binding on the parties, make payment by wire transfer in
immediately available funds of the amount of such difference, together with
interest thereon accrued from the Closing Date to the date of payment at the
Prime Rate. Notwithstanding the foregoing provisions of this Section 2.02(b), no
adjustment to the Purchase Price pursuant to this Section 2.02(b) shall be made
unless such adjustment (whether an increase or a decrease) would exceed
$12,500,000, and if the adjustment would exceed such amount, then the full
amount of the adjustment shall be made.
(ii) The term "WORKING CAPITAL" shall mean Current Assets minus
Current Liabilities. The W.C. Amount equals Working Capital on December 31,
2000, as reflected in the Clairol Balance Sheet, the Boclaro Working Capital
Statement and the CMO Working Capital Statement, and shall not be subject to
change regardless of whether the items included therein were in accordance with
generally accepted accounting principles or the Seller Accounting Policies. The
term "CURRENT ASSETS" shall mean the combined net account receivables, net
inventory and prepaid and other current assets of the Acquired Business, all
calculated (A) in accordance with the Xxxxxxx-Xxxxx Squibb Company Accounting
Policies and Procedures previously delivered to Buyer and in effect as of
December 31, 2000, (B) to give effect to the requirements of Emerging Issues
Task Force Issue No. 00-14 "Accounting for Certain Sales Incentives" and (C)
otherwise in conformity with the basis of presentation described in the notes to
the Financial Statements (clauses (A), (B) and (C), collectively, the "SELLER
ACCOUNTING POLICIES"). The term "CURRENT LIABILITIES" shall mean the sum of (x)
combined accounts payable and accrued liabilities of the Acquired Business
(other than the CMO) and (y)(1) the sum of 50% of combined accounts payable and
accrued liabilities of the CMO other than brokers' commissions and (2) all
brokers' commissions related to Clairol included in combined accounts payable of
the CMO, all calculated in accordance with the Seller Accounting Policies. For
the avoidance of doubt, current
10
assets and current liabilities relating to cash and cash equivalents, Taxes,
deferred Tax assets and deferred Tax liabilities, intercompany transactions, any
other Excluded Assets and any other Excluded Liabilities are not included in the
Clairol Balance Sheet, the Boclaro Working Capital Statement or the CMO Working
Capital Statement shall not be taken into account in determining Working
Capital. Items for which Buyer and its Affiliates (including the Clairol
Entities and any Buyer Subsidiaries that acquire Acquired Assets or assume
Assumed Liabilities) are indemnified by Seller pursuant to Article XI shall not
be taken into account in determining Working Capital. The parties agree that the
adjustment contemplated by Section 2.02(b) is intended to show the change in
Working Capital from December 31, 2000, to the Closing Date and that such change
can only be measured if the calculation is done in the same way, using the
Seller Accounting Policies at both dates.
(c) The scope of the disputes to be resolved by the Accounting Firm
is limited to whether such calculations were done in accordance with Section
2.02(b), including whether the calculations were in compliance with Seller
Accounting Policies and whether there were mathematical errors in the Statement,
and the Accounting Firm is not to make any other determination, including any
determination as to whether the Seller Accounting Policies are in accordance
with GAAP or whether GAAP was followed for the Statement or as to whether the
W.C. Amount is correct. Any items on or omissions from the Clairol Balance
Sheet, the Boclaro Working Capital Statement or the CMO Working Capital
Statement that are based upon errors of fact or mathematical errors or that are
not in accordance with the Seller Accounting Policies shall be carried forward
for purposes of calculating Closing Working Capital, as applicable.
(d) Until the later to occur of (i) the date on which the Statement
shall become final and binding on the parties pursuant to Section 2.02(a)(ii)
and (ii) the date on which the Assumed Liabilities Statement (as defined in the
CMO Transitional Services Agreement) shall become final and binding on the
parties pursuant to Section 5.03 of the CMO Transitional Services Agreement,
Buyer agrees that following the Closing it shall not take any actions with
respect to the accounting books and records of Clairol on which the Statement is
to be based that are not consistent with the Acquired Business' past practices
except to the extent that such changes are, in the written opinion of outside
counsel, necessary to comply with Applicable Law. Without limiting the
generality of the foregoing, no changes shall be made during such period in any
reserve or other account existing as of December 31, 2000, except as a result of
events occurring after December 31, 2000 and, in such event, only in a manner
consistent with past practices.
11
(e) Until the later to occur of (i) the date on which the Statement
shall become final and binding on the parties pursuant to Section 2.02(a)(ii)
and (ii) the date on which the Assumed Liabilities Statement (as defined in the
CMO Transitional Services Agreement) shall become final and binding on the
parties pursuant to Section 5.03 of the CMO Transitional Services Agreement,
Buyer agrees that following the Closing it shall, and shall cause the Acquired
Business (including the Clairol Entities and any Buyer Subsidiaries that acquire
Acquired Assets or assume Assumed Liabilities) to, afford to Seller and any
accountants, counsel or financial advisors retained by Seller in connection with
any adjustment to the Purchase Price contemplated by this Section 2.02 and the
calculation of each of the BMS Division's Allocable Portion of the CMO Accounts
Payable and Accrued Liabilities reasonable access upon reasonable notice during
normal business hours to the properties, books, contracts, personnel and records
of the Acquired Business (including the Clairol Entities and any Buyer
Subsidiaries that acquire Acquired Assets or assume Assumed Liabilities) and
Buyer's and its accountant's work papers relating to the Statement and the
Assumed Liabilities Statement relevant to the adjustment contemplated by this
Section 2.02 and the calculation of each of the BMS Division's Allocable Portion
of the CMO Accounts Payable and Accrued Liabilities and shall provide Seller
upon Seller's reasonable request and at Seller's expense, with copies of any
such books, contracts and records, including Buyer's and its accountants, work
papers relating to the Statement.
ARTICLE III
CONDITIONS TO CLOSING
SECTION 3.01. BUYER'S OBLIGATION. The obligation of Buyer to
purchase and pay for the Clairol Shares, the International Shares and the
Acquired Assets and to assume the Assumed Liabilities is subject to the
satisfaction (or written waiver by Buyer) as of the Closing of the following
conditions:
(a) (i) The representations and warranties of Seller made in this
Agreement shall be true and correct in all material respects on and as of
the date hereof, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations
and warranties shall be true and correct in all material respects, on and
as of such earlier date) and (ii) the representations and
12
warranties of Seller made in Sections 4.01, 4.02, 4.03, 4.04, 4.05, 4.06,
4.07, 4.08, 4.10, 4.11 and 4.14 shall be true and correct in all material
respects as of the date hereof and as of the time of the Closing as though
made as of such time, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties shall be true and correct in all material
respects, on and as of such earlier date), in each case in clauses (i) and
(ii) except for breaches as to matters that, individually or in the
aggregate, would not be reasonably likely to have a Material Adverse
Effect. Seller shall have performed or complied in all material respects
with all obligations and covenants required by this Agreement to be
performed or complied with by Seller by the time of the Closing; PROVIDED,
HOWEVER, that for purposes of this condition each of the covenants in
Section 5.02 with respect to the conduct by Seller of the Acquired
Business from the date hereof to the Closing that are qualified by
references to the phrase "consistent with past practice" shall be read as
if such phrase were deleted from such covenants. Seller shall have
delivered to Buyer a certificate dated the Closing Date and signed by an
authorized officer of Seller confirming the foregoing.
(b) No statute, rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction or other order
enacted, entered, promulgated, enforced or issued by any Federal, state,
local or foreign government or any court of competent jurisdiction,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "GOVERNMENTAL ENTITY"), or other
legal restraint or prohibition shall be in effect preventing (i) the
purchase and sale of the Clairol Shares or (ii) prior to the Twelve Month
Anniversary, the purchase or sale of any portion of the International
Shares or any portion of the Acquired Assets or the assumption of any
portion of the Assumed Liabilities, to the extent the exclusion of such
portion of the International Shares, Acquired Assets or Assumed
Liabilities would be reasonably likely to have a Material Adverse Effect.
(c) (i) The waiting period under the Xxxx-Xxxxx- Xxxxxx Antitrust
Improvements Act of 0000 (xxx "XXX XXX"), the Mexican Federal Economic
Competition Law (the "MEXICAN MERGER REGULATION") and Xxxxxxx 000 xx
00
xxx Xxxxxxxxxxx Xxx (Xxxxxx) (the "CANADA COMPETITION ACT"), if applicable
to the Transaction, shall have expired or been terminated and in Canada,
Buyer shall have been advised in writing, in a form and upon terms
reasonably satisfactory to Buyer, that the Commissioner of Competition
does not oppose the Transaction and will not make an application under
Section 92 or any other section of the Competition Act in relation to the
Transaction. Any consents, authorizations, orders, approvals, declarations
and filings under the HSR Act, the Mexican Merger Regulation, the Canada
Competition Act or any other applicable antitrust law, the absence of
which would prohibit the consummation of (i) the purchase and sale of the
Clairol Shares or (ii) the purchase and sale of any portion of the
International Shares or any portion of the Acquired Assets, or the
assumption of any portion of the Assumed Liabilities, to the extent the
exclusion of such portion of the International Shares, Acquired Assets or
Assumed Liabilities would be reasonably likely to have a Material Adverse
Effect, shall have been made or obtained.
(ii) The Office of Fair Trading shall have indicated, in terms and a
form reasonably satisfactory to Buyer, that it is not the intention of the
Secretary of the State for Trade and Industry to refer the proposed
acquisition of the Clairol Shares, the International Shares and the
Acquired Assets and the assumption of the Assumed Liabilities, or any
matter arising therefrom, to the Competition Commission; and/or if the
Secretary of the State for Trade and Industry makes a reference to the
Competition Commission, either:
(A) the Competition Commission has concluded, in terms and a
form reasonably satisfactory to Buyer, that neither the acquisition
of the Clairol Shares, the International Shares and the Acquired
Assets and the assumption of the Assumed Liabilities, nor any matter
arising therefrom, may be expected to operate against the public
interest; and/or
(B) the Secretary of the State for Trade and Industry allowing
the acquisition of the Clairol Shares, the International Shares and
the Acquired Assets and the assumption of the Assumed Liabilities to
proceed on terms reasonably satisfactory to the Buyer.
14
Notwithstanding anything else to the contrary herein, on and after
the Twelve Month Anniversary of the date of this Agreement, the conditions
set forth in Section 3.01(b)(ii) and Section 3.01(c) shall cease to be
conditions to Buyer's obligation to purchase and pay for the Clairol
Shares, the International Shares and the Acquired Assets and to assume the
Assumed Liabilities.
(d) Seller shall have executed and delivered, or shall have caused
its Affiliates named as parties to any Transaction Document other than
this Agreement (the "OTHER TRANSACTION DOCUMENTS") to execute and deliver,
the Other Transaction Documents.
SECTION 3.02. SELLER'S OBLIGATION. The obligation of Seller to sell
and deliver the Clairol Shares, the International Shares, the Acquired Assets
and the Assumed Liabilities to Buyer is subject to the satisfaction (or written
waiver by Seller) as of the Closing of the following conditions:
(a) The representations and warranties of Buyer made in this
Agreement shall be true and correct in all material respects, as of the
date hereof and as of the time of the Closing as though made as of such
time, except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and
warranties shall be true and correct in all material respects, on and as
of such earlier date), in each case except for breaches as to matters
that, individually or in the aggregate, would not be reasonably likely to
have a material adverse effect on the ability of Buyer to consummate the
transactions contemplated hereby. Buyer shall have performed or complied
in all material respects with all obligations and covenants required by
this Agreement to be performed or complied with by Buyer by the time of
the Closing. Buyer shall have delivered to Seller a certificate dated the
Closing Date and signed by an authorized officer of Buyer confirming the
foregoing.
(b) No statute, rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction or other order
enacted, entered, promulgated, enforced or issued by any Governmental
Entity or other legal restraint or prohibition shall be in effect
preventing (i) the purchase and sale of the Clairol Shares or (ii) the
purchase and sale of any portion of the International Shares
15
material, individually or in the aggregate, to the Acquired Business or
any portion of the Acquired Assets material, individually or in the
aggregate, to the Acquired Business or the assumption of any portion of
the Assumed Liabilities material, individually or in the aggregate, to the
Acquired Business.
(c) The waiting period under the HSR Act, the Mexican Merger
Regulation and the Canada Competition Act and the merger control act in
the United Kingdom or any other antitrust law, if applicable to the
Transaction, shall have expired or been terminated. Any consents,
authorizations, orders, approvals, declarations and filings under the HSR
Act, the Mexican Merger Regulation, the Canada Competition Act or any
other applicable antitrust law, the absence of which would prohibit the
consummation of (i) the purchase of the Clairol Shares or (ii) the
purchase and sale of any portion of the International Shares material,
individually or in the aggregate, to the Acquired Business or any portion
of the Acquired Assets material, individually or in the aggregate, to the
Acquired Business or the assumption of any portion of the Assumed
Liabilities material, individually or in the aggregate, to the Acquired
Business, shall have been made or obtained.
(d) Buyer shall have executed and delivered, or shall have caused
its Affiliates named as parties to any Other Transaction Document to
execute and deliver, the Other Transaction Documents.
SECTION 3.03. FRUSTRATION OF CLOSING CONDITIONS. Neither Buyer nor
Seller may rely on the failure of any condition set forth in Section 3.01 or
3.02, respectively, to be satisfied if such failure was caused by such party's
failure to act in good faith or to use its best efforts to cause the Closing to
occur, as required by Section 8.04.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Seller Disclosure Schedule attached
hereto (the "SELLER DISCLOSURE SCHEDULE"), Seller hereby represents and warrants
to Buyer with respect to Sections 4.01, 4.02, 4.03, 4.04, 4.05, 4.06, 4.07,
4.08, 4.09, 4.10, 4.11 and 4.14, as of the date hereof and as of the Closing
Date, except to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties shall be
true and
16
correct in all material respects, on and as of such earlier date) and with
respect to all other representations and warranties, as of the date hereof,
except to the extent such representations and warranties expressly relate to an
earlier date (in which case such representations and warranties shall be true
and correct in all material respects, on and as of such earlier date), as
follows:
SECTION 4.01. AUTHORITY. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to enter into this
Agreement. Each Seller Entity is a legal entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization.
Seller and the Seller Entities have all requisite corporate power to consummate
the transactions contemplated hereby. All corporate acts and other proceedings
required to be taken by Seller and the Seller Entities to authorize the
execution, delivery and performance of this Agreement, the Transfer Documents
and the Transitional Services Agreements (collectively, the "TRANSACTION
DOCUMENTS"), to the extent such persons are parties to such agreements, and the
consummation of the transactions contemplated hereby and thereby have been, or
in the case of the Seller Entities will have been by the Closing Date, duly and
properly taken. This Agreement and each of the Other Transaction Documents has
been, or in the case of the Other Transaction Documents will have been by the
Closing Date, duly executed and delivered by Seller or the applicable Seller
Entity or Seller Entities and constitutes a legal, valid and binding obligation
of Seller or such Seller Entity or Seller Entities, enforceable against Seller
or such Seller Entity or Seller Entities in accordance with its terms.
SECTION 4.02. NO CONFLICTS; CONSENTS. (a) The execution and delivery
of this Agreement by Seller do not, and the execution and delivery of the Other
Transaction Documents by Seller or the Seller Entities, as applicable, will not,
and the consummation of the transactions contemplated hereby and thereby and
compliance with the terms hereof and thereof will not, conflict with, or result
in any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or result in
the creation of any liens, claims, encumbrances, security interests, options,
charges or restrictions of any kind ("LIENS") upon any of the properties or
assets of the Clairol Entities or the Acquired Assets under, any provision of
(i) the Certificate of Incorporation or By-laws (or the
17
comparable governing instruments) of Seller, any Seller Entity or any Clairol
Entity, (ii) as of the date of this Agreement, any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, agreement or
arrangement to which Seller, any Seller Entity or any Clairol Entity is a party
(in the case of Seller or any Seller Entity, solely to the extent such note,
bond, mortgage, indenture, deed of trust, license, lease, contract, commitment,
agreement or arrangement relates to the Acquired Business) or by which any of
the properties or assets of any Clairol Entity or any Acquired Assets are bound
or (iii) as of the date of this Agreement, any judgment, order or decree, or,
subject to the matters referred to in clauses (i), (ii) and (iii) of paragraph
(b) below, statute, law, ordinance, rule or regulation applicable to Seller, any
Seller Entity or any Clairol Entity (in the case of Seller or any Seller Entity,
solely to the extent such judgment, order, decree, statute, law, ordinance, rule
or regulation relates to the Acquired Business) or the properties or assets of
any Clairol Entity or any Acquired Assets, other than, in the case of clauses
(ii) and (iii) above, any such items that, individually or in the aggregate,
would not be reasonably likely to have a Material Adverse Effect.
(b) No material consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required to be obtained or made by or with respect to Seller, any
Seller Entity or any Clairol Entity in connection with the execution, delivery
and performance of this Agreement, the Other Transaction Documents or the
consummation of the transactions contemplated hereby or thereby other than (i)
compliance with and filings under the HSR Act, the Mexican Merger Regulation,
the Canada Competition Act, the merger control acts in the United Kingdom and
Germany and the Irish Mergers Act, if applicable, (ii) those that may be
required solely by reason of Buyer's or any Buyer Subsidiary's (as opposed to
any other third party's) participation in the transactions contemplated hereby
or by the Other Transaction Documents, (iii) those required to transfer
environmental permits, and (iv) such consents, approvals, licenses, permits,
orders, authorizations, registrations, declarations and filings the absence of
which, or the failure to make or obtain which, individually or in the aggregate,
would not be reasonably likely to have a Material Adverse Effect.
SECTION 4.03. THE CLAIROL SHARES AND THE INTERNATIONAL SHARES. (a)
Seller has good and valid title
18
to the Clairol Shares, free and clear of any Liens. Assuming Buyer has the
requisite power and authority to be the lawful owner of the Clairol Shares, upon
delivery to Buyer at the Closing of certificates representing the Clairol
Shares, duly endorsed by Seller for transfer to Buyer, and upon Seller's receipt
of the Closing Date Amount (including any interest payable on the Purchase Price
pursuant to Section 1.01(a)), good and valid title to the Clairol Shares will
pass to Buyer, free and clear of any Liens, other than those arising from acts
of Buyer or its Affiliates. Other than this Agreement, the Clairol Shares are
not subject to any voting trust agreement or other contract, agreement,
arrangement, commitment or understanding, including any such agreement,
arrangement, preemptive rights, commitment or understanding restricting or
otherwise relating to the voting, dividend rights or disposition of the Clairol
Shares.
(b) Each International Stock Selling Entity has good and valid title
to the International Shares corresponding to its applicable International
Clairol Subsidiary, free and clear of any Liens. Assuming Buyer or its
designated Buyer Subsidiary has the requisite power and authority to be the
lawful owner of such International Shares, upon delivery to Buyer at the Closing
of certificates representing such International Shares, duly endorsed by the
applicable International Stock Selling Entity for transfer to Buyer or such
Buyer Subsidiary, or other appropriate instruments sufficient to evidence the
transfer of the International Shares under the Applicable Laws of the relevant
jurisdiction, and upon Seller's receipt of the Closing Date Amount (including
any interest payable on the Purchase Price pursuant to Section 1.01(a)), good
and valid title to such International Shares will pass to Buyer or such Buyer
Subsidiary, free and clear of any Liens, other than those arising from acts of
Buyer or its Affiliates. Other than this Agreement, the International Shares are
not subject to any voting trust agreement or other contract, agreement,
arrangement, preemptive rights, commitment or understanding, including any such
agreement, arrangement, commitment or understanding restricting or otherwise
relat ing to the voting, dividend rights or disposition of the International
Shares.
SECTION 4.04. ORGANIZATION AND STANDING; BOOKS AND RECORDS. Each of
the Company and each of the Clairol Subsidiaries is an entity duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization. Each of the Company and each of the Clairol Subsidiaries has full
corporate power and authority and
19
possesses all governmental franchises, licenses, permits, authorizations and
approvals necessary to enable it to own, lease or otherwise hold its properties
and assets and to carry on its business as presently conducted, other than such
franchises, licenses, permits, authorizations and approvals the lack of which,
individually or in the aggre gate, would not be reasonably likely to have a
Material Adverse Effect. Each of the Company and each of the Clairol
Subsidiaries is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction in which the conduct or nature of its business
or the ownership, leasing or holding of its properties makes such qualification
necessary, except such jurisdictions where the failure to be so qualified or in
good standing, individually or in the aggregate, would not be reasonably likely
to have a Material Adverse Effect. Seller has prior to the Closing Date
delivered to Buyer true and complete copies of the organizational documents,
each as amended to the date hereof, of the Company, and the Clairol
Subsidiaries.
SECTION 4.05. CAPITAL STOCK OF THE COMPANY. The authorized capital
stock of the Company consists of 200,000 shares of common stock, $10 par value
per share. Of such 200,000 duly authorized shares, 100,000 shares (constituting
the Clairol Shares) are validly issued and outstanding, fully paid and
nonassessable. Seller is the record and beneficial owner of the Clairol Shares.
Except for the Clairol Shares, there are no shares of capital stock or other
equity securities of the Company outstanding. The Clairol Shares have not been
issued in violation of, and are not subject to, any preemptive, subscription or
similar rights under any provision of applicable law, the Certificate of
Incorporation or By-laws of the Company, any contract, agreement or instrument
to which the Company is subject, bound or a party or otherwise. There are no
outstanding warrants, options, rights, "phantom" stock rights, agreements,
convertible or exchangeable securities or other commitments (other than this
Agreement) (a) pursuant to which Seller or the Company is or may become
obligated to issue, sell, purchase, return or redeem any shares of capital stock
or other securities of the Company or (b) that give any person the right to
receive any benefits or rights similar to any rights enjoyed by or accruing to
the holders of shares of capital stock of the Company. There are no equity
securities of the Company reserved for issuance for any purpose. There are no
outstanding bonds, debentures, notes or other indebtedness having the right to
vote on any matters on which stockholders of the Company may vote.
20
SECTION 4.06. CLAIROL SUBSIDIARIES; EQUITY INTERESTS. (a) Section
4.06(a) of the Seller Disclosure Schedule lists, for each company that is a
subsidiary of the Company as of the date of this Agreement (the "U.S. CLAIROL
SUBSIDIARIES"), its jurisdiction of organization and its authorized and
outstanding capital stock. All the outstanding shares of capital stock of each
U.S. Clairol Subsidiary have been validly issued and are fully paid and
nonassessable and are as of the date of this Agreement owned by the Company or
by an Affiliate of the Company or by the Company and an Affiliate of the
Company, free and clear of all Liens.
(b) Section 4.06(b) of the Seller Disclosure Schedule lists, for
each International Clairol Subsidiary, its jurisdiction of organization and its
authorized and outstanding capital stock. All of the outstanding shares of
capital stock of each International Clairol Subsidiary have been validly issued
and are fully paid and nonassessable and, except as set forth in Section 4.06(b)
of the Seller Disclosure Schedule, are as of the date of this Agreement owned by
the applicable International Stock Selling Entity or International Stock Selling
Entities, free and clear of all Liens.
(c) None of the outstanding shares of capital stock of any U.S.
Clairol Subsidiary or any International Clairol Subsidiary have been issued in
violation of, and is subject to, any preemptive, subscription or similar rights
under any provision of Applicable Law, the Certificate of Incorporation or
By-laws of such Subsidiary, any contract, agreement or instrument to which such
Subsidiary is subject, bound or a party or otherwise. There are no outstanding
warrants, options, rights, "phantom" stock rights, agreements, convertible or
exchangeable securities or other commitments (other than this Agreement) (i)
pursuant to which Seller, the applicable Clairol Subsidiary or any such
Subsidiary is or may become obligated to issue, sell, purchase, return or redeem
any shares of capital stock or other securities of U.S. Clairol Subsidiaries or
the International Clairol Subsidiaries or (ii) that give any person the right to
receive any benefits or rights similar to any rights enjoyed by or accruing to
the holders of shares of capital stock of the applicable Clairol Subsidiaries or
any such Subsidiaries. There are no equity securities of any U.S. Clairol
Subsidiary or International Clairol Subsidiary reserved for issuance for any
purpose. There are no outstanding bonds, debentures, notes or other indebtedness
having the right to vote on any matters on
21
which stockholders of any U.S. Clairol Subsidiary or International Clairol
Subsidiary may vote.
(d) As of the date of this Agreement, except for the Company's
interests in the U.S. Clairol Subsidiaries, none of the Clairol Entities as of
the date of this Agreement owns, directly or indirectly, and the Acquired Assets
do not include any capital stock, membership interest, partnership interest,
joint venture interest or other equity interest with a net book value as of the
date of this Agreement in excess of $5,000,000 in any person.
SECTION 4.07. FINANCIAL STATEMENTS. (a) Section 4.07 (a) of the
Seller Disclosure Schedule sets forth (i) the audited combined statements of
assets to be acquired and liabilities to be assumed as of December 31, 2000, of
Clairol (the "CLAIROL BALANCE SHEET") and the audited combined statement of
earnings before taxes of Clairol for the year ended December 31, 2000, together
with the notes to such financial statements, (ii) the audited combined statement
of assets to be acquired and liabilities to be assumed as of December 31, 1999,
of Clairol, and the audited statement of earnings before taxes of Clairol for
the years ended December 31, 1998 and 1999, together with the notes to such
financial statements (the financial statements described in clauses (i) and (ii)
above, together with the notes to such financial statements, collectively, the
"FINANCIAL STATEMENTS").
(b) Section 4.07(b) of the Seller Disclosure Schedule sets forth (i)
the unaudited Boclaro Working Capital Statement as of December 31, 2000 (the
"BOCLARO WORKING CAPITAL STATEMENT") and (ii) the unaudited CMO Working Capital
Statement as of December 31, 2000 (the "CMO WORKING CAPITAL STATEMENT") (the
statements in (i) and (ii) collectively, the "ADDITIONAL FINANCIAL STATEMENTS").
(c) The Financial Statements do not include any Other U.S. Assumed
Liabilities related to Boclaro, Inc. or any CMO Assumed Liabilities. The
Financial Statements have been prepared in conformity with GAAP consistently
applied (except in each case as described in the notes thereto) and on a basis
that fairly presents in all material respects the combined financial condition
and results of operations of Clairol as of the respective dates thereof and for
the respective periods indicated in conformity with the basis of presentation
described in the notes to the Financial Statements. The Additional Financial
Statements have been prepared in good faith in substantial conformity with the
Seller Accounting Policies, in each case consistently applied. The Clairol
Balance Sheet, the Boclaro Working Capital Statement and the CMO Working Capital
Statement, collectively, fairly present in all material respects the combined
financial condition of the Acquired Business as of December 31, 2000 in
conformity with the
22
basis of presentation described in the notes to the Financial Statements.
SECTION 4.08. TAXES. (a) For purposes of this Agreement, (i) "TAX"
or "TAXES" shall mean all Federal, state, local and foreign taxes and similar
assessments, including all interest, penalties and additions imposed with
respect to such amounts; (ii) "PRE-CLOSING TAX PERIOD" shall mean all taxable
periods ending on or before the Closing Date and the portion ending on the
Closing Date of any taxable period that includes (but does not end on) the
Closing Date; and (iii) "CODE" shall mean the U.S. Internal Revenue Code of
1986, as amended.
(b) (i) All material Tax returns, reports and forms required to be
filed by the Code or by applicable state, local or foreign Tax laws by or on
behalf of the Clairol Entities or with respect to the Acquired Assets have been
duly filed in a timely manner (within any applicable extension periods), and
such returns, reports and forms are true, complete and correct in all material
respects, (ii) all Taxes shown to be due on such returns, reports and forms and
all material Taxes otherwise due and payable have been timely paid in full or
will be timely paid in full by the due date thereof, and (iii) no material Tax
liens have been filed with respect to the assets of the Clairol Entities or with
respect to the Acquired Assets and no material claims are being asserted in
writing with respect to any Taxes of the Clairol Entities or with respect to the
Acquired Assets.
(c) (i) None of the Clairol Entities has filed a consent under
Section 341(f) of the Code concerning collapsible corporations, (ii) no property
of the Clairol Entities and none of the Acquired Assets is "tax exempt use
property" within the meaning of Section 168(h) of the Code, and (iii) none of
the Clairol Entities is a party to any lease, and none of the Acquired Assets
are subject to any lease, made pursuant to Section 168(f)(8) of the Internal
Revenue Code of 1954.
(d) None of the Clairol Entities has been a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. None of the Acquired Assets constitutes a "United States real property
interest" within the meaning of Section 897(c)(1) of the Code.
23
(e) Seller is not a "foreign person" within the meaning of Section
1445(f)(3) of the Code.
(f) None of the Clairol Entities has entered into any compensatory
agreements with respect to the performance of services that would, as a result
of the transactions contemplated by this Agreement, reasonably be likely to
result in a nondeductible expense pursuant to Section 280G of the Code or an
excise tax pursuant to Section 4999 of the Code to the recipient of a payment
under any such compensatory agreement as a result of the transactions
contemplated by this Agreement.
(g) None of the Clairol Entities has participated in an
international boycott within the meaning of Section 999 of the Code.
(h) None of the Clairol Entities has been a member of an affiliated
group filing consolidated returns other than the Seller's group.
(i) As of the Closing Date, none of the Clairol Entities will be a
party to any written Tax sharing agreement or will be liable for any material
Taxes of any person under any contract, in each case except for any such
agreement or contract with, between or among any Clairol Entity.
(j) Except as set forth in Section 4.08(j) of the Seller Disclosure
Schedule, none of the Clairol Entities has made an election to be treated as a
partnership or as an entity disregarded from its single owner for U.S. federal
income tax purposes pursuant to Treasury Regulation Section 301.7701-3.
SECTION 4.09. ASSETS OTHER THAN REAL PROPERTY INTERESTS. (a) The
Clairol Entities have, or as of the Closing Date will have, good and valid title
to all material assets reflected on the Clairol Balance Sheet or thereafter
acquired (other than the Acquired Assets), except those sold or otherwise
disposed of since the date of the Clairol Balance Sheet in the ordinary course
of business consistent with past practice and not in violation of this
Agreement, in each case free and clear of all Liens, except Permitted Liens.
(b) Seller and the Asset Selling Entities have, or as of the Closing
Date will have, good and valid title to all material Acquired Assets reflected
on the Clairol Balance Sheet or thereafter acquired, except those sold or
24
otherwise disposed of since the date of the Clairol Balance Sheet in the
ordinary course of business consistent with past practice and not in violation
of this Agreement, in each case free and clear of all Liens, except Permitted
Liens.
(d) This Section 4.09 does not relate to real property or interests
in real property, Intellectual Property or Contracts, such items being the
subjects of Section 4.10, Section 4.11 and Section 4.12, respectively.
SECTION 4.10. TITLE TO REAL PROPERTY. (a) Section 4.10(a)(i) of the
Seller Disclosure Schedule sets forth a list of all real property and interests
in real property owned in fee by the Clairol Entities, Seller and the Seller
Entities (in the case of Seller and the Seller Entities, solely to the extent
such property and interests are included in the Acquired Assets) (individually,
an "OWNED PROPERTY"). Section 4.10(a)(ii) of the Seller Disclosure Schedule sets
forth a complete list of all real property and interests in real property leased
by the Clairol Entities, Seller and the Seller Entities (in the case of Seller
and the Seller Entities, solely to the extent such property and interests are
included in the Acquired Assets) (individually, a "LEASED PROPERTY"). The
Clairol Entities, Seller and the Seller Entities, as applicable, have good and
insurable fee title to all Owned Property and have good and valid title to the
leasehold estates in all Leased Property (an Owned Property or Leased Property
being sometimes referred to herein, individually, as a "COMPANY PROPERTY"), in
each case free and clear of all mortgages, Liens, leases, assignments,
subleases, easements, covenants, rights-of-way and other similar restrictions of
any nature whatsoever, except (1) such as are set forth in Section 4.10 of the
Seller Disclosure Schedule; (2) leases, subleases and similar agreements set
forth in Section 4.12 of the Seller Disclosure Schedule; (3) Permitted Liens;
(4) easements, covenants, rights-of-way and other similar restrictions of
record; (5) (A) zoning, building and other similar restrictions, (B) mortgages,
Liens, easements, covenants, rights-of-way and other similar restrictions that
have been placed by any developer, landlord or other third party on property
over which the Clairol Entities, Seller or the Asset Selling Entities, as
applicable, have easement rights or on any Company Property and subordination or
similar agreements relating thereto, and (C) unrecorded easements, covenants,
rights-of-way and other similar restrictions, none of which items set forth in
clause (5), individually or in the aggregate, materially impairs the continued
use and
25
operation of the property to which they relate in the Acquired Business.
(b) Section 4.10(b) of the Seller Disclosure Schedule sets forth a
list of all material real property premises occupied by the Acquired Business
other than any Company Property.
SECTION 4.11. INTELLECTUAL PROPERTY. (a) Section 4.11(a) of the
Seller Disclosure Schedule sets forth a list of all material registered and
unregistered trademarks and service marks, trade names and domain names and
registered copyrights, owned or licensed and used or held for use by the Seller
and its Affiliates with respect to the Acquired Business (the "INTELLECTUAL
PROPERTY"). With respect to trademarks, registered and pending, Section 4.11(a)
of the Seller Disclosure Schedule sets forth a list of all jurisdictions in
which such trademarks are registered or applied for and all the respective
registration and application numbers. Seller, the Asset Selling Entities and the
Clairol Entities own, or as of the Closing Date will own, free and clear of all
Liens (except as set forth in Section 4.16(a) of the Seller Disclosure Schedule
and except to the extent the Intellectual Property may be licensed from third
parties, as specified on Section 4.11(c) of the Seller Disclosure Schedule), all
the Intellectual Property and the consummation of the transactions contemplated
hereby will not conflict with, alter or impair any such rights in any material
respect. The Intellectual Property contains all material registered and
unregistered trademarks and service marks, trade names, domain names, including
pending intent-to-use applications, and registered copyrights necessary for the
conduct of the Acquired Business. No claims are pending or, to the knowledge of
Seller, threatened in writing, as of the date of this Agreement, against Seller
or any of its Affiliates by any person with respect to the ownership, validity,
enforceability, effectiveness or use of any Intellectual Property.
(b) Section 4.11(b) of the Seller Disclosure Schedule sets forth a
list of all material patents owned, used, filed by or licensed to Seller and its
Affiliates with respect to the Acquired Business (the "Patents"). The Company
has the right (or will have the right as of the Closing Date) to use all the
Patents and all material processes, specifications and know-how (including trade
secrets and proprietary knowledge to the extent existing) necessary for the
conduct of the Acquired Business (collectively, the "OTHER INTELLECTUAL
PROPERTY" and,
26
together with the Intellectual Property, the "CLAIROL INTELLECTUAL PROPERTY")
without payment to any other person (except to the extent the Other Intellectual
Property may be licensed from third parties, as specified on Section 4.11(c) of
the Seller Disclosure Schedule), and the consummation of the transactions
contemplated hereby will not conflict with, alter or impair any such rights in
any material respect. To the knowledge of Seller, there are no claims of others
or Liens with respect to the Other Intellectual Property that conflict with or
prohibit the Company's use of the Other Intellectual Property. No claims are
pending or, to the knowledge of Seller, threatened, as of the date of this
Agreement, against Seller or its Affiliates by any person with respect to the
ownership, validity, enforceability, effectiveness or the use by the Company of
any Other Intellectual Property.
(c) None of Seller, the Seller Entities or the Clairol Entities has
granted any material options, licenses or agreements relating to Clairol
Intellectual Property or the marketing or distribution thereof, except
non-exclusive implied licenses to end-users in the ordinary course of business.
None of Seller, the Seller Entities or the Clairol Entities as of the date
hereof is bound by or a party to any material options, licenses or agreements of
any kind relating to the intellectual property of any other person (in the case
of Seller and the Seller Entities, solely to the extent relating to the Acquired
Business), except for agreements relating to computer software licensed to
Seller or its Affiliates in the ordinary course of business.
SECTION 4.12. CONTRACTS. (a) As of the date of this Agreement,
except as set forth in Section 4.12(a) of the Seller Disclosure Schedule, no
contract that constitutes an Acquired Asset or an Assumed Liability is, and none
of the Clairol Entities is a party to, any of the following:
(i) an employment agreement or employment contract that has an
aggregate future liability in excess of $250,000 and is not terminable by
Seller, an Asset Selling Entity or a Clairol Entity, as applicable, by
notice of not more than 90 days for a cost of less than $250,000
(excluding, for this purpose, any such agreements or contracts, express or
implied, oral or written, which are required to be provided or are imposed
under applicable law, practice, code, industry- wide collective or social
plan);
(ii) an employee collective bargaining agreement;
27
(iii) a covenant not to compete (other than pursuant to any radius 2
restriction contained in any lease, reciprocal easement or development,
construction, operating or similar agreement) or other covenant
restricting the development, manufacture, marketing or distribution of the
products and services of the Acquired Business, in each case that
materially impairs the operation of the Acquired Business;
(iv) an agreement, contract or other arrangement with (1) Seller or
any Affiliate of Seller (other than a Clairol Entity or an Employee) or
(2) any officer, director or employee of Seller or any Affiliate of Seller
(other than employment agreements covered by clause (i) above); PROVIDED,
HOWEVER, that the foregoing shall be deemed not to include any
Transitional Services Agreement and any agreement, contract or other
arrangement that will expire or be terminated at or prior to Closing;
(v) a lease, sublease or similar agreement with any person under
which Seller, an Asset Selling Entity or a Clairol Entity, as applicable,
is a lessor or sublessor of, or makes available for use, to any person or
any Company Property;
(vi) a lease or similar agreement with any person under which (1)
Seller, an Asset Selling Entity or a Clairol Entity, as applicable, is
lessee of, or holds or uses, any machinery, equipment, vehicle or other
tangible personal property owned by any person or (2) Seller, an Asset
Selling Entity or a Clairol Entity, as applicable, is a lessor or
sublessor of, or makes available for use by any person, any tangible
personal property owned or leased by Seller or such Asset Selling Entity
or Clairol Entity, as applicable, in any such case which has an aggregate
future liability or receivable, as the case may be, in excess of
$1,000,000 and is not terminable by Seller or such Asset Selling Entity or
Clairol Entity, as applicable, by notice of not more than 180 days for a
cost of less than $1,000,000;
(vii) (1) a continuing contract for the future pur chase of
materials, supplies or equipment (other than purchase contracts and orders
for inventory in the ordinary course of business consistent with past
practice); (2) a management, service, consulting or other similar type of
contract (other than contracts for services in the ordinary course of
business) or
28
(3) an advertising agreement or arrangement, in any such case which has an
aggregate future liability to any person in excess of $1,000,000 and is
not terminable by Seller, an Asset Selling Entity or a Clairol Entity, as
applicable, by notice of not more than 180 days for a cost of less than
$1,000,000;
(viii) a material license, option or other agreement relating in
whole or in part to the Clairol Intellectual Property (including any
license or other agreement under which Seller, an Asset Selling Entity or
a Clairol Entity, as applicable, is licensee or licensor of any such
Clairol Intellectual Property);
(ix) an agreement, contract or other instrument under which Seller,
an Asset Selling Entity or a Clairol Entity, as applicable, has borrowed
any money from, or issued any note, bond, debenture or other evidence of
indebtedness to, any person or any other note, bond, debenture or other
evidence of indebtedness issued to any person in any such case which,
individually, is in excess of $1,000,000; PROVIDED, HOWEVER, that the
foregoing shall be deemed not to include Transitional Services Agreements
and any agreement, contract or other arrangement that will expire or be
terminated at or prior to Closing;
(x) an agreement, contract or other instrument (including so-called
take-or-pay or keepwell agreements) under which (1) any person has
directly or indirectly guaranteed indebtedness, liabilities or obligations
of Seller, an Asset Selling Entity or a Clairol Entity, as applicable, or
(2) Seller, an Asset Selling Entity or a Clairol Entity, as applicable,
has directly or indirectly guaranteed indebtedness, liabilities or
obligations of any person (in each case other than endorsements for the
purpose of collection in the ordinary course of business), in any such
case which, individually, is in excess of $1,000,000, PROVIDED, HOWEVER,
that the foregoing shall be deemed not to include any Transitional
Services Agreement and any agreement, contract or other arrangement that
will expire or be terminated at or prior to Closing;
(xi) an agreement, contract or other instrument under which Seller,
an Asset Selling Entity or a Clairol Entity, as applicable, has, directly
or indirectly, made any advance, loan, extension of credit or capital
contribution to, or other investment in, any person, in any such case
which, individually, is in
29
excess of $1,000,000; PROVIDED, HOWEVER, that the foregoing shall be
deemed not to include Transitional Services Agreements and any agreement,
contract or other arrangement that will expire or be terminated at or
prior to Closing;
(xii) a material mortgage, pledge, security agree ment, deed of
trust or other instrument granting a Lien upon any Company Property, which
Lien is not set forth in Section 4.10 of the Seller Disclosure Schedule;
(xiii) an agreement or instrument providing for indemnification of
any person with respect to material liabilities relating to any former
business of Seller, an Asset Selling Entity or a Clairol Entity, as
applicable, or any predecessor person; or
(xiv) another agreement, contract, lease, license, commitment or
instrument to which Seller, an Asset Selling Entity or a Clairol Entity,
as applicable, is a party or by or to which it or any of its assets or
business is bound or subject which has an aggregate future liability to
any person in excess of $1,000,000 and is not terminable by Seller or such
Asset Selling Entity or Clairol Entity, as applicable, by notice of not
more than 180 days for a cost of less than $1,000,000.
Except as set forth in Section 4.12(a) of the Seller Disclosure Schedule, as of
the date of this Agreement, each agreement, contract, lease, license, commitment
or instrument of Seller, an Asset Selling Entity and a Clairol Entity listed in
Section 4.12(a) of the Seller Disclosure Schedule (collectively, the
"CONTRACTS") is valid, binding and in full force and effect and, to the
knowledge of Seller, is enforceable by Seller or such Clairol Entity or Asset
Selling Entity, as applicable, in accordance with its terms subject to
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws affecting creditors' rights generally, general
principles of equity and the discretion of courts in granting equitable remedies
and except to the extent that the failure of a Contract to be valid, binding and
in full force and effect would not be reasonably likely to have a Material
Adverse Effect. Each of Seller, the Asset Selling Entities and the Clairol
Entities, as applicable, has performed all material obligations required to be
performed by it to the date of this Agreement under the Contracts and, as of the
date of this Agreement, it is not (with or without the lapse of time or the
giving of notice, or both) in
30
breach or default in any material respect thereunder and, to the knowledge of
Seller, no other party to any of the Contracts, as of the date of this
Agreement, is (with or without the lapse of time or the giving of notice, or
both) in breach or default in any material respect thereunder, except to the
extent that such breach or default would not be reasonably likely to have a
Material Adverse Effect.
(b) As of the date of this Agreement, except as set forth in Section
4.12(b) of the Seller Disclosure Schedule, no contract related to the Acquired
Business that is not an Acquired Asset, Assumed Liability or a contract to which
a Clairol Entity is a party is any of the following:
(i) an employment agreement or employment contract for an Employee
that has an aggregate future liability in excess of $250,000 and is not
terminable by a Seller or one of its Affiliates, as applicable, by notice
of not more than 90 days for a cost of less than $250,000 (excluding, for
this purpose, any such agreements or contracts, express or implied, oral
or written, which are required to be provided or are imposed under
applicable law, practice, code, industry-wide collective or social plan);
(ii) an employee collective bargaining agreement;
(iii) a covenant not to compete (other than pursuant to any radius
restriction contained in any lease, reciprocal easement or development,
construction, operating or similar agreement) or other covenant
restricting the development, manufacture, marketing or distribution of the
products and services of the Acquired Business, in each case that
materially impairs the operation of the Acquired Business;
(iv) an agreement, contract or other arrangement with (1) Seller or
any Affiliate of Seller (other than a Clairol Entity or an Employee) or
(2) any officer, director or employee of Seller or any Affiliate of Seller
(other than employment agreements covered by clause (i) above); PROVIDED,
HOWEVER, that the foregoing shall be deemed not to include any
Transitional Services Agreement and any agreement, contract or other
arrangement that will expire or be terminated at or prior to Closing;
(v) a lease, sublease or similar agreement with any person under
which Seller or any Affiliate of Seller, as applicable, is a lessor or
sublessor of, or
31
makes available for use, to any person, any Company Property;
(vi) a lease or similar agreement with any person under which (1)
Seller or any Affiliate of Seller, as applicable, is lessee of, or holds
or uses, any machinery, equipment, vehicle or other tangible personal
property owned by any person or (2) Seller or any Affiliate of Seller, as
applicable, is a lessor or sublessor of, or makes available for use by any
person, any tangible personal property owned or leased by Seller or such
Affiliate of Seller, as applicable, in any such case which has an
aggregate future liability or receivable, as the case may be, in excess of
$1,000,000 and is not terminable by Seller or such Affiliate of Seller, as
applicable, by notice of not more than 180 days for a cost of less than
$1,000,000;
(vii) a (1) continuing contract for the future pur chase of
materials, supplies or equipment (other than purchase contracts and orders
for inventory in the ordinary course of business consistent with past
practice); (2) management, service, consulting or other similar type of
contract (other than contracts for services in the ordinary course of
business) or (3) advertising agreement or arrangement, in any such case
which has an aggregate future liability to any person in excess of
$1,000,000 and is not terminable by Seller or an Affiliate of Seller, as
applicable, by notice of not more than 180 days for a cost of less than
$1,000,000;
(viii) a material license, option or other agreement relating in
whole or in part to the Clairol Intellectual Property (including any
license or other agreement under which Seller or any Affiliate of Seller
is licensee or licensor of any such Clairol Intellectual Property);
(ix) an agreement, contract or other instrument under which Seller
or any Affiliate of Seller, as applicable, has borrowed any money from, or
issued any note, bond, debenture or other evidence of indebtedness to, any
person or any other note, bond, debenture or other evidence of
indebtedness issued to any person in any such case which, individually, is
in excess of $1,000,000; PROVIDED, HOWEVER, that the foregoing shall be
deemed not to include any Transitional Services Agreement and any
agreement, contract or other
32
arrangement that will expire or be terminated at or prior to Closing;
(x) an agreement, contract or other instrument (including so-called
take-or-pay or keepwell agreements) under which (1) any person has
directly or indirectly guaranteed indebtedness, liabilities or obligations
of Seller or any Affiliate of Seller, as applicable, (2) Seller or any
Affiliate of Seller, as applicable, has directly or indirectly guaranteed
indebtedness, liabilities or obligations of any person (in each case other
than endorsements for the purpose of collection in the ordinary course of
business), in any such case which, individually, is in excess of
$1,000,000; PROVIDED, HOWEVER, that the foregoing shall be deemed not to
include any Transitional Services Agreement and any agreement, contract or
other arrangement that will expire or be terminated at or prior to
Closing;
(xi) an agreement, contract or other instrument under which Seller
or any Affiliate of Seller, as applicable, has, directly or indirectly,
made any advance, loan, extension of credit or capital contribution to, or
other investment in, any person, in any such case which, individually, is
in excess of $1,000,000; PROVIDED, HOWEVER, that the foregoing shall be
deemed not to include Transitional Services Agreements and any agreement,
contract or other arrangement that will expire or be terminated at or
prior to Closing;
(xii) another agreement, contract, lease, license, commitment or
instrument to which Seller or any Affiliate of Seller, as applicable, is a
party or by or to which it or any of its assets or business is bound or
subject which has an aggregate future liability to any person in excess of
$1,000,000 and is not terminable by Seller or such Affiliate of Seller, as
applicable, by notice of not more than 180 days for a cost of less than
$1,000,000.
SECTION 4.13. LITIGATION. Section 4.13 of the Seller Disclosure
Schedule sets forth a list, as of the date of this Agreement, of all pending
lawsuits or claims, with respect to which Seller, any Seller Entity or any
Clairol Entity has been contacted in writing by the plaintiff or claimant or by
counsel for the plaintiff or claimant, which relate to the Acquired Business and
which (a) involve a claim against Seller, any Seller Entity or any Clairol
33
Entity, as applicable, and which involve a specified amount of, or unspecified
amount which would reasonably be likely to result in a liability of, more than
$1,000,000, (b) seek any material injunctive relief or (c) seek any legal
restraint on or prohibition against the transactions contemplated by this
Agreement. To the knowledge of Seller, as of the date of this Agreement, none of
Seller, the Seller Entities or the Clairol Entities is a party or subject to or
in default under any material judgment, order, injunction or decree of any
Governmental Entity or arbitration tribunal applicable to the Acquired Business.
This Section 4.13 does not relate to matters with respect to environmental
matters, which are the subject of Section 4.16(b), or to matters with respect to
employee benefits or ERISA matters, which are the subject of Section 4.14.
SECTION 4.14. BENEFIT PLANS. The representations made herein in
Sections 4.14(a)-(h) below relate solely to plans and arrangements maintained by
Seller, the Seller Entities or the Clairol Entities for Employees (as defined in
Section 9.01(a)) primarily based in the United States.
(a) Section 4.14(a) of the Seller Disclosure Schedule contains a
list of all "EMPLOYEE PENSION BENEFIT PLANS" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(sometimes referred to herein as "PENSION PLANS"), "EMPLOYEE WELFARE BENEFIT
PLANS" (as defined in Section 3(1) of ERISA), bonus, stock option, stock
purchase, deferred compensation plans or arrangements and other employee fringe
benefit plans (all the foregoing being herein called "BENEFIT PLANS")
maintained, or contributed to, by Seller or the Company or the U.S. Clairol
Subsidiaries for the benefit of any officers or employees of the Company or the
U.S. Clairol Subsidiaries. Seller has made available to Buyer true, complete and
correct copies of (i) each Benefit Plan (or, in the case of any unwritten
Benefit Plans, descriptions thereof), (ii) the most recent annual report on Form
5500 filed with the Internal Revenue Service with respect to each Benefit Plan
(if any such report was required) and (iii) the most recent summary plan
description for each Benefit Plan for which such a summary plan description is
required.
(b) Except for matters that would not be reasonably likely to have a
Material Adverse Effect or as disclosed in writing to Buyer, (i) each Benefit
Plan has been administered in all material respects in accordance with its
terms; (ii) the Company or the U.S. Clairol Subsidiaries and all the Benefit
Plans are in compliance in
34
all material respects with the applicable provisions of ERISA and the Code; and
(iii) there are no material lawsuits, actions, termination proceedings or other
proceedings pending, or, to the knowledge of Seller, threatened against or
involving any Benefit Plan and, to the knowledge of Seller, there are no
investigations by any Governmental Entity or other claims (except claims for
benefits payable in the normal operation of the Benefit Plans) pending or
threatened against or involving any Benefit Plan or asserting any rights to
benefits under any Benefit Plan.
(c) Except for matters that would not be reasonably likely to have a
Material Adverse Effect, (i) all contributions to, and payments from, the
Benefit Plans that have been required to be made in accordance with the Benefit
Plans and, when applicable, Section 302 of ERISA or Section 412 of the Code,
have been timely made, (ii) there has been no application for or waiver of the
minimum funding standards imposed by Section 412 of the Code with respect to any
Pension Plan and (iii) no Pension Plan has an "ACCUMULATED FUNDING DEFICIENCY"
within the meaning of Section 412(a) of the Code as of the most recent plan
year.
(d) All Pension Plans that are intended to qualify under Section
401(c) of the Code have been the subject of determination letters from the
Internal Revenue Service to the effect that such Pension Plans are qualified and
exempt from Federal income taxes under Sections 401(a) and 501(a), respectively,
of the Code, and no such determination letter has been revoked nor, to the
knowledge of Seller, has revocation been threatened, nor has any such Pension
Plan been amended since the date of its most recent determination letter or
application therefor in any respect that is reasonably expected to adversely
affect its qualification or materially increase its cost.
(e) Except for matters that would not be reasonably likely to have a
Material Adverse Effect, (i) to Seller's knowledge, no "PROHIBITED TRANSACTION"
(as defined in Section 4975 of the Code or Section 406 of ERISA) has occurred
that involves the assets of any Benefit Plan and that is reasonably expected to
subject the Company or the U.S. Clairol Subsidiaries or any of its employees, or
a trustee, administrator or other fiduciary of any trusts created under any
Benefit Plan to a material tax or penalty on prohibited transactions imposed by
Section 4975 of ERISA or the sanctions imposed under Title I of ERISA; (ii) none
of the Pension Plans has been terminated nor have there been any "REPORTABLE
EVENTS" (as defined in Section 4043 of ERISA
35
and the regulations thereunder) with respect thereto that are required to be
reported to the Pension Benefit Guaranty Corporation by law or regulation; and
(iii) to the knowledge of Seller, neither Seller nor any trustee, administrator
or other fiduciary of any Benefit Plan nor any agent of any of the foregoing has
engaged in any transaction or acted or failed to act in a manner that is
reasonably expected to subject the Company or the U.S. Clairol Subsidiaries to
any material liability for breach of fiduciary duty under ERISA or any other
applicable law.
(f) Except for amounts that would not be reasonably likely to have a
Material Adverse Effect, with respect to any Pension Plan subject to Title IV of
ERISA (including for the purposes of this Section 4.14(f) any Pension Plan
maintained or contributed to by Seller or any other person required to be
treated as a single employer with Seller under Section 414 of the Code), Seller
has not incurred any material liability to such Pension Plan or to the Pension
Benefit Guaranty Corporation, other than for the payment of contributions or
premiums. Seller has delivered or made available to Buyer the most recent
actuarial report or valuation with respect to each Pension Plan that is a
"DEFINED BENEFIT PENSION PLAN" (as defined in Section 3(35) of ERISA.
(g) At no time within the five years preceding the Closing Date has
Seller or the Company or the U.S. Clairol Subsidiaries been required to
contribute to any "MULTIEMPLOYER PLAN" (as defined in Section 4001(a)(3) of
ERISA) for the benefit of any employees of the Company or the U.S. Clairol
Subsidiaries or incurred any withdrawal liability, within the meaning of Section
4201 of ERISA, with respect to any multiemployer plan for the benefit of
employees of the Company or the U.S. Clairol Subsidiaries, which liability has
not been fully paid as of the date hereof, or announced an intention to
withdraw, but not yet completed such withdrawal, from any such multiemployer
plan.
(h) Except for matters that would not be reasonably likely to have a
Material Adverse Effect, each Benefit Plan that is a group health plan, as such
term is defined in Section 5000(b)(1) of the Code, complies in all material
respects with the applicable requirements of Section 4980B(f) of the Code.
(i) Except for matters that would not be reasonably likely to have a
Material Adverse Effect or as disclosed in writing to Buyer, to the knowledge of
Seller, all plans and arrangements maintained outside of the United
36
States for the benefit of Employees are in material compliance with all
applicable laws of the relevant jurisdiction in which such plans or arrangements
are maintained. Section 4.14(i) of the Seller Disclosure Schedule contains a
list of the material employee benefit plans maintained by Seller, the Seller
Entities or the Clairol Entities for Employees primarily based in countries and
territories other than the United States.
SECTION 4.15. ABSENCE OF CHANGES OR EVENTS. (a) As of the date of
this Agreement, since December 31, 2000, there has not been any material adverse
change in the business, financial condition or results of operations of the
Acquired Business other than changes relating to United States or foreign
economies in general or the Acquired Business's industries in general and not
specifically relating to the Acquired Business. Buyer acknowledges that there
has been and will continue to be a disruption to the Acquired Business as a
result of the possibility of a sale by Seller of the Acquired Business to
Buyer(and there may be further disruption to the Acquired Business as a result
of the execution and public announcement of this Agreement and the Other
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby) (any such disruption, a "BUSINESS DISRUPTION"), and Buyer
agrees that any such Business Disruption does not and shall not constitute a
breach of this Section 4.15.
(b) As of the date of this Agreement, except as contemplated by this
Agreement and the Other Transaction Documents (including the Seller Disclosure
Schedule), including actions taken in furtherance of the separation of the
Acquired Business from Seller and its Affiliates, since December 31, 2000,
Seller has caused the Acquired Business to be conducted in the ordinary course
and none of Seller, the Seller Entities or the Clairol Entities has taken any
action that, if taken after the date of this Agreement, would constitute a
breach of any of the covenants set forth in Section 5.02.
SECTION 4.16. COMPLIANCE WITH APPLICABLE LAWS. As of the date of
this Agreement:
(a) Except as previously disclosed by Seller to Buyer in writing,
Seller, the Seller Entities and the Clairol Entities are in compliance with all
applicable statutes, laws, ordinances, rules, orders and regulations of any
Governmental Entity ("APPLICABLE LAWS") (in the case of Seller and the Seller
Entities, solely to the extent related to the Acquired Business conducted by
Seller and the Seller
37
Entities), including those relating to occupational health and safety, except
for instances of noncompliance that, individually or in the aggregate, would not
be reasonably likely to have a Material Adverse Effect. None of Seller, the
Seller Entities or the Clairol Entities has received any written communication
during the two years prior to the date hereof from a Governmental Entity that
alleges that Seller, any of the Seller Entities or any of the Clairol Entities
is in violation of any Applicable Laws (in the case of Seller or the Seller
Entities, solely to the extent related to the Acquired Business conducted by
Seller and the Seller Entities) except for any such violations that,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect. This Section 4.16(a) does not relate to matters with
respect to Taxes, which are the subject of Section 4.08, to employee benefit or
ERISA matters which are the subject of Section 4.14 or to environmental matters,
which are the subject of Section 4.16(b).
(b) Seller has provided Buyer with certain environmental reports
relating to the facilities and opera tions of the Clairol Entities, Seller and
the Seller Entities (in the case of Seller and the Seller Entities, solely to
the extent such reports relate to the Acquired Business conducted by Seller and
the Seller Entities) which are identified in Section 4.16(b) of the Seller
Disclosure Schedule (the "ENVIRONMENTAL REPORTS"). Except as set forth in the
Environmental Reports, and except as would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect, (i) none of
Seller, the Seller Entities or the Clairol Entities has received any written
communication during the two years prior to the date hereof from a Governmental
Entity that alleges that any of Seller, the Seller Entities or the Clairol
Entities are in violation of any Environmental Laws or of any Environmental
Permits (as hereinafter defined), the substance of which communication has not
been resolved, (ii) none of Seller, the Seller Entities or the Clairol Entities
has received any written communication during the past five years from a
Governmental Entity or any person that alleges any of the Seller, the Seller
Entities or the Clairol Entities is a potentially responsible party under the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980 or state or international equivalents thereof (in each case, in the case of
Seller or the Seller Entities, solely to the extent related to the Acquired
Business conducted by Seller or the Seller Entities), (iii) each of Seller, the
Seller Entities and the Clairol Entities hold, and are in compliance with, all
permits,
38
licenses and governmental authorizations required under Environmental Laws for
it to conduct the Acquired Business, ("Environmental Permits"), none of which is
being threatened in writing with suspension or cancellation, (iv) Seller, the
Seller Entities and the Clairol Entities are in compliance with all
Environmental Laws (in the case of Seller and the Seller Entities, solely to the
extent related to the Acquired Business conducted by Seller and the Seller
Entities), (v) Seller, the Seller Entities and the Clairol Entities have not
entered into or agreed to any agreement, consent decree or order, which
agreement, decree or order is still in effect, and are not subject to any
outstanding judgment, decree or judicial order with respect to any property
currently or formerly owned, occupied or operated by Seller, a Seller Entity or
a Clairol Entity relating to compliance with any Environmental Law or to the
investigation or cleanup of Hazardous Substances under any Environmental Law (in
the case of Seller and the Seller Entities, solely to the extent related to the
Acquired Business conducted by Seller and the Seller Entities), (vi) to the
knowledge of Seller, the Seller Entities and the Clairol Entities, there are no
pending or threatened investigations, claims or complaints relating to
compliance with Environmental Laws or Environmental Permits or to Hazardous
Substances with respect to the Acquired Business or to any property currently or
formerly owned, occupied, or operated by Seller, Seller Entity or a Clairol
Entity, in each case, in connection with the Acquired Business, and (vii) there
are no Hazardous Substances requiring remediation under Environmental Laws
located on Company Property or, to Seller's knowledge, on any property formerly
owned, occupied or operated by Seller, the Seller Entities or the Clairol
Entities. The representations and warranties made in this Section 4.16(b) are
Seller's exclusive representations and warranties relating to environmental
matters. As used in this Agreement, the term "ENVIRONMENTAL LAWS" means any
applicable statutes, laws (including common law), regulations, ordinances, rules
or administrative or judicial orders, in any such case entered into, issued, or
promulgated in final form as of the Closing Date by any Governmental Entity,
relating to the environment, pollution preservation or reclamation of natural
resources, or to the management of Hazardous Substances. As used in this
Agreement, the term "HAZARDOUS SUBSTANCES" means any hazardous or toxic
substance or waste that is regulated pursuant to any Environmental Law.
SECTION 4.17. EMPLOYEE AND LABOR MATTERS. As of the date of this
Agreement and except as would not be reasonably likely to have a Material
Adverse Effect and only
39
insofar as it relates to the Acquired Business or to an Employee, there is not
and since January 1, 1998, has not been: (a) any labor strike, dispute, work
stoppage or lockout pending, or, to the knowledge of Seller, threatened, against
Seller, any Seller Entity or any Clairol Entity; (b) to the knowledge of Seller,
any union organizational campaign in progress with respect to the employees of
Seller, any Asset Selling Entity or any Clairol Entity or any question
concerning representation respecting such employees other than routine employee
representative issues in those countries other than in the U.S. where employee
representative bodies such as works councils exist; (c) any unfair labor
practice charge or complaint against the Company or the U.S. Clairol
Subsidiaries pending, or, to the knowledge of Seller, threatened, before the
National Labor Relations Board; (d) any pending, or, to the knowledge of Seller,
threatened, union grievances against Seller, any Seller Entity or any Clairol
Entity as to which there is a reasonable possibility of adverse determination;
(e) any pending, or, to the knowledge of Seller, threatened, charges or claims
against the Company or the U.S. Clairol Subsidiaries or any current or former
employee of Seller, any Seller Entity or any Clairol Entity (solely to the
extent such employees relate to the Acquired Business) before the Equal
Employment Opportunity Commission or any federal, state, local or foreign agency
or court responsible for the prevention of unlawful employment practices or
breaches of employment contracts; and (f) to the knowledge of Seller, any
receipt of written notice by Seller, the Seller Entities or the Clairol
Entities, of the intent of any Governmental Entity responsible for the
enforcement of labor or employment laws to conduct an investigation of Seller,
any Seller Entity or any Clairol Entity and, to the knowledge of Seller, any
such investigation in progress.
SECTION 4.18. LIMITATIONS ON REPRESENTATIONS AND WARRANTIES. SELLER
DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES RELATING TO THE MAINTENANCE,
REPAIR, CONDITION, DESIGN, PERFORMANCE OR MARKETABILITY OF ANY ACQUIRED ASSETS,
INCLUDING MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, BUYER
AND THE BUYER SUBSIDIARIES WILL OBTAIN RIGHTS IN THE ACQUIRED ASSETS IN THEIR
PRESENT CONDITION AND STATE OF REPAIR, "AS IS" AND "WHERE IS."
40
ARTICLE V
COVENANTS OF SELLER
Seller covenants and agrees as follows:
SECTION 5.01. ACCESS. From the date hereof to the Closing, Seller
shall, and shall cause the Seller Entities and the Clairol Entities to, give or
furnish Buyer and its representatives, employees, counsel and accountants
reasonable access, during normal business hours and upon reasonable notice, to
the personnel, properties, books and records of the Acquired Business; PROVIDED,
HOWEVER, that such access does not unreasonably disrupt the normal operations of
Seller, the Seller Entities or the Clairol Entities.
SECTION 5.02. ORDINARY CONDUCT. (a) Except as set forth in Section
5.02 of the Seller Disclosure Schedule or otherwise contemplated by the terms of
this Agreement and the Other Transaction Documents, including any actions taken
in furtherance of the separation of the Acquired Business from Seller and its
Affiliates from the date hereof to the Closing, Seller shall use commercially
reasonable efforts consistent with past practice to cause the Acquired Business
to be conducted in the ordinary course consistent with past practice and shall
make commercially reasonable efforts consistent with past practice to preserve
the Acquired Business's relationships with customers, suppliers, distributors
and others with whom the Acquired Business has a material business relationship.
In the event of any Business Disruption after the date hereof, Seller shall act
in good faith and in a commercially reasonable manner in its response to such
Business Disruption; PROVIDED,HOWEVER, that Seller shall not have any liability
under, or be deemed in breach of, this Section 5.02(a) for any loss, liability,
claim, damage or expense (including reasonable legal fees and expenses)that
arises out of, results from or is related to any such Business Disruption
(including any such loss, liability, claim, damage or expense arising out of,
resulting from or related to Seller's good faith, commercially reasonable
response to any such Business Disruption). Notwithstanding anything to the
contrary in this Section 5.02(a), Seller shall not be obligated to, directly or
indirectly, provide any funds to the Acquired Business.
(b) Except as set forth in Section 5.02 of the Seller Disclosure
Schedule or otherwise contemplated by the terms of this Agreement and the Other
Transaction Documents (including any actions taken in furtherance of the
separation of the Acquired Business from Seller and its Affiliates), Seller
shall not permit any of the following in connection with the Acquired Business
without the prior
41
written consent of Buyer (which shall not be unreasonably withheld):
(i) a Clairol Entity to amend its Certificate of Incorporation,
By-laws or other organizational documents;
(ii) a Clairol Entity to declare or pay any dividend or make any
other distribution to its stockholders whether or not upon or in respect
of any shares of its capital stock; PROVIDED, HOWEVER, that (A) Buyer
acknowledges that the Clairol Entities do not maintain cash balances and,
at or prior to the time of the Closing, Seller will withdraw any cash
balances of the Clairol Entities and (B) dividends and distributions of
cash may continue to be made by Clairol Entities to Seller or its
Affiliates;
(iii) a Clairol Entity to redeem or otherwise acquire any shares of
its capital stock or issue any capital stock or any option, warrant or
right relating thereto or any securities convertible into or exchangeable
for any shares of capital stock;
(iv) a Clairol Entity to adopt or amend in any material respect any
Benefit Plan or collective bargaining agreement, in each case relating to
any Employees, except as required by Applicable Law and except as
disclosed in Section 4.17(b) of the Seller Disclosure Schedule;
(v) a Clairol Entity to grant to any Employee that is an executive
officer or executive employee any increase in compensation or benefits,
except in the ordinary course of business consistent with past practice or
as may be required under existing agreements or Applicable Law and except
for any increases for which Seller shall be solely obligated;
(vi) a Clairol Entity to incur or assume any liabilities,
obligations or indebtedness for borrowed money or guarantee any such
liabilities, obligations or indebtedness, other than in the ordinary
course of business consistent with past practice; PROVIDED, HOWEVER, that
the foregoing shall be deemed not to include any liabilities, obligations
or indebtedness, or guarantees thereof, that will be satisfied in full or
terminated prior to Closing;
42
(vii) a Clairol Entity to voluntarily permit any of its assets, or
Seller or a Seller Entity to voluntarily permit any of the Acquired
Assets, to become subjected to any mortgage, lien, security interest,
encumbrance, easement, covenant, right-of-way or other similar restriction
of any nature whatsoever which would have been required to be set forth in
Section 4.09 or 4.10 of the Seller Disclosure Schedule if existing on the
date of this Agreement;
(viii) except for intercompany transactions in the ordinary course
of business or necessary to withdraw cash or settle intercompany accounts
prior to the Closing, a Clairol Entity, Seller or an Asset Selling Entity
to cancel any material indebtedness (individually or in the aggregate) or
waive any claims or rights of material value (in the case of Seller or an
Asset Selling Entity, solely to the extent such indebtedness, claims or
rights relate to the Acquired Business);
(ix) except for (A) dividends and distributions permitted under
clause (ii) above and (B) intercompany transactions in the ordinary course
of business or necessary to withdraw cash or settle intercompany accounts
prior to the Closing, a Clairol Entity to pay, loan or advance any amount
to, or sell, transfer or lease any of its assets to, or enter into any
agreement or arrangement with, Seller or any of its Affiliates (other than
other Clairol Entities);
(x) a Clairol Entity, Seller or any Seller Entity to make any change
in any method of accounting or accounting practice or policy other than
those required by GAAP (in the case of Seller or any Seller Entity, solely
to the extent such change is applicable to the Acquired Business);
(xi) a Clairol Entity, Seller or a Seller Entity to acquire by
merging or consolidating with, or by purchasing a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof which are material, individually or in the aggregate, to the
Acquired Business;
(xii) a Clairol Entity, Seller or a Seller Entity to make or incur
any capital expenditure that is not currently approved or budgeted which,
individually, is in excess of $1,000,000 or make or incur any such
43
expenditures which, in the aggregate, are in excess of $5,000,000 (in the
case of Seller or a Seller Entity, solely to the extent such capital
expenditure relates to the Acquired Business);
(xiii) a Clairol Entity to sell, lease or otherwise dispose of any
of its assets, or Seller or an Asset Selling Entity to sell, lease or
otherwise dispose of any Acquired Assets, which are material, individually
or in the aggregate, to the Acquired Business, except in the ordinary
course of business consistent with past practice or enter into any lease
of any personal property except leases entered into in the ordinary course
of business or leases with aggregate lease payments not in excess of
$1,000,000;
(xiv) a Clairol Entity, Seller or a Seller Entity to enter into any
lease of real property, except any renewals of existing leases in the
ordinary course of business consistent with past practice (in the case of
Seller or a Seller Entity, solely to the extent such lease relates to the
Acquired Business);
(xv) a Clairol Entity, Seller or a Seller Entity to modify, amend,
terminate or permit the lapse of any lease of, or reciprocal easement
agreement, operating agreement or other material agreement relating to,
any Company Property (except modifications or amendments associated with
renewals of existing leases in the ordinary course of business); or
(xvi) Seller, a Seller Entity or a Clairol Entity to agree, whether
in writing or otherwise, to do any of the foregoing.
SECTION 5.03. INSURANCE. Seller shall keep, or cause to be kept, all
insurance policies presently maintained with respect to the Clairol Entities,
their respective assets and properties and the Acquired Assets, or suitable
replacements therefor, in full force and effect through the close of business on
the Closing Date. Any and all insurance policies maintained with respect to the
Clairol Entities, their respective assets and properties and the Acquired Assets
are owned and maintained by Seller and its Affiliates. None of the Buyer, any
Buyer Subsidiary or the Clairol Entities will have any rights under any such
insurance policies from and after the Closing Date; PROVIDED, HOWEVER, that
after the Closing Date Buyer, any Buyer Subsidiary, or Clairol Entities will
have the right to submit claims under the Seller's workers compensation
44
policies in accordance with such policies to the extent such claims occurred
prior to the Closing Date.
SECTION 5.04. NO USE OF CLAIROL NAMES. Seller shall, and shall cause
its Affiliates to, promptly, and in any event, within 60 days after Closing,
change the names of its Affiliates to discontinue any references to the Clairol
Names. "Clairol Names" means "Clairol" and any variation or derivative thereof
and any logos or trademarks related to the Acquired Business included in Section
4.11 of the Seller Disclosure Schedule.
SECTION 5.05. INTERCOMPANY ACCOUNTS. All intercompany accounts
between Seller or its Affiliates, on the one hand, and any Clairol Entity, on
the other hand, shall be settled in full or cancelled, at Seller's option, at or
prior to the Closing so that the Acquired Business shall have no further
intercompany liabilities as of the Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
SECTION 6.01. AUTHORITY. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of Ohio. Buyer has all
requisite corporate power and authority to enter into this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. All corporate acts and other proceedings required to be taken by Buyer
to authorize the execution, delivery and performance of this Agreement and any
Other Transaction Documents to which it or any Buyer Subsidiary is a party and
the consummation of the transactions contemplated hereby and thereby have been
duly and properly taken. This Agreement has been duly executed and delivered by
Buyer and, prior to the Closing, each of the Other Transaction Documents to
which Buyer or any Buyer Subsidiary is, or is specified to be, a party, will be
duly executed and delivered by such party. This Agreement, and each Other
Transaction Document to which Buyer or any Buyer Subsidiary, is, or is specified
to be, a party, constitutes a legal, valid and binding obligation of Buyer or
such Buyer Subsidiary, enforceable against Buyer or such Buyer Subsidiary in
accordance with its terms.
45
SECTION 6.02. NO CONFLICTS; CONSENTS. (a) The execution and delivery
of this Agreement by Buyer does not, and the execution and delivery by Buyer or
any Buyer Subsidiary of each Other Transaction Document to which it is, or is
specified to be, a party will not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the terms hereof and thereof
will not, conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation of any Lien upon any of the
properties or assets of Buyer, any subsidiary of Buyer or any Buyer Subsidiary
or the Acquired Assets under any provision of (i) the Certificate of
Incorporation or By-laws of Buyer or the comparable governing instruments of any
subsidiary of Buyer or any Buyer Subsidiary (ii) any material note, bond,
mortgage, indenture, deed of trust, license, lease, contract, commitment,
agreement or arrangement to which Buyer or any subsidiary of Buyer or any Buyer
Subsidiary is a party or by which any of their respective properties or assets
or the Acquired Assets are bound, or (iii) any judgment, order, or decree, or
material statute, law, ordinance, rule or regulation applicable to Buyer, any
subsidiary of Buyer or any Buyer Subsidiary or their respective properties or
assets or the Acquired Assets, other than, in the case of clauses (ii) and (iii)
above, any such items that, individually or in the aggregate, would not have a
material adverse effect on the ability of Buyer or any Buyer Subsidiary, as
applicable, to either perform its obligations hereunder or under any Other
Transaction Document or consummate the transactions contemplated hereby.
(b) No material consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required to be obtained or made by or with respect to Buyer, the Buyer
Subsidiaries or any of their respective subsidiaries or Affiliates in connection
with the execution, delivery and performance of this Agreement or any Other
Transaction Document or the consummation of the transactions contemplated hereby
or thereby, other than (i) compliance with and filings under the HSR Act, the
Mexican Merger Regulation, the Canada Competition Act, the merger control acts
in the United Kingdom and Germany and the Irish Mergers Act, if applicable, and
(ii) those that may be required solely by reason of Seller's or the Seller
Entities' (as opposed to any other third party's) participation in the
46
transactions contemplated hereby and in the Other Transaction Documents.
SECTION 6.03. SECURITIES ACT. The Clairol Shares and the
International Shares purchased by Buyer or the Buyer Subsidiaries pursuant to
this Agreement are being acquired for investment only and not with a view to any
public distribution thereof, and Buyer or the Buyer Subsidiaries, as applicable,
shall not offer to sell or otherwise dispose of the Clairol Shares or
International Shares so acquired by it or them in violation of any of the
registration requirements of the Securities Act or the securities laws of any
other jurisdiction applicable to the transactions contemplated hereby.
SECTION 6.04. ACTIONS AND PROCEEDINGS, ETC. There are no (a)
outstanding judgments, orders, injunctions or decrees of any Governmental Entity
or arbitration tribunal against Buyer or any of its Affiliates, (b) lawsuits,
actions or proceedings pending or, to the knowledge of Buyer, threatened against
Buyer or any of its Affiliates, or (c) investigations by any Governmental Entity
which are, to the knowledge of Buyer, pending or threatened against Buyer or any
of its Affiliates, which, in the case of each of clauses (a), (b) and (c), have
or could have a material adverse effect on the ability of Buyer to perform its
obligations hereunder or consummate the transactions contemplated hereby.
SECTION 6.05. AVAILABILITY OF FUNDS. Buyer has cash available or has
existing borrowing facilities which together are sufficient to enable it to
consummate the transactions contemplated by this Agreement. The financing
required to consummate the transactions contemplated hereby is collectively
referred to as the "Financing". As of the date hereof, Buyer has no reason to
believe that Financing will not be available on a timely basis for the
transactions contemplated by this Agreement.
ARTICLE VII
COVENANTS OF BUYER
Buyer covenants and agrees as follows:
SECTION 7.01. CONFIDENTIALITY. Buyer acknowledges that the
information being provided to it in connection with the Transaction and the
consummation of the other transactions contemplated hereby is subject to the
47
terms of a confidentiality agreement between Buyer and Seller dated December 13,
2000 (the "CONFIDENTIALITY AGREEMENT"), the terms of which are incorporated
herein by reference. Effective upon, and only upon, the Closing, the
Confidentiality Agreement shall terminate with respect to information relating
solely to the Acquired Business PROVIDED, HOWEVER, that Buyer acknowledges that
any and all other information not related to the Acquired Business provided to
it by Seller or Seller's representatives concerning Seller, the Seller Entities
or any other Affiliate of Seller shall remain subject to the terms and
conditions of the Confidentiality Agreement after the Closing Date.
SECTION 7.02. NO ADDITIONAL REPRESENTATIONS. Buyer acknowledges that
none of Seller, any of its Affiliates (including any Seller Entity or any
Clairol Entity) or any other person has made any representation or warranty,
expressed or implied, as to the accuracy or completeness of any information
regarding the Acquired Business furnished or made available to Buyer and its
representatives, except as expressly set forth in this Agreement or the Seller
Disclosure Schedule, and none of Seller, any of its Affiliates (including any
Seller Entity or any Clairol Entity) or any other person shall have or be
subject to any liability to Buyer, any Buyer Subsidiary or any other person
resulting from the distribution to Buyer, or Buyer's use of, any such
information, including the Confidential Offering Memorandum prepared by Xxxxxxx,
Xxxxx & Co. dated December 2000, and any information, documents or material made
available to Buyer and its representatives in certain "data rooms", management
presentations or in any other form in expectation of the transactions
contemplated hereby.
SECTION 7.03. NO USE OF CERTAIN NAMES. Subject to the terms of the
Transaction Documents, Buyer shall, and shall cause the Buyer Subsidiaries and
the Clairol Entities to, promptly and in any event (a) within 60 days after
Closing, to change the names of the International Clairol Subsidiaries to
discontinue any references to the BMS Names, (b) within 90 days after Closing,
to revise product literature and labeling to delete all references to the BMS
Names and (c) within 45 days after Closing, to change signing and stationery and
otherwise discontinue use of the BMS Names; PROVIDED, HOWEVER, that, for a
period of 180 days from the Closing Date, Buyer, the Buyer Subsidiaries and the
Clairol Entities may continue to distribute product literature that uses any BMS
Names and distribute products with labeling that uses any BMS Names to the
extent that
48
such product literature and labeling exists on the Closing Date. In no event
shall Buyer, any Buyer Subsidiary or any Clairol Entity use any BMS Names after
the Closing in any manner or for any purpose different from the use of such BMS
Names by Seller, the Seller Entities and the Clairol Entities during the 90-day
period preceding the Closing. With respect to product inventory manufactured
prior to the Closing, Buyer, the Buyer Subsidiaries and the Clairol Entities may
continue to sell such inventory, notwithstanding that it bears one or more of
the BMS Names, for a reasonable time after the Closing (not to exceed 365 days).
"BMS NAMES" means "Xxxxxxx-Xxxxx", "Xxxxxxx-Xxxxx Squibb" and "Xxxxxxx-Xxxxx
Squibb Company", any variations and derivatives thereof and all other logos or
trademarks of Seller or its Affiliates not included in Section 4.11 of the
Seller Disclosure Schedule.
SECTION 7.04. BUYER ACTIVITY ON CLOSING DATE. On the Closing Date,
Buyer shall, and shall cause the Buyer Subsidiaries and the Clairol Entities to,
conduct the Acquired Business in the ordinary course in substantially the same
manner as presently conducted and, on the Closing Date, shall not permit any
Buyer Subsidiary or any Clairol Entity to effect any extraordinary transactions
(other than any such transactions expressly required by Applicable Law or by
this Agreement) that could result in Tax liability to Seller, a Seller Entity or
a Clairol Entity in excess of Tax liability associated with the conduct of their
business in the ordinary course.
SECTION 7.05. SECURITIES ACT. Buyer and the Buyer Subsidiaries shall
not offer to sell or otherwise dispose of the Clairol Shares or the
International Shares so acquired by it or them in violation of any of the
registration requirements of the Securities Act of 1933, as amended, or the
applicable securities laws of any other jurisdiction.
SECTION 7.06. GUARANTEES. To the extent Seller or an Affiliate of
Seller (other than a Clairol Entity) has made or given a Seller Guarantee, Buyer
will use its best efforts to cause Seller or such Affiliate of Seller to be
released from such Seller Guarantee or to terminate such Seller Guarantee.
SECTION 7.07. LION AGREEMENT. Buyer and Seller agree that this
Agreement shall not be deemed to constitute an assignment of the Seller's rights
and obligations under the License Agreement, effective January 1, 1984 (as the
same may be amended from time to time, the "LION
49
AGREEMENT"), by and between the Seller and Lion Corporation ("LION"), which
grants to Lion, among other things, the exclusive right to Vitalis and other
products (the "COVERED PRODUCTS") in Japan. Buyer agrees not to, and agrees to
cause any purchaser or transferee of the Acquired Business or rights with
respect to the Covered Products to agree not to, directly or indirectly,
manufacture, market or sell Covered Products in Japan. Buyer shall have no
liability to Seller pursuant to this Section 7.07 if, through no fault or
knowledge of Buyer, a third party unaffiliated with Buyer sells any Covered
Products in the Japanese market; PROVIDED that if Buyer learns of such diversion
of Covered Products into the Japanese market by a third party, Buyer shall use
its best efforts to cease selling Covered Products to such third party.
SECTION 7.08. CERTAIN ACTIONS. Buyer agrees not to take any of the
actions set forth in Schedule I.
ARTICLE VIII
MUTUAL COVENANTS
Each of Seller and Buyer covenants and agrees as follows:
SECTION 8.01. CONSENTS. Buyer acknowledges that consents and waivers
with respect to the transactions contemplated by this Agreement and the Other
Transaction Documents may be required from parties to contracts that are
Acquired Assets or Assumed Liabilities, or contracts to which a Clairol Entity
is a party, including the Contracts listed in the Seller Disclosure Schedule
(collectively, the "TRANSFERRED CONTRACTS") or with respect to environmental
permits or other assets and that such consents and waivers have not been
obtained. Buyer agrees that Seller shall not have any liability whatsoever to
Buyer arising out of or relating to the failure to obtain any consents or
waivers that may be required in connection with the transactions contemplated by
this Agreement or because of the termination of any Transferred Contract as a
result thereof. Buyer further agrees that no representation, warranty or
covenant of Seller contained herein shall be breached or deemed breached, and no
condition shall be deemed not satisfied, as a result of (a) the failure to
obtain any such consent or waiver, (b) any such termination or (c) any lawsuit,
action, proceeding or investigation commenced or threatened by or on behalf of
any person arising out of or relating to the failure to obtain any such consent
or any such termination.
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Prior to the Closing, Seller and Buyer will use commercially reasonable efforts
to obtain all such consents and waivers; PROVIDED, HOWEVER, that such efforts
shall not include any requirement of Seller or any of its Affiliates to expend
money, commence, defend or participate in any litigation, incur any obligation
in favor of, or offer or grant any accommodation (financial or otherwise) to,
any third party, and all costs and expenses related to seeking and obtaining
such consents and waivers shall be for Buyer's account.
SECTION 8.02. COOPERATION. Buyer and Seller shall cooperate with
each other, and shall cause their officers, employees, agents, auditors and
representatives to cooperate with each other, for a period of 60 days after the
Closing to ensure the orderly transition of the Acquired Business from Seller to
Buyer and to minimize any disruption to the respective businesses of Seller,
Buyer and the Acquired Business, that might result from the transactions
contemplated hereby. After the Closing, upon reasonable written notice, Buyer
and Seller shall furnish or cause to be furnished to each other and their
employees, counsel, auditors and representatives access, during normal business
hours, to such information and assistance relating to the Acquired Business as
is reasonably necessary for financial reporting and accounting matters, the
preparation and filing of any Tax returns, reports or forms or the defense of
any Tax claim or assessment. The obligation to cooperate pursuant to the
preceding sentence insofar as it concerns Taxes shall terminate at the time the
relevant applicable statute of limitations expires (giving effect to any
extension thereof). Each party shall reimburse the other for reasonable
out-of-pocket costs and expenses incurred in assisting the other pursuant to
this Section 8.02. Neither party shall be required by this Section 8.02 to take
any action that would unreasonably interfere with the conduct of its business or
unreasonably disrupt its normal operations (or, in the case of Buyer, the
Acquired Business).
SECTION 8.03. PUBLICITY. Seller and Buyer agree that, from the date
hereof through the Closing Date, no public release or announcement concerning
the transactions contemplated hereby shall be issued by either party without the
prior consent of the other party (which consent shall not be unreasonably
withheld), except as such release or announcement may be required by law or the
rules or regulations of any United States or foreign securities exchange, in
which case the party required to make the release or announcement shall allow
the other party reasonable time to comment on such release or announcement in
advance of such issuance.
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SECTION 8.04. BEST EFFORTS. (a) Subject to the terms and conditions
of this Agreement (including the provisions set forth in Sections 8.01 and
8.05), each party shall use its best efforts to cause the Closing to occur.
Without limiting the foregoing or the provisions set forth in Section 8.05 and
without limiting the requirements for Closing set forth in Section 2.01(a),
Buyer and Seller shall use their respective best efforts to cause the Closing to
occur on or prior to the Six Month Anniversary or as soon as practicable
thereafter. Except as expressly provided in Section 8.05(c), each of Seller and
Buyer shall not, and shall not permit any of their respective Affiliates to,
take any action that would, or that could reasonably be expected to, result in
any of the conditions to the purchase and sale of the Clairol Shares, the
International Shares and the Acquired Assets and the assignment and assumption
of the Assumed Liabilities set forth in Article III not being satisfied
(b) Except as expressly provided in Section 8.05(c), Buyer shall use
its best efforts to have any restraint or prohibition of the type described in
clause (z) of the proviso to Section 2.01(a)(ii) terminated as promptly as
practicable.
(c) Buyer and Seller agree that Seller's right to (i) receive
interest on the Purchase Price after the Six Month Anniversary pursuant to
Section 1.01(a), (ii) terminate this Agreement pursuant to Section 13.01(d) and
(iii) receive the payment specified in Section 13.03 upon a termination pursuant
to Section 13.01(d), do not, in any manner, reduce, lessen, alter, modify or
otherwise change Buyer's obligations under this Section 8.04 to use its best
efforts to cause the Closing to occur (including its obligation to use best
efforts to cause the Closing to occur on or prior to the Six Month Anniversary
or as soon as practicable thereafter) or to cause any restraint or prohibition
of the type described in clause (z) of the proviso to Section 2.01(a)(ii) to be
lifted or terminated.
SECTION 8.05. ANTITRUST NOTIFICATION AND OTHER REGULATORY FILINGS.
(a) Each of Seller and Buyer shall as promptly as practicable, but in no event
later than five business days following the execution and delivery of this
Agreement, file with the United States Federal Trade Commission (the "FTC") and
the United States Department of Justice (the "DOJ") the notification and report
form required for the transactions contemplated hereby. Each of Buyer and Seller
shall furnish to the other such necessary information and reasonable assistance
as the other may
52
request in connection with its preparation of any filing or submission which is
necessary under the HSR Act. Seller and Buyer shall keep each other apprised of
the status of any communications with, and any inquiries or requests for
additional information from, the FTC and the DOJ and shall comply with any such
inquiry or request as promptly as practicable, but in no event later than five
business days after receipt of such inquiry or request. Any such notification
and report form and supplemental information shall be in substantial compliance
with the requirements of the HSR Act. Each of Seller and Buyer shall use its
best efforts to obtain any clearance required under the HSR Act for the
Transaction.
(b) Seller and Buyer shall make any required regulatory filings, and
shall use their best efforts to obtain any required regulatory consents,
authorizations, orders, approvals and declarations outside the United States, in
each case as promptly as practicable after the execution and delivery of this
Agreement, including filings under the Mexican Merger Regulation, the Canada
Competition Act and the merger control acts in the United Kingdom and Germany
and the Irish Mergers Act.
(c) Seller and Buyer shall further use their best efforts to (i) if
and to the extent Buyer so elects, contest any Antitrust Proceeding until each
such Antitrust Proceeding is either resolved pursuant to a final nonappealable
court order or Buyer has determined not to further contest such Antitrust
Proceeding and (ii) once all such Antitrust Proceedings are so resolved or
abandoned by Buyer, take such actions as may be necessary to resolve any
objections as may be asserted by any Governmental Entity to obtain all necessary
clearances and approvals under the U.S. Antitrust Laws. Subject to Buyer's
obligations pursuant to Section 8.05(a) to keep Seller apprised of the status of
the regulatory process, Buyer shall control the regulatory process to obtain all
such clearances and consents under the U.S. Antitrust Laws (including all
Antitrust Proceedings), subject to Seller's right to participate therein. Seller
shall not have independent substantive contacts with any Governmental Entities
administering the U.S. Antitrust Laws with respect to the transactions
contemplated hereby (unless Seller is otherwise advised by its counsel that it
is advisable for Seller to do so).
(d) Buyer and Seller agree that Seller's right to (i) receive
interest on the Purchase Price after the Six Month Anniversary pursuant to
Section 1.01(a), (ii) terminate this Agreement pursuant to Section 13.01(d)
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and (iii) receive the payment specified in Section 13.03 upon a termination
pursuant to Section 13.01(d), do not, in any manner, reduce, lessen, alter,
modify, or otherwise change Buyer's obligations under this Section 8.05 to use
its best efforts to obtain any clearance required under the HSR Act for the
Transaction and any other required regulatory consents, authorizations, orders,
approvals and declarations outside the United States.
SECTION 8.06. RECORDS. As soon as practicable on or after the
Closing Date, Seller shall deliver or cause to be delivered to Buyer all
Records, if any, in the possession of Seller and its Affiliates relating to the
Acquired Business to the extent not then in the possession of the Clairol
Entities, subject to the following exceptions:
(i) Buyer recognizes that certain Records may contain incidental
information relating to the Acquired Business or may relate primarily to
subsidiaries or divisions of Seller other than the Acquired Business and
that Seller may retain such Records and shall provide copies of the
relevant portions thereof to Buyer;
(ii) Seller may retain all Records prepared in connection with the
Transaction, including bids received from other parties and analyses
relating to the Acquired Business; and
(iii) Seller may retain any Tax returns, reports or forms, and Buyer
shall be provided with copies of such returns, reports or forms only to
the extent that they relate to the Company's or the Clairol Subsidiaries'
separate returns or separate Tax liability.
SECTION 8.07. SUPPORT SERVICES. Seller and its Affiliates provide
certain support services, including accounting, office, sales and distribution,
corporate management, information management, tax, legal, financial, treasury,
strategic sourcing, logistics, trademark maintenance, and employee compensation
and benefits services ("SUPPORT SERVICES") to the Acquired Business. Buyer
acknowledges that, except to the extent provided in the Transitional Services
Agreements, all Support Services will be terminated as of the Closing Date.
SECTION 8.08. COLLECTION OF RECEIVABLES; FORWARDING OF PAYMENTS.
From and after the Closing, Buyer and each of the Buyer Subsidiaries and Clairol
Entities, as applicable, shall have the right and authority to collect
54
for its own account all Receivables and other related items that are included in
the Acquired Assets and to endorse with the name of Seller or an Affiliate of
Seller, as applicable, any checks or drafts received with respect to any
Receivables or such other related items. Seller shall, or shall cause its
Affiliates to, promptly deliver to Buyer, the Buyer Subsidiaries and the Clairol
Entities, as applicable, any cash or other property received directly or
indirectly by it with respect to the Receivables and such other related items.
Buyer shall, or shall cause its Affiliates to, promptly deliver to Seller and
its Affiliates, as applicable, any cash or other property received directly or
indirectly by it with respect to the Excluded Receivables or any other Excluded
Assets.
SECTION 8.09 ADVISORY COMMITTEES. Seller and Buyer shall establish
four advisory committees (the "ADVISORY COMMITTEES"), which shall each act as a
forum in which issues and disputes arising under the International Sales and
Distribution Transitional Services Agreement, the GBS Transitional Services
Agreement, the CMO Transitional Services Agreement and the IM Transitional
Services Agreement, respectively, can be evaluated and discussed. Each Advisory
Committee will consist of four members, with Buyer eligible to designate two
members and Seller eligible to designate two members. Seller and Buyer agree
that they shall designate the members of each Advisory Committee within thirty
days following the date of this Agreement, and shall cause each Advisory
Committee to establish guidelines governing its operation and function within
sixty days following the date of this Agreement.
SECTION 8.10. TRANSITIONAL RELABELING SERVICES. Seller agrees that,
not less than thirty days prior to the Closing Date, it will provide written
notice to Buyer if Seller or its Affiliates will require Buyer or its Affiliates
to perform relabeling services that, as a result of the Transaction, are
required to comply with Applicable Laws after the Closing ("TRANSITIONAL
RELABELING SERVICES"). Buyer agrees that, not less than thirty days prior to the
Closing Date, it will provide written notice to Seller if Buyer or its
Affiliates will require Seller or its Affiliates to perform Transitional
Relabeling Services. Any notice provided pursuant to this Section 8.10 shall
describe the Transitional Relabeling Services, including the nature of such
services and the countries in which they will be necessary. Seller and Buyer
further agree that, to the extent any such notice is provided, they will agree
on a fee for such services based on the fully burdened costs of the party
responsible for providing the services, and the
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Schedules to the International Sales and Distribution Transitional Services
Agreement shall be appropriately modified to reflect such services and the
related fees for such services.
ARTICLE IX
EMPLOYEE AND RELATED MATTERS
SECTION 9.01. EMPLOYEE MATTERS. (a) Effective as of the Closing
Date, Buyer, shall, or shall cause the Buyer Subsidiaries and the Clairol
Entities to, assume and be responsible for all employment and employee benefit-
related matters, obligations and liabilities that are payable on or after the
Closing Date, regardless of whether such liabilities arise before, on or after
the Closing Date, with respect to all persons who are employees of the Acquired
Business immediately before the Closing Date, including active employees,
employees on leave of absence or vacation, employees on short-term or long-term
disability, employees represented by bargaining unit representatives and persons
employed within and outside the United States (collectively, the "EMPLOYEES"),
except as specifically provided otherwise in this Article IX. From and after the
Closing Date, (i) Buyer and the Clairol Entities shall assume and have all
responsibilities, liabilities and obligations with respect to the Employees and
their beneficiaries, including any claims incurred at any time, and (ii) Seller
and its Affiliates shall have no responsibilities, liabilities or obligations
with respect to the Employees and their beneficiaries, except as specifically
provided otherwise in this Article IX.
(b) The provisions of this Article IX shall apply to all Employees,
including Employees based in locations outside the United States. The term
"Employee" includes all employees of the CMO, other than BMS Retained Employees
(as defined in the CMO Transitional Services Agreement).
(c) In addition to the foregoing, effective as of the Closing Date,
Buyer shall, or shall cause the Buyer Subsidiaries to, assume all contracts,
obligations and liabilities with respect to independent contractors of Seller,
the Seller Entities and the Clairol Entities that relate primarily to the
Acquired Business (including any sales agents and other independent contractors
who are not Employees).
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(d) Seller has provided to Buyer a list (by name or by category and
number) of all Employees of the Acquired Business who are employees of the
Clairol Entities, as well as all Employees who are not employees of the Clairol
Entities, and all independent contractors of Seller, the Seller Entities and the
Clairol Entities that relate primarily to the Acquired Business. Seller shall
provide Buyer with an updated list on the Closing Date, which shall reflect any
employment terminations and new hires in the ordinary course of business
consistent with this Agreement.
SECTION 9.02. BARGAINING UNIT EMPLOYEES. From and after the Closing
Date, Buyer shall, or shall cause the Buyer Subsidiaries, if applicable, to,
assume the collective bargaining agreement between Clairol, Inc. and Local 300S,
Production Service & Sales District Council, U.F.C.W. AFL-CIO-CLC and any other
collective bargaining or labor agreements with respect to Employees previously
disclosed to Buyer (collectively, the "COLLECTIVE BARGAINING AGREEMENTS"), and
shall assume all liabilities and obligations under the Collective Bargaining
Agreements arising under, INTER ALIA, the terms of the Collective Bargaining
Agreements, the National Labor Relations Act, the Labor Management Relations Act
and all other laws and regulations applicable in the jurisdictions in which
Employees are employed, and Seller and its Affiliates shall have no liability in
connection with the Collective Bargaining Agreements with respect to Employees
and their beneficiaries.
SECTION 9.03. CONTINUITY OF EMPLOYMENT. (a) Buyer and Seller intend
that there shall be continuity of employment with respect to all Employees as of
the Closing Date. Buyer shall, or shall cause the Buyer Subsidiaries to, offer
employment to each Employee as of the Closing Date, or, as applicable, shall
cause the Clairol Entity that presently employs each Employee to continue the
Employee's employment as of the Closing Date, in all cases on substantially the
same terms and conditions as are applicable to such Employees immediately before
the Closing Date.
(b) Notwithstanding anything in this Agreement to the contrary, as
of the Closing Date, Buyer shall, or shall cause, the Buyer Subsidiaries and the
Clairol Entities to, continue the employment of Employees based in locations
outside the United States as required by the Acquired Rights Directive or any
similar law in the relevant jurisdiction, and shall grant for a period of not
less than that provided for by local country law, substantially the same terms
and
57
conditions of employment that apply to such Employees immediately prior to the
Closing Date. The term "ACQUIRED RIGHTS DIRECTIVE" shall mean the "European
Council Directive of February 14, 1977 on the Approximation of the Laws of the
Member States relating to the Safeguarding of Employee's Rights in the Event of
Transfers of Undertakings, Business or Parts of Businesses" (77/187/EC), as
amended, and its subsequent transposition into local laws. In addition,
notwithstanding anything in this Agreement to the contrary, as of the Closing
Date, Buyer shall, or shall cause the Buyer Subsidiaries and the Clairol
Entities to, offer and continue the employment of the Employees on the same
terms and conditions as in effect before the Closing Date, where necessary to
avoid the imposition of severance or similar obligations on Seller or its
Affiliates or where otherwise required by law.
(c) For not less than 18 months following the Closing Date (the
"CONTINUATION PERIOD"), Buyer shall maintain, or, where applicable, shall cause
the Buyer Subsidiaries and the Clairol Entities to maintain (to the extent
permitted by law), compensation arrangements, employee benefit plans, and
perquisites with respect to Employees that are comparable in the aggregate to
those provided to such Employees by Seller and its Affiliates immediately prior
to the Closing Date. In the alternative, during the Continuation Period, Buyer
may replace or, where applicable, cause the Buyer Subsidiaries and the Clairol
Entities to replace (to the extent permitted by law), Seller's compensation
arrangements, employee benefit plans and perquisites with compensation
arrangements, employee benefit plans and perquisites that are comparable in the
aggregate to those provided to similarly situated employees of Buyer and the
Buyer Subsidiaries, PROVIDED that Employees shall either be treated entirely
under the first sentence or entirely under the second sentence of this Section
9.03(c). With respect to Buyer's stock-based plans, all Employees in Seller's
grades D-8 and above, and at least 50% of the Employees in Seller's grades D-6
and D-7, shall receive stock awards from Buyer in accordance with this Section
9.03 immediately after the Closing, and Employees' stock awards shall provide
for full vesting upon termination of employment in circumstances that entitle
such Employees to severance benefits under Section 9.08.
(d) Buyer shall cause Employees' service with Seller and its
Affiliates before the Closing Date to be credited for all purposes for which
such service was recognized by Seller and its Affiliates with respect to all
employee benefit plans and arrangements and employment-
58
related entitlements provided, maintained or contributed to by Buyer, the Buyer
Subsidiaries and the Clairol Entities for Employees on or after the Closing
Date, except as specifically provided otherwise in this Article IX.
(e) Nothing in this Agreement shall be deemed to prohibit the
termination of any Employee's employment or the modification of any benefit
plans and arrangements, consistent with applicable law and the requirements of
Sections 9.03(b) and (c).
SECTION 9.04. PENSION PLAN. Seller shall retain responsibility for
all benefits accrued before the Closing Date by Employees under the
Xxxxxxx-Xxxxx Squibb Company Retirement Income Plan (the "Seller's Pension
Plan"), and neither Buyer, the Buyer Subsidiaries nor any of their Affiliates
shall have any liability with respect to the Seller's Pension Plan. As of the
Closing Date, all Employees shall have a fully vested interest in their accrued
benefits under the Seller's Pension Plan. Employees who, on the Closing Date,
are participants in the Seller's Pension Plan shall be immediately eligible on
the Closing Date for participation under the terms of the Procter & Xxxxxx
Profit Sharing Trust and Employee Stock Ownership Plan ("PST PLAN"). Employees
shall receive credit for their service with Seller and its Affiliates prior to
the Closing Date for all purposes under the PST Plan, including for the purposes
of eligibility, vesting and contribution formulas.
SECTION 9.05. SAVINGS AND INVESTMENT PLAN. (a) Effective as of the
Closing Date, Buyer shall, or shall cause the Buyer Subsidiaries and the Clairol
Entities to, have in effect a profit-sharing plan in accordance with Section
9.03 hereof that includes a qualified cash or deferred arrangement within the
meaning of Section 401(k) of the Code (the "BUYER'S 401(K) PLAN") and is
intended to be qualified pursuant to Section 401(a) of the Code. Buyer shall
cause Buyer's 401(k) Plan to accept direct rollover contributions (within the
meaning of Section 401(a)(31) of the Code and the regulations promulgated
thereunder) of Employee account balances which are made in the form of cash
and/or outstanding Employee loan balances from the Xxxxxxx- Xxxxx Squibb Company
Savings and Investment Program (the "SELLER'S 401(K) PLAN"). Employees shall
have a fully vested interest in their accounts under the Seller's 401(k) Plan,
and in any accounts transferred to the Buyer's 401(k) Plan. Neither Buyer, the
Buyer Subsidiaries, Buyer's 401(k) Plan nor any of their Affiliates shall have
or assume any liability in connection with Seller's 401(k) Plan (except
59
with respect to accounts that are transferred as described above).
SECTION 9.06. NON-QUALIFIED PLANS. (a) Effective as of the Closing
Date, Buyer shall, or shall cause the Buyer Subsidiaries and the Clairol
Entities to, have in effect non-qualified defined benefit and defined
contribution plans that provide benefits to Employees who are participating in
Seller's Benefit Equalization Plans and Key International Pension Plan before
the Closing Date, in accordance with Section 9.03 above.
(b) The non-qualified defined contribution plans of Buyer, the Buyer
Subsidiaries and the Clairol Entities ("BUYER'S BEP-SIP") shall provide those
Employees who are participating before the Closing Date in the Benefits
Equalization Plan of Xxxxxxx-Xxxxx Squibb Company and its Subsidiary or
Affiliated Corporations Participating in the Xxxxxxx-Xxxxx Squibb Company
Savings and Investment Program ("SELLER'S BEP-SIP") with an account balance
under Buyer's BEP-SIP equal to the Employees' account balance under Seller's
BEP-SIP as of the Closing Date. Buyer shall, and shall cause the Buyer
Subsidiaries and the Clairol Entities to, assume and be responsible for paying
all benefits accrued by Employees under Seller's BEP-SIP before the Closing
Date.
(c) Seller shall retain responsibility for all benefits accrued
before the Closing Date by Employees under (i) the Benefits Equalization Plan of
Xxxxxxx-Xxxxx Squibb Company and its Subsidiary or Affiliated Corporations
Participating in the Xxxxxxx-Xxxxx Squibb Company Retirement Income Plan or the
Xxxxxxx-Xxxxx Squibb Company Puerto Rico, Inc. Retirement Income Plan ("SELLER'S
BEP-RIP") and (ii) Seller's Key International Pension Plan ("SELLER'S XXX").
Neither Buyer, the Buyer Subsidiaries, the Clairol Entities nor any plan of
Buyer, the Buyer Subsidiaries, or the Clairol Entities shall have or assume any
liability with respect to Seller's BEP-RIP or Seller's XXX.
SECTION 9.07. WELFARE BENEFIT PLANS. (a) Effective as of the Closing
Date, Buyer shall, and shall cause the Buyer Subsidiaries and the Clairol
Entities to, offer the Employees and their eligible dependents participation in
welfare benefit plans and programs of Buyer (the "BUYER WELFARE BENEFIT PLANS"),
including medical, dental, life insurance, accident, survivor, short term
disability, long term disability, long term care, flexible benefit, adoption
assistance and other welfare benefit plans and programs, as applicable, in
accordance with
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Section 9.03. All waiting periods and pre-existing condition clauses shall be
waived under the Buyer Welfare Benefit Plans for Employees and their eligible
dependents who were participating in the welfare benefits plans and programs of
Seller and its Affiliates ("SELLER WELFARE BENEFIT PLANS") before the Closing
Date. Buyer shall cause the Buyer Welfare Benefit Plans to recognize any out-of-
pocket medical and dental expenses incurred by each of the Employees and their
eligible dependents prior to the Closing Date and during the calendar year in
which the Closing Date occurs for purposes of determining deductibles and
out-of- pocket maximums under the Buyer Welfare Benefit Plans.
(b) Seller shall retain responsibility for (i) all claims incurred
by Employees under Seller's health and dental plans before the Closing Date and
(ii) all stock options and restricted stock granted to Employees under Seller's
equity plans before the Closing Date, and Buyer shall not be responsible for
such health and dental claims, stock options and restricted stock. In addition,
Buyer shall not be responsible for any dependent life insurance and other
insured benefit claims that are incurred by Employees before the Closing Date,
to the extent that such claims are paid by the insurance carrier to the
Employees according to the terms of the applicable insurance contracts
maintained by Seller.
(c) Buyer agrees to provide or cause to be provided under the Buyer
Welfare Benefit Plans to each Employee who retires on or after the Closing Date
and during the Continuation Period, and their dependents, health care benefits
and coverage that are comparable in the aggregate to those set forth in the
Comprehensive Medical Plan Summary Plan Description for Retirees of
Xxxxxxx-Xxxxx Squibb Company, or such other retiree benefit plan or arrangement
of Seller or its Affiliates that is applicable to the Employee immediately
before the Closing Date (or that would have been applicable had the Employee
been eligible to retire immediately before the Closing Date), in accordance with
Section 9.03. If Employees are eligible to receive health care benefits under
Seller's retiree plans on or after the Closing Date, Buyer agrees that Seller's
retiree plans shall be secondary to the Buyer Welfare Benefit Plans (both active
and retiree plans).
(d) Effective as of the Closing Date, Buyer shall, or shall cause
the Buyer Subsidiaries and the Clairol Entities to, have in effect a health care
and dependent care reimbursement account plan (the "BUYER REIMBURSEMENT PLAN"),
in accordance with Section 9.03. Buyer's Reimbursement Plan
61
shall give full effect to, and continues in effect, salary reduction elections
made under the health care and dependent care reimbursement account plans of
Seller and its Affiliates as in effect on the Closing Date (the "Seller
Reimbursement Plan"). The Seller Reimbursement Plan shall transfer to the Buyer
Reimbursement Plan an amount equal to the aggregate account balances of
Employees as of the Closing Date under the Seller Reimbursement Plan. Buyer
shall reimburse Seller on a dollar-for-dollar basis for forfeitures of the
Employee accounts under the Buyer Reimbursement Plan that relate to the calendar
year in which the Closing Date occurs.
(e) Effective as of the Closing Date, Buyer shall, or shall cause
the Buyer Subsidiaries and the Clairol Entities to, assume all responsibilities
and obligations for continuation coverage under Sections 601 ET SEQ. of ERISA
(COBRA obligations) and any state continuation coverage requirements with
respect to the Employees and their beneficiaries.
SECTION 9.08. SEVERANCE. Buyer shall, or shall cause the Buyer
Subsidiaries and the Clairol Entities to, adopt and maintain, effective as of
the Closing Date, one or more severance policies which shall be identical in all
material respects (including the Rule of 70 provisions, as described in Seller's
written communications to Employees) to the terms of the severance policies of
Seller and its Affiliates applicable to Employees as in effect on the Closing
Date (the "SELLER SEVERANCE POLICIES") and which shall be enhanced as described
in Exhibit N (the "ENHANCED SEVERANCE PROGRAM"). Buyer shall cause the Enhanced
Severance Program to be maintained for Employees whose employment terminates on
or after the Closing Date and during the Continuation Period. Buyer and the
Buyer Subsidiaries shall assume and be responsible for paying any severance
obligations (including termination indemnities, notice liabilities and statutory
severance obligations) that are payable as a result of the transactions
contemplated by this Agreement, or that are otherwise payable with respect to
Employees on or after the Closing Date.
SECTION 9.09. VACATION BENEFITS. As of the Closing Date, Buyer
shall, or shall cause the Buyer Subsidiaries and the Clairol Entities to,
recognize all of the Employees' accrued and unused vacation benefits consistent
with the terms of the vacation policies of Seller and its Affiliates applicable
to Employees as in effect on the Closing Date.
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SECTION 9.10. RELOCATION BENEFITS. As of the Closing Date, Buyer
shall, or shall cause the Buyer Subsidiaries and the Clairol Entities to,
provide each eligible Employee with relocation benefits that are comparable in
the aggregate to the relocation policies of Seller and its Affiliates that are
applicable to such Employees on the Closing Date. Buyer shall, or shall cause
the Buyer Subsidiaries and the Clairol Entities to, perform or cause to be
performed all obligations of Seller and its Affiliates with respect to
Employees' existing relocation arrangements, and Buyer shall, or shall cause the
Buyer Subsidiaries and the Clairol Entities to, have all rights and obligations
of Seller and its Affiliates under such relocation arrangements with respect to
Employees.
SECTION 9.11. EXPATRIATES. As of the Closing Date, Buyer shall, or
shall cause the Buyer Subsidiaries and the Clairol Entities to, assume all
obligations and responsibilities with respect to each Employee who is or was
temporarily assigned to work at a location outside such Employee's home country
("EXPATRIATES") as of the Closing Date as disclosed to Buyer. Such obligations
and responsibilities shall include, without limitation, compensation increments,
housing expenses, travel expenses, relocation expenses and all other applicable
benefits, all of which shall be provided by Buyer according to the terms of the
Employee's agreement with Seller and its Affiliates as in effect before the
Closing Date. Buyer and Seller shall take all actions necessary so that Buyer,
the Buyer Subsidiaries and the Clairol Entities shall have all rights and
obligations of Seller and its Affiliates with respect to Expatriates, including
rights and obligations under tax equalization agreements with the Expatriates.
SECTION 9.12. OTHER AGREEMENTS AND BENEFITS. Without limiting the
foregoing, as of the Closing Date, Buyer shall, or shall cause the Buyer
Subsidiaries and the Clairol Entities to, assume all liabilities, and perform or
cause to be performed all obligations, of Seller or its Affiliates under the
following agreements, programs and policies in effect with respect to Employees
as of the Closing Date as disclosed to Buyer: (i) employment and supplemental
benefit agreements with respect to Employees based in countries outside the
United States, (ii) tuition assistance programs and automobile policies, and
(iii) statutory benefits applicable to Employees and their beneficiaries.
SECTION 9.13. ANNUAL BONUSES. As of the Closing Date, Buyer shall,
or shall cause the Buyer Subsidiaries and
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the Clairol Entities to, assume responsibility for, and pay, all annual bonuses
that are payable to Employees for the year 2001, including bonuses accrued
before the Closing Date under the annual bonus plans of Seller and its
Affiliates.
SECTION 9.14. RETENTION BONUS ARRANGEMENTS. (a) To the extent so
requested by Seller, Buyer shall, or shall cause the Buyer Subsidiaries and the
Clairol Entities to, administer and make any and all retention bonus payments
required to be made to Employees pursuant to the retention bonus arrangements of
Seller and its Affiliates that are applicable to the Employees, as set forth in
the retention bonus announcements to Employees dated October 2000 from Xxxxxxx
X. Xxxxx. Seller shall retain the economic obligation with respect to such
retention bonus payments to Employees and shall reimburse Buyer, the Buyer
Subsidiaries or the Clairol Entities, as applicable, for the net cost of such
retention bonus payments made by Buyer, the Buyer Subsidiaries or the Clairol
Entities to Employees.
(b) In addition to the foregoing, as of the Closing Date, Buyer
shall, and shall cause the Buyer Subsidiaries and the Clairol Entities to,
provide to Employees the additional retention bonuses described in Exhibit N.
Buyer shall be liable for all costs of the retention bonuses described in
Exhibit N.
SECTION 9.15. INTERNATIONAL PENSION AND SAVINGS PLANS. Appendix A
sets forth provisions that are applicable to certain pension and savings plans
maintained for Employees based outside the United States.
ARTICLE X
FURTHER ASSURANCES
SECTION 10.01. FURTHER ASSURANCES. From time to time, as and when
requested by either party hereto, the other party shall execute and deliver, or
cause to be executed and delivered, all such documents and instruments and shall
take, or cause to be taken, all such further or other actions (subject to the
provisions of Sections 8.01, 8.04 and 8.05), as such other party may reasonably
deem necessary or desirable to consummate the transactions contemplated by this
Agreement.
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ARTICLE XI
INDEMNIFICATION
SECTION 11.01. TAX INDEMNIFICATION. (a) Seller shall indemnify Buyer
and its Affiliates (including the Clairol Entities) and each of their respective
officers, directors, employees, stockholders, agents and representatives and
hold them harmless from (i) all liability for Taxes of the Clairol Entities and
Taxes relating to the Acquired Assets for the Pre-Closing Tax Period (including
any U.S. federal income Taxes imposed on the Company or the U.S. Clairol
Subsidiaries as a result of the Code Section 338(h)(10) election contemplated by
Section 12.04 of this Agreement), (ii) all liability for Taxes of the Clairol
Entities for any taxable period ending after the Closing Date attributable to
Seller's breach of its obligations under Section 12.04, and (iii) all liability
as a result of Treasury Regulation ss. 1.1502-6(a) for Taxes of Seller or any
other corporation which is or has been affiliated with Seller (other than the
Clairol Entities). Notwithstanding the foregoing, Seller shall not indemnify and
hold harmless Buyer and its Affiliates (including the Clairol Entities) and each
of their respective officers, directors, employees or agents, from any liability
for Taxes attributable to any action taken on or after the Closing Date by
Buyer, any of its Affiliates (including the Clairol Entities), or any transferee
of Buyer or any of its Affiliates (other than any such action expressly required
by Applicable Law or by this Agreement) (a "BUYER TAX ACT") or attributable to a
breach by Buyer of its obligations under this Agreement.
(b) Buyer shall, and shall cause the Buyer Subsidiaries and Clairol
Entities to, indemnify Seller and its Affiliates and each of their respective
officers, directors, employees, stockholders, agents and representatives and
hold them harmless from (i) all liability for Taxes of the Clairol Entities and
Taxes relating to the Acquired Assets for any taxable period ending after the
Closing Date (except to the extent such taxable period began before the Closing
Date, in which case Buyer's indemnity will cover only that portion of any such
Taxes that are not for the Pre-Closing Tax Period) and (ii) all liability for
Taxes attributable to a Buyer Tax Act or to a breach by Buyer of its obligations
under this Agreement.
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(c) In the case of any taxable period that includes (but does not
end on) the Closing Date (a "STRADDLE PERIOD"):
(i) real, personal and intangible property Taxes ("PROPERTY TAXES")
of the Clairol Entities and Property Taxes relating to the Acquired Assets
allocable to the Pre-Closing Tax Period shall be equal to the amount of
such Property Taxes for the entire Straddle Period multiplied by a
fraction, the numerator of which is the number of days during the Straddle
Period that are in the Pre-Closing Tax Period and the denominator of which
is the number of days in the Straddle Period; and
(ii) the Taxes of the Clairol Entities and Taxes relating to the
Acquired Assets (other than Property Taxes) allocable to the Pre-Closing
Tax Period shall be computed as if such taxable period ended as of the
close of business on the Closing Date.
SECTION 11.02. OTHER INDEMNIFICATION BY SELLER. (a) Except as
relates to Taxes, for which the sole indemnification is provided in Section
11.01, Seller shall indemnify Buyer, its Affiliates (including the Clairol
Entities) and each of their respective officers, directors, employees,
stockholders, agents and representatives against and hold them harmless from any
loss, liability, claim, damage or expense (including reasonable legal fees and
expenses) suffered or incurred by any such indemnified party to the extent
arising from (i) any breach of any representation or warranty of Seller
contained in this Agreement or in any certificate delivered pursuant hereto, in
each case, which survives the Closing, (ii) any breach of any covenant of Seller
contained in this Agreement or any Other Transaction Document, (iii) any failure
of Seller to perform or satisfy any employee benefit obligations or liabilities
specifically retained by Seller under Article IX, (iv) all Excluded Liabilities
or (v) any breach by Buyer or any of its Affiliates of the Agreements set forth
in Section 11.02(a)(v) of the Seller Disclosure Schedule. Notwithstanding the
foregoing, (A) Seller shall not have any liability under clause (i) or clause
(ii) of this Section 11.02(a) (in the case of clause (ii), only with respect to
breaches of covenants that occur prior to Closing) unless the aggregate of all
losses, liabilities, costs and expenses relating thereto for which Seller would,
but for this clause (A), be liable exceeds on a cumulative basis an amount equal
to 1% of the Purchase Price, and then only to the extent of any such excess; (B)
Seller shall not have any liability under clause (i) or clause (ii) of this
Section 11.02(a) (in the case of clause (ii), only with respect to breaches of
covenants that occur prior to Closing) for any individual item or series of
related items where the loss, liability, cost or expense relating thereto is
less than $250,000 and such items shall not be aggregated for purposes of the
foregoing clause (A) of this Section 11.02(a); (C) Seller's liability under
clause (i) or clause (ii) of this
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Section 11.02(a) (in the case of clause (ii), only with respect to breaches of
covenants that occur prior to Closing) shall in no event exceed 20% of the
Purchase Price; and (D) Seller shall not have any liability under this Section
11.02(a) to the extent the liability or obligation arises as a result of any
action taken or omitted to be taken by Buyer or any of its Affiliates.
Notwithstanding the foregoing, the limitations of clauses (A), (B) and (C) of
the preceding sentence shall not apply to any employee benefit obligations or
liabilities specifically retained by Seller pursuant to the provisions of
Article IX or any Excluded Liabilities. In no event shall Seller be obligated to
indemnify Buyer or any other person with respect to any matter to the extent
that such matter was reflected in the calculation of the adjustment to the
Purchase Price, if any, pursuant to Section 2.02.
(b) Buyer further acknowledges and agrees that, should the Closing
occur, its sole and exclusive remedy with respect to any and all claims relating
to this Agreement, any Other Transaction Document, any document or certificate
delivered in connection herewith, the transactions contemplated hereby, the
Clairol Shares, the International Shares, the Acquired Assets, the Assumed
Liabilities or the Clairol Entities or their respective assets, liabilities and
business (other than claims of, or causes of action arising from, fraud) or any
Federal, state, local or foreign statute, law, ordinance, rule or regulation or
otherwise, shall be pursuant to the indemnification provisions set forth in this
Article XI. In furtherance of the foregoing, Buyer hereby waives, from and after
the Closing, to the fullest extent permitted under applicable law, any and all
rights, claims and causes of action (other than claims of, or causes of action
arising from, fraud) it or any of its Affiliates (including the Clairol
Entities) may have against Seller and its Affiliates arising under or based upon
this Agreement, any Other Transaction Document, any document or certificate
delivered in connection herewith, or any Federal, state, local or foreign
statute, law, ordinance, rule or regulation or otherwise (except pursuant to the
indemnification provisions set forth in this Article XI).
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SECTION 11.03. OTHER INDEMNIFICATION BY BUYER. Except as relates to
Taxes, for which the sole indemnification is provided in Section 11.01, Buyer
shall, and shall cause the Buyer Subsidiaries and Clairol Entities to, indemnify
Seller, its Affiliates and each of their respective officers, directors,
employees, stockholders, agents and representatives against and hold them
harmless from any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses) suffered or incurred by any such indemnified
party to the extent arising from (i) any breach of any representation or
warranty of Buyer contained in this Agreement or in any certificate delivered
pursuant hereto, in each case, which survives the Closing, (ii) any breach of
any covenant of Buyer contained in this Agreement or any Other Transaction
Document, (iii) any guarantee or obligation or liability given or made by Seller
or an Affiliate of Seller with respect to any obligation or any Assumed
Liability set forth in clause (iv),(v) or (vi) below (each, a "SELLER
GUARANTEE"), (iv) all Assumed Liabilities, (v) any obligations assumed or
retained by Buyer, the Buyer Subsidiaries or the Clairol Entities pursuant to
Article IX, (vi) all obligations and liabilities of whatever kind and nature,
primary or secondary, direct or indirect, absolute or contingent, known or
unknown, whether or not accrued, whether arising before, on or after the Closing
Date, of the Clairol Entities, including any such obligations or liabilities
under any agreement, lease, license, permit, plan or commitment to which any
Clairol Entity is a party or by which any Clairol Entity or any of its
properties or assets are bound or the Benefit Plans set forth in Section 4.14 of
the Seller Disclosure Schedule or any plan, fund, program, policy, contract or
arrangement described in Section 4.14 but not required to be set forth in
Section 4.14 of the Seller Disclosure Schedule (collectively, the "PLANS") (in
each case other than items for which indemnification is provided under Section
11.02), (vii) any discontinuance, suspension or modification on or after the
Closing Date of any Plan and (viii) any claim that the purchase and sale of the
Clairol Shares, the International Shares, the Acquired Assets or the
transactions contemplated hereby give rise to any severance or other benefits
under any Plan.
SECTION 11.04. LIMITATIONS ON LIABILITY; COOPERATION. (a)
Notwithstanding any provision herein, neither Seller nor Buyer shall in any
event be liable to the other party or its Affiliates, officers, directors,
employees, stockholders, agents or representatives on account of any indemnity
obligation set forth in Section 11.02 or 11.03 for any indirect, consequential,
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special, incidental or punitive damages (including, but not limited to, lost
profits, loss of use, damage to goodwill or loss of business).
(b) Buyer and Seller shall cooperate with each other with respect to
resolving any claim or liability with respect to which one party is obligated to
indemnify the other party hereunder including by making commercially reasonable
efforts to mitigate or resolve any such claim or liability.
SECTION 11.05. LOSSES NET OF INSURANCE, ETC. The amount of any loss,
liability, claim, damage, expense or Tax for which indemnification is provided
under this Article XI shall be net of any amounts recovered or recoverable by
the indemnified party under insurance policies with respect to such loss,
liability, claim, damage, expense or Tax (collectively, a "LOSS") and shall be
reduced to take account of any net Tax benefit (including as a result of any
basis adjustment) of the indemnified party arising from the incurrence or
payment of any such Loss. In computing the amount of any such Tax benefit, the
indemnified party shall be deemed to recognize all other items of income, gain,
loss, deduction or credit before recognizing any item arising from the receipt
of any indemnity payment hereunder or the incurrence or payment of any
indemnified Loss. Any indemnity payment under this Agreement shall be treated as
an adjustment to the Purchase Price for Tax purposes, unless a final
determination (which shall include the execution of a Form 870-AD or successor
form) with respect to the indemnified party or any of its Affiliates causes any
such payment not to be treated as an adjustment to the Purchase Price for United
States Federal income Tax purposes.
SECTION 11.06. TERMINATION OF INDEMNIFICATION. The obligations to
indemnify and hold harmless a party hereto (a) pursuant to Section 11.01, shall
terminate at the time the applicable statutes of limitation with respect to the
Tax liabilities in question expire (giving effect to any extension thereof), (b)
pursuant to Sections 11.02(a)(i) and 11.03(i), shall terminate when the
applicable representation or warranty terminates pursuant to Article XIV and (c)
pursuant to Sections 11.02(a)(ii) and 11.03(ii), in each case with respect to
breaches of covenants that occur prior to the Closing, shall terminate eighteen
months after the Closing Date and (d) pursuant to the other clauses of Sections
11.02 and 11.03 shall not terminate; PROVIDED, HOWEVER, that as to clauses (a),
(b) and (c) above such obligations to indemnify and hold harmless shall not
terminate with respect to any item as to which the person to
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be indemnified or the related party thereto shall have, before the expiration of
the applicable period, previously made a claim by delivering a notice of such
claim (stating in reasonable detail the basis of such claim) to the indemnifying
party.
SECTION 11.07. PROCEDURES RELATING TO INDEMNIFICATION FOR THIRD
PARTY CLAIMS. In order for a party (the "INDEMNIFIED PARTY") to be entitled to
any indemnification provided for under this Agreement (other than
indemnification for a Tax Claim under Section 11.01 which shall be governed by
Section 11.09) in respect of, arising out of or involving a claim or demand made
by any person against the indemnified party (a "THIRD PARTY CLAIM"), such
indemnified party must notify the indemnifying party in writing, and in
reasonable detail, of the Third Party Claim within 10 business days after
receipt by such indemnified party of written notice of the Third Party Claim;
PROVIDED, HOWEVER, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the indemnifying party
shall have been actually prejudiced as a result of such failure (except that the
indemnifying party shall not be liable for any expenses incurred during the
period in which the indemnified party failed to give such notice). Thereafter,
the indemnified party shall deliver to the indemnifying party, promptly after
the indemnified party's receipt thereof, copies of all notices and documents
(including court papers) received by the indemnified party relating to the Third
Party Claim.
If a Third Party Claim is made against an indemni fied party, the
indemnifying party shall be entitled to participate in the defense thereof and,
if it so chooses and acknowledges its obligation to indemnify the indemnified
party therefor, to assume the defense thereof with counsel selected by the
indemnifying party; PROVIDED, HOWEVER, that such counsel is not reasonably
objected to by the indemnified party. Should the indemnifying party so elect to
assume the defense of a Third Party Claim, the indemnifying party shall not be
liable to the indemnified party for legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof, unless the indemnified
party retains its own counsel due to a mutually agreed upon conflict of
interest. If the indemnifying party assumes such defense, the indemnified party
shall have the right to participate in the defense thereof and to employ counsel
(not reasonably objected to by the indemnifying party), at its own expense,
separate from the counsel employed by the indemnifying party, it being
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understood that the indemnifying party shall control such defense. The
indemnifying party shall be liable for the fees and expenses of counsel employed
by the indemnified party for any period during which the indemnifying party has
failed to assume the defense thereof (other than during the period prior to the
time the indemnified party shall have given notice of the Third Party Claim as
provided above).
If the indemnifying party so elects to assume the defense of any
Third Party Claim, all of the indemnified parties shall cooperate with the
indemnifying party in the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the indemnifying party's request) the provision
to the indemnifying party of records and information which are reasonably
relevant to such Third Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Whether or not the indemnifying party shall have
assumed the defense of a Third Party Claim, the indemnified party shall not
admit any liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the indemnifying party's prior written consent (which
consent shall not be unreasonably withheld).
SECTION 11.08. PROCEDURES RELATED TO INDEMNIFICATION FOR OTHER
CLAIMS (OTHER THAN TAX CLAIMS UNDER SECTION 11.01). In the event any indemnified
party should have a claim against any indemnifying party under Section 11.02 or
11.03 that does not involve a Third Party Claim being asserted against or sought
to be collected from such indemnified party, the indemnified party shall deliver
notice of such claim with reasonable promptness to the indemnifying party. The
failure by any indemnified party so to notify the indemnifying party shall not
relieve the indemnifying party from any liability which it may have to such
indemnified party under Section 11.02 or 11.03, except to the extent that the
indemnifying party demonstrates that it has been materially prejudiced by such
failure.
SECTION 11.09. PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS.
(a) If one party is responsible for the payment of Taxes pursuant to Section
11.01 (the "TAX INDEMNIFYING PARTY"), and the other party to this Agreement (the
"TAX INDEMNIFIED PARTY") receives notice of any deficiency, proposed adjustment,
assessment, audit, examination, suit, dispute or other claim (a "TAX CLAIM")
with respect to such Taxes, the Tax Indemnified Party shall promptly notify the
Tax Indemnifying Party in writing of such Tax Claim. If notice of a Tax
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Claim is not given to the Tax Indemnifying Party within a sufficient period of
time to allow such party effectively to contest such Tax Claim, or in reasonable
detail to apprise such party of the nature of the Tax Claim, in each case taking
into account the facts and circumstances with respect to such Tax Claim, the Tax
Indemnifying Party shall not be liable to the Tax Indemnified Party (or, any of
its Affiliates or any of their respective officers, directors, employees,
stockholders, agents or representatives) to the extent that the Tax Indemnifying
Party position is materially prejudiced as a result thereof.
(b) With respect to any Tax Claim, for which the Tax Indemnified
Party has not waived its rights to indemnification for Taxes under this
Agreement, the Tax Indemnifying Party shall assume and control all proceedings
taken in connection with such Tax Claim (including selection of counsel) and,
without limiting the foregoing, may in its sole discretion pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with any
taxing authority with respect thereto, and may, in its sole discretion, either
pay the Tax claimed and xxx for a refund where applicable law permits such
refund suits or contest the Tax Claim in any permissible manner; PROVIDED,
HOWEVER, that in the case of a Tax Claim relating solely to Taxes with respect
to any Clairol Entity for a Straddle Period, Seller and Buyer shall jointly
control all proceedings taken in connection with any such Tax Claim.
(c) The Tax Indemnified Party and each of its respective Affiliates
shall cooperate with the Tax Indemnifying Party in contesting any Tax Claim,
which cooperation shall include the retention and (upon the Tax Indemnifying
Party's request) the provision to the Tax Indemnifying Party of records and
information which are reasonably relevant to such Tax Claim, and making
employees available on a mutually convenient basis to provide additional
information or explanation of any material provided hereunder or to testify at
proceedings relating to such Tax Claim.
(d) In no case shall Buyer, the Buyer Subsidiaries, the Clairol
Entities or any of their respective officers, directors, employees,
stockholders, agents or representatives settle or otherwise compromise any Tax
Claim without Seller's prior written consent. Neither party shall settle a Tax
Claim relating solely to Taxes of the Company or the Clairol Subsidiaries for a
Straddle Period without the other party's prior written consent.
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ARTICLE XII
TAX MATTERS
SECTION 12.01. RESPONSIBILITY FOR PREPARATION AND FILING OF TAX
RETURNS AND AMENDMENTS. (a) For any taxable period of the Clairol Entities that
includes (but does not end on) the Closing Date, Buyer shall timely prepare and
file with the appropriate authorities all Tax returns, reports and forms
required to be filed and shall pay all Taxes due with respect to such returns,
reports and forms; PROVIDED that Seller shall remit to Buyer not less than ten
(10) days prior to the due date of any such return, report or form any amount
owed by Seller pursuant to Section 11.01 with respect to the taxable periods
covered by such returns, reports or forms. All such returns shall be prepared on
a basis consistent with the past practice of the Clairol Entities and in a
manner that does not distort taxable income provided such basis will not subject
Buyer to any penalties or fines or such basis is otherwise not prohibited by
Applicable Law. Buyer shall furnish such returns to Seller for its approval
(which approval shall not be unreasonably delayed or withheld) at least 30 days
prior to the due date for filing such returns.
(b) For any taxable period of the Clairol Entities that ends on or
before the Closing Date, Seller shall timely prepare and file with the
appropriate authorities all Tax returns, reports and forms required to be filed,
and shall pay all Taxes due with respect to such returns, reports and forms. To
the extent that they relate to the Clairol Entities, all such returns shall be
prepared on a basis consistent with the past practice of Clairol Entities and in
a manner that does not distort taxable income. Buyer and Seller agree to cause
the Clairol Entities to file all Tax returns, reports and forms for the period
including the Closing Date on the basis that the relevant taxable period ended
as of the close of business on the Closing Date, unless the relevant taxing
authority will not accept a return, report or form filed on that basis.
(c) Seller shall be responsible for filing any amended,
consolidated, combined or unitary Tax returns for taxable years ending on or
prior to the Closing Date. For those jurisdictions in which separate Tax returns
are filed by the Company or the Clairol Subsidiaries, any required amended
returns shall be prepared by Seller and furnished to the Company or the Clairol
Subsidiaries, as the case may be, for signature and filing at least 30 days
prior to the due date for filing such returns, and the Company or applicable
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Clairol Subsidiary, as the case may be, shall promptly sign and timely file any
such amended return.
SECTION 12.02. COOPERATION. Each of Seller, the Seller Entities, the
Clairol Entities and Buyer shall reasonably cooperate, and shall cause their
respective Affiliates, officers, employees, agents, auditors and representatives
reasonably to cooperate, in preparing and filing all returns, reports and forms
relating to Taxes, including maintaining and making available to each other all
records necessary in connection with Taxes and in resolving all disputes and
audits with respect to all taxable periods relating to Taxes. Buyer and Seller
recognize that Seller and its Affiliates will need access, from time to time,
after the Closing Date, to certain accounting and Tax records and information
held by the Clairol Entities to the extent such records and information pertain
to events occurring prior to the Closing Date; therefore, Buyer agrees, and
agrees to cause the Clairol Entities, (a) to use their best efforts to properly
retain and maintain such records until such time as Seller agrees that such
retention and maintenance is no longer necessary, and (b) to allow Seller and
its agents and representatives (and agents or representatives of any of its
Affiliates), at times and dates mutually acceptable to the parties, to inspect,
review and make copies of such records as Seller may deem necessary or
appropriate from time to time, such activities to be conducted during normal
business hours and at Seller's expense.
SECTION 12.03. REFUNDS AND CREDITS. Any refunds or credits of Taxes
of the Clairol Entities or Taxes relating to the Acquired Assets for any taxable
period ending on or before the Closing Date shall be for the account of Seller.
Any refunds or credits of Taxes of the Clairol Entities or Taxes relating to the
Acquired Assets for any taxable period beginning after the Closing Date shall be
for the account of the Buyer. Any refunds or credits of Taxes of the Clairol
Entities or Taxes relating to the Acquired Assets for any Straddle Period shall
be equitably apportioned between Seller and Buyer. Buyer shall, if Seller so
requests and at Seller's expense, cause the Clairol Entities to file for and
obtain any refunds or credits to which Seller is entitled under this Section
12.03. Buyer shall permit Seller to control the prosecution of any such refund
claim and, where deemed appropriate by Seller, shall cause the Clairol Entities
to authorize by appropriate powers of attorney such persons as Seller shall
designate to represent the Clairol Entities, as applicable, with respect to such
refund claim, PROVIDED,
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HOWEVER, that the prosecution of such could not give rise to Taxes imposed upon
any Buyer Indemnified Person. Buyer shall cause the Clairol Entities to forward
to Seller any such refund to which it is entitled under this Section 12.03
within 10 days after the refund is received (or reimburse Seller for any such
credit within 10 days after the credit is allowed or applied against other Tax
liability); PROVIDED, HOWEVER, that any such amounts payable to Seller shall be
net of any Tax cost or Tax benefit (including as a result of any basis
adjustment) to Buyer or the Clairol Entities, as the case may be, attributable
to the receipt of such refund and/or the payment of such amounts to Seller.
Seller and Buyer shall treat any payments under the preceding sentence that
Seller shall receive pursuant to this Section 12.03 as an adjustment to the
Purchase Price, unless a final determination (which shall include the execution
of a Form 870-AD or successor form) with respect to the Buyer or any of its
Affiliates causes any such payment not to be treated as an adjustment to the
Purchase Price for United Stated Federal income Tax purposes. Notwithstanding
the foregoing, the control of the prosecution of a claim for refund of Taxes
paid pursuant to a deficiency assessed subsequent to the Closing Date as a
result of an audit shall be governed by the provisions of Section 11.09.
SECTION 12.04. SECTION 338(h)(10). (a) SECTION 338(h)(10) ELECTIONS.
Buyer and Seller shall (i) join in making an election under Section 338(h)(10)
of the Code and Section 1.338(h)(10)-1 of the United States Treasury Regulations
promulgated thereunder (the "TREASURY REGULATIONS") and any comparable election
under state or local Tax law with respect to Clairol, Inc., any U.S. Clairol
Subsidiaries and U.S. legal entity acquired pursuant to these Transaction
Documents (the "ELECTIONS"), (ii) provide to the other party any information
reasonably requested in reasonable detail by such other party to permit the
Elections to be made, (iii) as promptly as practicable following the Closing
Date, take all actions reasonably requested in reasonable detail by the other
party to effect and preserve timely Elections (including filing such forms,
returns, elections, schedules and other documents reasonably requested in
reasonable detail by the other party to effect and preserve timely Elections in
accordance with the provisions of Section 1.338(h)(10)-1 of the Treasury
Regulations (or any comparable provisions of state or local tax law)) and (iv)
report Buyer's acquisitions pursuant to this Agreement consistent with such
Elections.
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(b) Section 338(g) ELECTIONS. Buyer and Seller agree that neither
Buyer nor Seller nor any Affiliate of either thereof shall make any election
pursuant to Section 338(g) of the Code and the United States Treasury
Regulations promulgated thereunder (or any comparable election under state or
local Tax law) with respect to any International Clairol Subsidiary.
SECTION 12.05. PURCHASE PRICE ALLOCATIONS. (a) ALLOCATIONS OF
PURCHASE PRICE. As soon as practicable following the Closing Date (but in no
event later than sixty (60) calendar days prior to the last date on which an IRS
Form 8023 ("FORM 8023") can be filed to provide for the Elections) Seller shall
prepare and deliver to Buyer, and Buyer and Seller shall agree on (i) an
allocation of that portion of the Purchase Price (as adjusted pursuant to the
operation of Section 2.02) attributable to the Clairol Shares pursuant to
Section 1.01(d) among the assets of the Company and each U.S. Clairol Subsidiary
and (ii) a completed Form 8023 and the required schedules thereto, providing for
each election under Section 338(h)(10) of the Code and Section 1.338(h)(10)-1 of
the Treasury Regulations.
(b) ADJUSTMENTS TO PURCHASE PRICE. Buyer and Seller agree that, to
the extent that the Purchase Price is adjusted pursuant to the operation of
Section 2.02, Buyer and Seller, for all Tax purposes (including for purposes of
completing or amending Form 8023), shall allocate such adjustment to the item or
items to which it is principally attributable.
(c) PARTIES AGREE TO REPORT THE ELECTIONS, PURCHASE PRICE
ALLOCATIONS AND INDEMNITY PAYMENTS CONSISTENTLY. Buyer and Seller agree to file
all Tax returns, reports and forms consistent with the Elections and with the
allocations described in Section 1.01(d) (including the allocations set forth on
Exhibit E) and this Section 12.05 and not to take any position inconsistent
therewith for any Tax purpose, unless required by Applicable Law. In addition,
Buyer and Seller agree to treat any indemnity payment under Article XI as an
adjustment to the Purchase Price (as adjusted pursuant to the operation of
Section 2.02) for all Tax purposes, unless otherwise required by Applicable Law.
(d) DISPUTES BY TAXING AUTHORITY. In the event that any of the
allocations described in Section 1.01(d) (including the allocations set forth on
Exhibit E) or this Section 12.05 are disputed by any Taxing Authority, the party
receiving notice of such dispute shall promptly notify the other party in
writing of such dispute, and Buyer and Seller shall cooperate in good faith in
responding to such
76
challenge in order to preserve the effectiveness of such allocation.
SECTION 12.06. TRANSFER TAXES. All transfer, documentary, sales,
use, value added, registration and other such Taxes (including all applicable
real estate transfer or gains Taxes) and related fees (including any penalties,
interest and additions to Tax) incurred in connection with this Agreement and
the transactions contemplated hereby ("TRANSFER TAXES") shall be shared equally
between Seller and Buyer, and Seller and Buyer shall cooperate in timely making
all filings, returns, reports and forms as may be required to comply with the
provisions of such Tax laws; PROVIDED, HOWEVER, that all Transfer Taxes which
are refundable to or otherwise recoverable by Buyer shall be paid solely by
Buyer.
SECTION 12.07. FIRPTA CERTIFICATE. Seller shall deliver to Buyer at
the Closing a certificate in form and substance satisfactory to Buyer, duly
executed and acknowledged, certifying any facts that would exempt the
transactions contemplated hereby from withholding pursuant to the provisions of
the Foreign Investment in Real Property Tax Act.
SECTION 12.08. BUYER ACTIVITY POST-CLOSING. Buyer shall not, with
respect to any Pre-Closing Tax Period, (a) file any amended Tax return with
respect to the Clairol Entities; (b) carry back any loss or other Tax attribute
of the Clairol Entities; or (c) take or advocate any position with respect to
Taxes of the Clairol Entities that reasonably could be expected to adversely
affect Seller or that would have the effect of shifting income to a Pre- Closing
Tax Period unless, in each case, Seller shall have consented in writing to such
action by the Buyer.
ARTICLE XIII
TERMINATION
SECTION 13.01. TERMINATION. Anything contained herein to the
contrary notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
(a) by mutual written consent of Seller and Buyer;
77
(b) by Seller if any of the conditions set forth in Section 3.02
shall have become incapable of fulfillment, and shall not have been waived
by Seller;
(c) by Buyer if any of the conditions set forth in Section 3.01
(other than the conditions set forth in Sections 3.01(b) or 3.01(c)) shall
have become incapable of fulfillment, and shall not have been waived by
Buyer; or
(d) by Seller, if the Closing does not occur on or prior to the
Twelve Month Anniversary of the date of this Agreement;
PROVIDED, HOWEVER, that the party seeking termination pursuant to clause (b),
(c) or (d) is not in breach in any material respect of any of its
representations, warranties, covenants or agreements contained in this
Agreement.
SECTION 13.02. RETURN OF CONFIDENTIAL INFORMATION. If the
transactions contemplated by this Agreement are terminated as provided herein:
(a) Buyer shall return all documents and other material received
from Seller, any Seller Entity, any Clairol Entity or any other Affiliate
of Seller relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to Seller; and
(b) all confidential information received by Buyer with respect to
the businesses of Seller and its Affiliates (including the Clairol
Entities, the Acquired Assets and the Assumed Liabilities) shall be
treated in accordance with the Confidentiality Agreement, which shall
remain in full force and effect notwithstanding the termination of this
Agreement.
SECTION 13.03. CONSEQUENCES OF TERMINATION. In the event of
termination by Seller or Buyer pursuant to Article XIII, written notice thereof
shall forthwith be given to the other party and the transactions contemplated by
this Agreement shall be terminated, without further action by either party. If
this Agreement is terminated and the transactions contemplated hereby are
abandoned as described in this Article XIII, this Agreement shall become void
and of no further force or effect, except for the provisions of (a) Section 7.01
relating to the obligation of Buyer to keep confidential certain information and
data obtained by it, (b) Section 15.03 relating to certain
78
expenses, (c) Section 15.04 relating to attorney fees and expenses, (d) Section
8.03 relating to publicity, (e) Section 15.10 relating to finder's fees and
broker's fees and (f) this Article XIII. Nothing in this Article XIII or
elsewhere in this Agreement shall be deemed to impair the right of either party
to compel specific performance by the other party of its obligations under this
Agreement. Subject to Section 13.04, nothing in this Article XIII shall be
deemed to release either party from any liability for any breach by such party
of the terms and provisions of this Agreement.
SECTION 13.04. PAYMENT. Buyer shall pay to Seller $500 million if
this Agreement is terminated by Seller pursuant to Section 13.01(d) at any time
on or after the Twelve Month Anniversary, which payment shall be Seller's sole
and exclusive remedy against and recovery from Buyer in the event of such a
termination. Any payment due under this Section shall be paid by wire transfer
of same- day funds on the date of termination of this Agreement.
ARTICLE XIV
SURVIVAL OF REPRESENTATIONS
SECTION 14.01. SURVIVAL OF REPRESENTATIONS. The representations and
warranties in this Agreement and in any certificate delivered pursuant hereto
(in each case other than the representations and warranties relating to Taxes)
shall survive the Closing solely for purposes of Sections 11.02 and 11.03 and
shall terminate at the close of business on the eighteen month anniversary of
the Closing Date, except that (a) representations and warranties relating to Tax
matters (including the representations and warranties set forth in Section 4.08)
shall not survive the Closing and (b) the representations and warranties set
forth in Section 4.03 (a) and, with respect to Xxxxxxx-Xxxxx Company Limited and
Xxxxxxx-Xxxxx de Mexico S. de X.X. de C.V., 4.03(b) shall terminate on the fifth
anniversary of the Closing Date.
ARTICLE XV
MISCELLANEOUS
SECTION 15.01. ASSIGNMENT. This Agreement and the rights and
obligations hereunder shall not be assignable or transferable by Buyer or Seller
without the prior written consent of the other party hereto; PROVIDED, HOWEVER,
that
79
Buyer may assign its right to purchase the Clairol Shares, the International
Shares or the Acquired Assets hereunder to a majority-owned, controlled
subsidiary of Buyer (each, a "BUYER SUBSIDIARY") without the prior written
consent of Seller; PROVIDED FURTHER, HOWEVER, that no assignment shall limit or
affect Buyer's obligations hereunder. Any attempted assignment in violation of
this Section 15.01 shall be void.
SECTION 15.02. NO THIRD-PARTY BENEFICIARIES. Except as provided in
Article XI, this Agreement is for the sole benefit of the parties hereto and
their permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any person, other than the parties hereto and such assigns,
any legal or equitable rights hereunder.
SECTION 15.03. EXPENSES. Whether or not the transactions
contemplated hereby are consummated, and except as otherwise specifically
provided in this Agreement, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs or expenses.
SECTION 15.04. ATTORNEY FEES. A party in breach of this Agreement
shall, on demand, indemnify and hold harmless the other party for and against
all reasonable out- of-pocket expenses, including legal fees, incurred by such
other party by reason of the enforcement and protection of its rights under this
Agreement. The payment of such expenses is in addition to any other relief to
which such other party may be entitled.
SECTION 15.05. AMENDMENTS. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto. By
an instrument in writing Buyer, on the one hand, or Seller, on the other hand,
may waive compliance by the other with any term or provision of this Agreement
that such other party was or is obligated to comply with or perform.
SECTION 15.06. NOTICES. All notices or other communications required
or permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent by prepaid telex, cable or telecopy or sent, postage prepaid, by
registered, certified or express mail or reputable overnight courier service and
shall be deemed given when so delivered by hand, telexed, cabled or telecopied,
or if mailed, three days after mailing (one
80
business day in the case of express mail or overnight courier service), as
follows:
(a) if to Buyer,
The Procter & Xxxxxx Company
0 Xxxxxxx & Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Chief Financial Officer
with a copy to:
The Procter & Xxxxxx Company
0 Xxxxxxx & Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Secretary
(b) if to Seller,
Xxxxxxx-Xxxxx Squibb Company
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxx, Esq.
SECTION 15.07. INTERPRETATION; EXHIBITS AND THE SELLER DISCLOSURE
SCHEDULE; DEFINITIONS. (a) The definitions of the terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise, (i) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or
81
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth herein), (ii) any reference herein to any Person
shall be construed to include the Person's successors and assigns, (iii) the
words "herein", "hereof" and "hereunder", and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (iv) all references herein to Articles, Sections, Appendices,
Exhibits or Schedules shall be construed to refer to Articles, Sections,
Appendices, Exhibits and Schedules of this Agreement and (v) the headings
contained in this Agreement, the Seller Disclosure Schedule, other Schedules or
any Appendix or Exhibit and in the table of contents to this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any matter set forth in any provision,
subprovision, section or subsection of the Seller Disclosure Schedule shall be
deemed set forth for all purposes of the Seller Disclosure Schedule to the
extent relevant and reasonably apparent. The Seller Disclosure Schedule, all
other Schedules and all Appendices and Exhibits annexed hereto or referred to
herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein. Any capitalized terms used in the Seller Disclosure
Schedule, any other Schedule or any Appendix or Exhibit annexed hereto but not
otherwise defined therein, shall have the meaning as defined in this Agreement.
In the event of an ambiguity or a question of intent or interpretation, 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.
(b) For all purposes hereof:
"ACQUIRED BUSINESS" means the businesses and operations conducted by the
Seller, Seller Entities, the Company, the Clairol Subsidiaries, the CMO
and the International Business Units, relating to the research and
development, manufacturing, marketing, distribution or sales of the hair
care, hair color, antiperspirant/deodorant and all other products of the
Company worldwide, as currently conducted, including the Clairol Entities,
the Acquired Assets and the Assumed Liabilities.
"AFFILIATE" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or
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indirect common control with such specified person; and
for the purposes of this definition, "CONTROL" when used with respect to
any specified person means the power to direct the management and policies
of such person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms "CONTROLLING"
and "CONTROLLED" have meanings correlative to the foregoing.
"ANTITRUST PROCEEDING" means any proceeding seeking a preliminary
injunction or other comparable legal impediment to the acquisition by
Buyer of the Acquired Business or to Buyer's freedom to operate the
Acquired Business after Closing under any U.S. Antitrust Laws.
"ASSET SELLING ENTITIES" means the U.S. Asset Selling Entities and the
International Asset Selling Entities.
"CLAIROL" means the Clairol Entities, the CMO Acquired Assets, the Other
U.S. Acquired Assets, the International Acquired Assets, the Other U.S.
Assumed Liabilities (other than any such Other U.S. Assumed Liabilities
related to Boclaro, Inc.) and the International Assumed Liabilities, taken
as a whole.
"CLAIROL ENTITIES" means the Company and the Clairol Subsidiaries.
"CLAIROL SUBSIDIARIES" means the U.S. Clairol Subsidiaries and the
International Clairol Subsidiaries.
"CMO ACQUIRED ASSETS" means certain assets attributable to the CMO, as set
forth in Exhibit F-1.
"CMO ASSUMED LIABILITIES" means certain liabilities attributable to the
CMO, as set forth in Exhibit G-1.
"CMO EXCLUDED ASSETS" means certain assets attributable to the CMO, as set
forth in Exhibit F-2.
"CMO EXCLUDED LIABILITIES" means certain liabilities attributable to the
CMO, as set forth in Exhibit G-2.
"CMO TRANSITIONAL SERVICES AGREEMENT" means the agreement dated as of the
date hereof between Buyer and Seller regarding the provision of certain
services by
83
the Buyer to the Seller in connection with the business of the CMO.
"EXCLUDED ASSETS" means the U.S. Excluded Assets and the International
Excluded Assets.
"EXCLUDED LIABILITIES" means the U.S. Excluded Liabilities and the
International Excluded Liabilities.
"GAAP" means United States generally accepted accounting principles.
"GBS TRANSITIONAL SERVICES AGREEMENT" means the agreement dated as of the
Closing Date between Buyer and Seller regarding the provision of certain
services by Seller's Global Business Services to Buyer and Buyer
Subsidiaries.
"IM TRANSITIONAL SERVICE AGREEMENT" means the agreement dated as of the
date hereof between Buyer and Seller regarding the provision of
information management services by Seller to Buyer and Buyer Subsidiaries.
"INTERNATIONAL ACQUIRED ASSETS" means certain assets of Seller and its
Affiliates related to the Acquired Business, as set forth in Exhibit H-1.
"INTERNATIONAL ASSUMED LIABILITIES" means certain liabilities of Seller
and its Affiliates related to the Acquired Business, as set forth in
Exhibit I-1.
"INTERNATIONAL BUSINESS UNIT" means the Acquired Business conducted in any
country outside the U.S. by the Asset Selling Entity or Asset Selling
Entities in each such country, together with the assets and liabilities
related thereto.
"INTERNATIONAL EXCLUDED ASSETS" means certain assets of Seller and its
Affiliates related to the Acquired Business, as set forth in Exhibit H-2.
"INTERNATIONAL EXCLUDED LIABILITIES" means certain liabilities of Seller
and its Affiliates related to the Acquired Business, as set forth in
Exhibit I-2.
"INTERNATIONAL SALES AND DISTRIBUTION TRANSITIONAL SERVICES AGREEMENT"
means the agreement dated as of the Closing Date between Buyer and Seller
regarding the provision of certain sales and distribution services by
Seller to Buyer and Buyer Subsidiaries.
84
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the business,
financial condition or results of operations of the Acquired Business.
"OTHER U.S. ACQUIRED ASSETS" means certain assets of the Seller and its
Affiliates related to the Acquired Business, as set forth in Exhibit J-1.
"OTHER U.S. ASSUMED LIABILITIES" means certain liabilities of the Seller
and its Affiliates related to the Acquired Business, as set forth in
Exhibit K-1.
"OTHER U.S. EXCLUDED ASSETS" means certain assets of the Seller and its
Affiliates related to the Acquired Business, as set forth in Exhibit J-2.
"OTHER U.S. EXCLUDED LIABILITIES" means certain liabilities of the Seller
and its Affiliates related to the Acquired Business, as set forth in
Exhibit K-2.
"PERMITTED LIENS" means (a) Liens set forth in Section 4.09 of the Seller
Disclosure Schedule; (b) mechanics', carriers', workmen's, repairmen's or
other like Liens arising or incurred in the ordinary course of business,
Liens arising under original purchase price conditional sales contracts
and equipment leases with third parties entered into in the ordinary
course of business and liens for Taxes and other governmental charges
which are not due and payable or which may thereafter be paid without
penalty; (c) mortgages and Liens which secure debt that is reflected as a
liability on the Clairol Balance Sheet and the existence of which is
indicated in the notes thereto; and (d) other imperfections of title or
encumbrances, if any, which do not, individually or in the aggregate,
materially impair the continued use and operation of the assets to which
they relate in the Acquired Business.
"PERSON" means any individual, firm, corporation, partnership, limited
liability company, trust, joint venture, Governmental Entity or other
entity.
"PRIME RATE" means the rate of interest from time to time publicly
announced by Citibank, N.A., in its New York office as its prime or base
rate, calculated on the basis of the actual number of days elapsed over
365.
85
"SELLER ENTITIES" means the International Stock Selling Entities and the
Asset Selling Entities.
"SIX MONTH ANNIVERSARY" means the six month anniversary of the date of
this Agreement.
"TRANSITIONAL SERVICES AGREEMENTS" means the CMO Transitional Services
Agreement, the GBS Transitional Services Agreement, the International
Sales and Distribution Transitional Services Agreement and the IM
Transitional Services Agreement set forth in Xxxxxxxx X-0, X-0, X-0 xxx
X-0, respectively.
"TWELVE MONTH ANNIVERSARY" means the twelve month anniversary of the date
of this Agreement.
"U.S." means the 00 xxxxxx xx xxx Xxxxxx Xxxxxx xx Xxxxxxx and the
District of Columbia, and does not include the Commonwealth of Puerto Rico
or any other territory or possession of the United States of America.
"U.S. ACQUIRED ASSETS" means the CMO Acquired Assets and the Other U.S.
Acquired Assets.
"U.S. ACQUIRED LIABILITIES" means the CMO Acquired Liabilities and the
Other U.S. Acquired Liabilities.
"U.S. ANTITRUST LAWS" means the HSR Act and any other Applicable Laws in
the U.S. that pertain to antitrust or competition matters.
"U.S. EXCLUDED ASSETS" means the CMO Excluded Assets and the Other U.S.
Excluded Assets.
"U.S. EXCLUDED LIABILITIES" means the CMO Excluded Liabilities and the
Other U.S. Excluded Liabilities.
(c) The following terms have the meanings given such terms in the
Sections set forth below:
Term Section
---- -------
Accounting Firm 2.02(a)
Acquired Assets 2.01(e)
Acquired Rights Directive 9.03(b)
Adjusted Closing Date Amount 2.02(b)
Applicable Laws 4.16(a)
Assumed Liabilities 1.02
Benefit Plans 4.14(a)
BMS Names 7.03
86
Boclaro Working Capital Statement 4.07(b)
Buyer Subsidiary 15.01
Buyer Tax Act 11.01(a)
Buyer's 401(k) Plan 9.05(a)
Buyer's Pension Plan 9.04
Buyer Reimbursement Plan 9.07(d)
Buyer Severance Policies 9.08
Buyer Welfare Benefit Plans 9.07(a)
Covered Products 7.07
Clairol Balance Sheet 4.07
Clairol Intellectual Property 4.11(b)
Clairol Names 5.04
Clairol Shares Preamble
Clairol Subsidiaries 4.06(a)
Closing 2.01(a)
Closing Date 2.01(a)
Closing Date Amount 2.01(b)
Closing Working Capital 2.02(a)
CMO Working Capital Statement 4.07(b)
Code 4.08(a)
Collective Bargaining Agreements 9.02
Clairol Balance Sheet 4.07
Clairol Working Capital 2.02(b)
Company Preamble
Company Property 4.10(a)
Confidentiality Agreement 7.01
Continuation Period 9.03(c)
Contracts 4.12(a)
Current Liabilities 2.02(b)
Current Assets 2.02(b)
DOJ 8.05(a)
EC Merger Regulation 3.01(c)
Elections 12.04
Employees 9.01(a)
Environmental Permits 4.16(b)
Environmental Reports 4.16(b)
Environmental Laws 4.16(b)
Excluded Inventories Exhibit H-2
Excluded Receivables Exhibit H-2
Expatriates 9.11
ERISA 4.14(a)
Financial Statements 4.07
Financing 6.05
Form 8023 12.05(a)
FTC 8.05(a)
Governmental Entity 3.01(b)
Hazardous Substances 4.16(b)
HSR Act 3.01(c)
indemnified party 11.07
Intellectual Property 4.11(a)
87
International Asset Purchase Agreements 1.01(c)
International Asset Selling Entity Preamble
International Shares Preamble
International Stock Purchase Agreement 1.01(b)
International Clairol Subsidiary Preamble
International Stock Selling Entity Preamble
Inventories Exhibit H-1
Leased Property 4.10(a)
Liens 4.02(a)
Lion 7.07
Lion Agreement 7.07
Loss 11.05
Mexican Merger Regulation 3.01(c)
Notice of Disagreement 2.02(a)
Other Intellectual Property 4.11(b)
Other Transaction Documents 3.01(d)
Owned Property 4.10
Pension Plans 4.14(a)
Plans 11.03
Pre-Closing Tax Period 4.08(a)
Property Taxes 11.01(c)
Purchase Price 1.01(a)
Receivables Exhibit H-1
Records Exhibit H-1
Seller Disclosure Schedule Article IV
Seller Guarantee 11.03
Seller's 401(k) Plan 9.05(a)
Seller's BEP-SIP 9.06(a)
Seller Reimbursement Plan 9.07(d)
Seller Severance Policies 9.08
Seller's Stock Fund 9.05(b)
Seller Welfare Benefit Plans 9.07(a)
Statement 2.02(a)
Straddle Period 11.01(c)
Support Services 8.07
Tax 4.08(a)
Tax Claim 11.09(a)
Tax Indemnified Party 11.09(a)
Tax Indemnifying Party 11.09(a)
Taxes 4.08(a)
Third Party Claim 11.07
Transaction 1.01(a)
Transaction Documents 4.01
Transfer Documents 2.01(e)
Transfer Taxes 12.06
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Transferred Contracts 8.01
Treasury Regulations 12.04
U.S. Asset Selling Entity Preamble
U.S. Clairol Subsidiaries 4.06(a)
W.C. Amount 2.02(b)
Working Capital 2.02(c)
Working Capital Statement 2.02(a)
SECTION 15.08. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts have
been signed by each of the parties and delivered to the other party.
SECTION 15.09. ENTIRE AGREEMENT. This Agreement, the Other
Transaction Documents and the Confidentiality Agreement, in each case along with
the Appendices, Exhibits and Schedules hereto and thereto, contain the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings
relating to such subject matter. Neither party shall be liable or bound to any
other party in any manner by any representations, warranties or covenants
relating to such subject matter except as specifically set forth herein, in the
Other Transaction Documents or in the Confidentiality Agreement.
SECTION 15.10. BROKER AND FINDER FEES. Each party hereto hereby
represents and warrants that (a) the only brokers or finders that have acted for
such party in connection with this Agreement or the transactions contemplated
hereby or that may be entitled to any brokerage fee, finder's fee or commission
in respect thereof are Xxxxxxx, Xxxxx & Co. with respect to Seller and X.X.
Xxxxxx with respect to Buyer and (b) each party shall pay all fees or
commissions which may be payable to the firm so named with respect to such
party.
SECTION 15.11. SEVERABILITY. If any provision of this Agreement (or
any portion thereof) or the application of any such provision (or any portion
thereof) to any person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof (or the remaining portion thereof) or the application of such provision
to any other persons or circumstances.
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SECTION 15.12. BULK TRANSFER LAWS. Buyer hereby waives compliance by
Seller and its Affiliates with the provisions of any so-called "bulk transfer
law" of any jurisdiction in connection with the sale of the Acquired Business.
SECTION 15.13. CONSENT TO JURISDICTION. Each of Buyer and Seller
irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of
the State of
New York,
New York County, and (b) the United States District Court
for the Southern District of
New York, for the purposes of any suit, action or
other proceeding arising out of this Agreement, the Other Transaction Documents
or any transaction contemplated hereby or thereby. Each of Buyer and Seller
agrees to commence any action, suit or proceeding relating hereto either in the
United States District Court for the Southern District of
New York or if such
suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the Supreme Court of the State of
New York,
New York
County. Each of Buyer and Seller further agrees that service of any process,
summons, notice or document by U.S. registered mail to such party's respective
address set forth above shall be effective service of process for any action,
suit or proceeding in
New York with respect to any matters to which it has
submitted to jurisdiction in this Section 15.13. Each of Buyer and Seller
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contem plated hereby in (i) the Supreme Court of the State of
New York,
New York
County, or (ii) the United States District Court for the Southern District of
New York, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
SECTION 15.14. WAIVER OF JURY TRIAL. Each party hereto hereby waives
to the fullest extent permitted by applicable law, any right it may have to a
trial by jury in respect of any litigation directly or indirectly arising out
of, under or in connection with this Agreement or any of the Other Transaction
Documents or any transaction contemplated hereby or thereby. Each party hereto
(a) certifies that no representative, agent or attorney of any other party has
represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce that foregoing waiver and (b) acknowledges
that it and the other parties hereto have been induced to enter into this
Agreement and the Other Transaction Documents, as
90
applicable, by, among other things, the mutual waivers and certifications in
Section 15.13 and in this Section 15.14.
SECTION 15.15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF SUCH STATE.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
XXXXXXX-XXXXX SQUIBB COMPANY,
by
______________________________
Name:
Title:
THE PROCTER & XXXXXX COMPANY,
by
______________________________
Name:
Title:
