PURCHASE AGREEMENT
BY AND AMONG
REVLON, INC.
REVLON CONSUMER PRODUCTS CORPORATION
REMEA 2 B.V.
REVLON EUROPE, MIDDLE EAST AND AFRICA, LTD.
REVLON INTERNATIONAL CORPORATION
EUROPEENNE DE PRODUITS DE BEAUTE S.A.
DEUTSCHE REVLON GmbH & CO. K.G.
REVLON CANADA, INC.
REVLON DE ARGENTINA, S.A.I.C.
REVLON SOUTH AFRICA (PROPRIETARY) LIMITED
REVLON (SUISSE) S.A.
REVLON OVERSEAS CORPORATION C.A.
CEIL - COMERCIAL, EXPORTADORA, INDUSTRIAL LTDA.
REVLON MANUFACTURING LTD.
REVLON BELGIUM N.V.
REVLON (CHILE) S.A.
REVLON (HONG KONG) LIMITED
REVLON, S.A.
REVLON NEDERLAND B.V.
REVLON NEW ZEALAND LIMITED
EUROPEAN BEAUTY PRODUCTS S.p.A.
AND
BEAUTY CARE PROFESSIONAL PRODUCTS LUXEMBOURG, S.a.r.l.
DATED AS OF FEBRUARY 18, 2000
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TABLE OF CONTENTS
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ARTICLE I CERTAIN DEFINED TERMS
Section 1.1 "A.P. Products Agreement" ....................................3
Section 1.2 "Acquired Assets" ............................................3
Section 1.3 "Acquired Books and Records" .................................5
Section 1.4 "Acquired Companies' Intellectual Property" ..................5
Section 1.5 "Acquired Contracts" .........................................7
Section 1.6 "Acquired Intellectual Property" .............................7
Section 1.7 "Acquired Intellectual Property Contracts" ...................8
Section 1.8 "Acquired Leases" ............................................8
Section 1.9 "Acquired Manufacturing Equipment" ...........................8
Section 1.10 "Acquired Personal Property" .................................9
Section 1.11 "Adjusted U.S. GAAP"..........................................9
Section 1.12 "American Crew Agreement" ....................................9
Section 1.13 "Assumed Liabilities" ........................................9
Section 1.14 "Business Intellectual Property" ............................10
Section 1.15 "Common" ....................................................10
Section 1.16 "Creative Nail Agreement" ...................................10
Section 1.17 "Excluded Assets" ...........................................11
Section 1.18 "Excluded Liabilities".......................................12
Section 1.19 "Funded Debt"................................................12
Section 1.20 "General Wig Agreement" .....................................12
Section 1.21 "Governmental Entity" .......................................12
Section 1.22 "Huber Agreement" ...........................................12
Section 1.23 "Income Taxes" ..............................................12
Section 1.24 "Non-Income Taxes" ..........................................12
Section 1.25 "Intercosmo Agreement" ......................................12
Section 1.26 "Liability" .................................................13
Section 1.27 "Licensed Intellectual Property" ............................13
Section 1.28 "Licensed Revlon Marks" .....................................13
Section 1.29 "Pan-African JV Agreement" ..................................13
Section 1.30 "Revlon Marks"...............................................13
Section 1.31 "Other Definitions"..........................................13
ARTICLE II PURCHASE AND SALE
Section 2.1 Purchase and Sale of Shares..................................20
Section 2.2 Purchase and Sale of Certain Assets..........................20
Section 2.3 Consideration................................................21
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Section 2.4 Closing......................................................21
Section 2.5 Deliveries by the Sellers....................................22
Section 2.6 Deliveries by Buyer..........................................24
Section 2.7 Determination of Estimated Purchase Price....................25
Section 2.8 Contingent Consideration.....................................27
Section 2.9 Post-Closing Adjustments.....................................29
Section 2.10 Intercompany Liabilities.....................................33
ARTICLE III RELATED MATTERS
Section 3.1 Books and Records of the Acquired Companies..................35
Section 3.2 No Ongoing or Transition Services............................35
Section 3.3 Distributions................................................36
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
Section 4.1 Organization.................................................37
Section 4.2 Authorization; Validity of Agreement; Sellers Action.........38
Section 4.3 Capital Stock................................................38
Section 4.4 Ownership of the Shares......................................39
Section 4.5 Consents and Approvals; No Violations........................40
Section 4.6 Business Financial Statements................................41
Section 4.7 Assets Necessary to Business.................................42
Section 4.8 Title to Property and Assets.................................42
Section 4.9 Condition of Property........................................42
Section 4.10 No Undisclosed Liabilities...................................43
Section 4.11 Absence of Certain Changes...................................43
Section 4.12 Real Property................................................45
Section 4.13 Intellectual Property........................................48
Section 4.14 Litigation...................................................49
Section 4.15 No Default; Compliance with Applicable Laws..................50
Section 4.16 Certain Contracts and Arrangements...........................50
Section 4.17 Employee Benefit Plans; ERISA................................51
Section 4.19 Environmental Protection.....................................56
Section 4.20 Insurance....................................................57
Section 4.21 Labor Matters................................................58
Section 4.22 Affiliate Agreements.........................................58
Section 4.23 Brokers......................................................59
Section 4.24 Permits......................................................59
Section 4.25 Customers and Suppliers......................................59
Section 4.26 SEC Financial Statements.....................................60
Section 4.27 Anti-Loading.................................................60
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 5.1 Organization.................................................61
Section 5.2 Authorization; Validity of Agreement;
Necessary Action.............................................61
Section 5.3 Consents and Approvals; No Violations........................62
Section 5.4 Financing....................................................62
Section 5.5 Solvency of the Buyer, Acquired Companies
and Subsidiaries at the Closing Date.........................63
Section 5.6 Litigation...................................................63
Section 5.7 Brokers......................................................63
Section 5.8 Acquisition of Capital Stock of Acquired
Companies for Investment.....................................63
ARTICLE VI COVENANTS
Section 6.1 Interim Operations of the Business by Sellers................63
Section 6.2 Preservation of Business.....................................66
Section 6.3 Access to Information........................................67
Section 6.4 Consents and Approvals.......................................67
Section 6.5 Publicity....................................................69
Section 6.6 Notification of Certain Matters..............................70
Section 6.7 Further Assurances...........................................70
Section 6.8 Employees; Employee Benefits.................................70
Section 6.9 Certain Tax Matters..........................................79
Section 6.10 Supplemental Disclosure......................................90
Section 6.11 Licensing Arrangements.......................................90
Section 6.12 Transitional Use of Excluded Intellectual
Property Rights..............................................92
Section 6.13 Insurance; Risk of Loss......................................93
Section 6.14 Separation of the Business from Sellers......................94
Section 6.15 Guarantees and Other Commitments.............................96
Section 6.16 Exclusivity..................................................97
Section 6.17 Noncompete and Nonsolicitation...............................97
Section 6.18 Confidentiality.............................................101
Section 6.19 Litigation Support..........................................103
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Section 6.20 Restructuring...............................................103
Section 6.21 Estoppel Certificates.......................................103
Section 6.22 Right of Offset.............................................103
Section 6.23 Interim Operations of the Business by Buyers................104
Section 6.24 Transition Countries........................................104
Section 6.25 Preparation of GAAP Statement of Net Assets.................105
Section 6.26 Sellers Cooperation in Buyer Preparation
of SEC Financial Statements.................................105
Section 6.27 Amend User Agreements.......................................106
Section 6.28 Cease and Desist............................................106
Section 6.29 Buyer Cooperation with Respect to Certain
Books and Records...........................................106
Section 6.30 Sellers' Agreement to Indemnify for American
Crew Earnouts...............................................107
Section 6.31 Third Party Beneficiary under Purchase Agreements...........107
Section 6.32 Revlon S.L. Tax Losses......................................107
Section 6.33 Creation of RPHC............................................107
Section 6.34 Research & Development Projects.............................108
Section 6.35 Delivery of Formula Documentation...........................108
Section 6.36 Spanish Headquarters........................................108
Section 6.37 MIS.........................................................108
Section 6.38 Revlon Coiffure.............................................109
Section 6.39 Transitional Services.......................................109
Section 6.40 Accrued Italian Severance...................................109
Section 6.41 Italian Receivables.........................................109
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE PARTIES.............110
Section 7.1 Conditions to Each Party's Obligation.......................110
Section 7.2 Conditions to Obligations of the Sellers....................111
Section 7.3 Conditions to Obligations of the Buyer......................111
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER ..................113
Section 8.1 Termination.................................................113
Section 8.2 Procedure and Effect of Termination.........................113
Section 8.3 Amendment, Modification and Waiver..........................114
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ARTICLE IX SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 9.1 Survival of Representations and Warranties and
Agreements...................................................114
Section 9.2 Sellers' Agreement to Indemnify..............................115
Section 9.3 Buyer's Agreement to Indemnify...............................118
Section 9.4 Third Party Indemnification..................................120
Section 9.5 Purchase Price Adjustment....................................122
ARTICLE X MISCELLANEOUS
Section 10.1 Fees and Expenses............................................123
Section 10.2 Notices......................................................123
Section 10.3 Severability.................................................125
Section 10.4 Binding Effect; Assignment...................................125
Section 10.5 No Third Party Beneficiaries.................................126
Section 10.6 Appointment of Seller Representative.........................126
Section 10.7 Interpretation...............................................126
Section 10.8 Exclusive Jurisdiction and Consent to Service................127
Section 10.9 Entire Agreement.............................................127
Section 10.10 Governing Law................................................127
Section 10.11 Counterparts.................................................128
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EXHIBIT INDEX
<S> <C>
A. Reserved
B. License Agreement (COLORLOCK).........................................................(Section)2.5(e)(i)
C. Patent Formula and KnowHow License Agreement (Revlon to Buyer).......................(Section)2.5(e)(ii)
D. License Agreement (Revlon Marks)....................................................(Section)2.5(e)(iii)
E. License Agreement (INTERACTIVES).....................................................(Section)2.5(e)(iv)
F. The Toiletries Agreement..............................................................(Section)2.5(e)(v)
G. The Cosmetics Agreement..............................................................(Section)2.5(e)(vi)
H. The South Africa Agreement..........................................................(Section)2.5(e)(vii)
I. The Charlie Agreement..............................................................(Section)2.5(e)(viii)
J. The Natural Honey Agreement..........................................................(Section)2.5(e)(ix)
K. The Transitional Services Agreement......................................................(Section)2.5(j)
L. Revlon Professional Holding Company Term Sheet.........................................(Section)6.33(a)
M. Delivery of Formula Documentation..........................................................(Section)6.35
N. MIS Agreement.............................................................................(Section)6.37
O. Opinions (from Sellers' U.S. and Spain Counsel)..........................................(Section)7.3(g)
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PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of February 18, 2000 (the "Agreement"), by and
among Revlon, Inc., a Delaware corporation ("Revlon"), Revlon Consumer Products
Corporation, a Delaware corporation and a wholly owned subsidiary of Revlon
("RCPC"), REMEA, 2 B.V., a Dutch corporation and an indirect wholly owned
subsidiary of Revlon ("REMEA"), Revlon Europe, Middle East and Africa, Ltd., a
corporation organized under the laws of Bermuda ("REMEA LTD"), Revlon
International Corporation, a Delaware corporation and an indirect wholly owned
subsidiary of Revlon ("RIC"), Europeenne de Produits de Beaute S.A., a
corporation organized under the laws of France and an indirect wholly owned
subsidiary of Revlon ("EPB"), Deutsche Revlon GmbH & Co. K.G., a corporation
organized under the laws of Germany and an indirect wholly owned subsidiary of
Revlon ("Deutsche Revlon"), Revlon Canada, Inc., a corporation organized under
the laws of Canada and an indirect wholly owned subsidiary of Revlon ("Revlon
Canada"), Revlon de Argentina, S.A.I.C., a corporation organized under the laws
of Argentina and an indirect wholly owned subsidiary of Revlon ("Revlon
Argentina"), Revlon South Africa (Proprietary) Limited, a corporation organized
under the laws of South Africa and an indirect wholly owned subsidiary of Revlon
("Revlon South Africa"), Revlon (Suisse) S.A., a corporation organized under the
laws of Switzerland and an indirect wholly owned subsidiary of Revlon ("Revlon
Suisse"), Revlon Overseas Corporation C.A., a corporation organized under the
laws of Venezuela and an indirect wholly owned subsidiary of Revlon ("Revlon
Venezuela"), CEIL - Comercial, Exportadora, Industrial Ltda., a corporation
organized under the laws of Brazil and an indirect wholly owned subsidiary of
Revlon ("CEIL"), Revlon Manufacturing Ltd., a corporation organized under the
laws of Bermuda and an indirect wholly owned subsidiary of Revlon ("Revlon
Manufacturing"), Revlon Belgium, N.V., a corporation organized under the laws of
Belgium and an indirect wholly owned subsidiary of Revlon ("Revlon Belgium"),
Revlon (Chile) S.A., a corporation organized under the laws of Chile and an
indirect wholly owned subsidiary of Revlon ("Revlon Chile"), Revlon (Hong Kong)
Limited, a corporation organized under the laws of Hong Kong and an indirect
wholly owned subsidiary of Revlon ("Revlon Hong Kong"), Revlon, S.A., a
corporation organized under the laws of Mexico and an indirect wholly owned
subsidiary of Revlon ("Revlon Mexico"), Revlon Nederland B.V., a corporation
organized under the laws of the Netherlands and an indirect wholly owned
subsidiary of Revlon ("Revlon Nederland"), European Beauty Products S.p.A, a
corporation organized under the laws of Italy ("EBP Italy"), Revlon New Zealand
Limited, a corporation organized under the laws of New Zealand ("Revlon New
Zealand," and together with Revlon, RCPC, REMEA, REMEA LTD, RIC, EPB,
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Deutsche Revlon, Revlon Canada, Revlon Argentina, Revlon South Africa, Revlon
Suisse, CEIL, Revlon Manufacturing, Revlon Belgium, Revlon Chile, Revlon Hong
Kong, Revlon Mexico, Revlon Nederland, Revlon Venezuela and EBP Italy, the
"Sellers"), and Beauty Care Professional Products Luxembourg, S.a.r.l., a
Luxembourg corporation (the "Buyer").
WHEREAS, the Sellers desire to sell, and the Buyer desires to purchase, the
business as conducted by Sellers and their Affiliates, including the Acquired
Companies and the Subsidiaries on or prior to the Closing Date, of
manufacturing, distributing, advertising, promoting, marketing and selling (i)
worldwide professional and salon hair care and other professional and salon
personal care products (including professional cosmetics, skin care, body care,
nail care, hard goods, implements and sundries) and professional and salon
services (including schools and academies), (ii) worldwide ethnic hair care and
other ethnic personal care products (including retail and professional
channels), and (iii) retail branded hair care and other personal care products,
in the case of subsection (iii) under those brands set forth on Annex A attached
hereto and/or set forth on Sections 1.4(a) or 1.6(a) of the Disclosure Letter
attached hereto (the "Disclosure Letter") which are used in retail channels on
the date hereof (other than any business conducted under the brands "Bain de
Soleil" and "Milk Plus 6") (the "Business"). Products referred to in clauses
(i), (ii) and (iii) above shall be collectively referred to herein as the
"Products."
WHEREAS, the Business (i) is presently conducted primarily by (a) Roux
Laboratories, Inc., a New York corporation and a wholly owned subsidiary of RCPC
("Roux"), and Fermodyl Professionals Inc., a Delaware corporation and a wholly
owned subsidiary of RCPC ("Fermodyl"), (b) Revlon Coiffure SNC, a company
organized under the laws of France ("Revlon Coiffure"), (c) Revlon S.L., a
corporation organized under the laws of Spain ("Revlon S.L.") (it being
understood that the business conducted by Revlon S.L. will be restructured (the
"Restructuring") as set forth in Section 4.11 of the Disclosure Letter; the
companies conducting the Business upon completion of the Restructuring, together
with their respective subsidiaries, and together with Roux, Fermodyl and Revlon
Coiffure, which are identified in Section 4.3 of the Disclosure Letter, the
"Acquired Companies"), and (d) the Sellers in the United Kingdom, Canada,
Argentina, South Africa, Venezuela, Brazil, Mexico, Australia, New Zealand, Hong
Kong, Chile, Indonesia, France, Italy, Belgium, the Netherlands, Luxembourg,
Germany, Austria, Switzerland, and various African and other European countries
in conjunction with their respective businesses other than the Business and (ii)
includes certain other assets to be acquired and licensed, and certain other
liabilities to be assumed, pursuant hereto; and
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WHEREAS, pursuant to the terms and conditions of this Agreement, (i)
Sellers desire to sell, and Buyer desires to purchase (a) all of the outstanding
shares of common stock of each of the Acquired Companies and, indirectly, each
subsidiary of the Acquired Companies (the "Subsidiaries") owned, directly or
indirectly, by Sellers (the "Shares") and (b) the Acquired Assets; and (ii) the
Sellers desire to transfer, and the Buyer desires to assume, the Assumed
Liabilities.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
CERTAIN DEFINED TERMS
As used in this Agreement, except as otherwise expressly provided or unless
the context otherwise requires, each of the following terms shall have the
meanings listed below. Singulars shall include plurals and vice versa, as
appropriate.
Section 1.1 "A.P. Products Agreement" means the stock purchase
agreement dated as of May 13, 1998, as amended as of July 15, 1999, by and among
Roux, a buyer, RCPC, as guarantor, and Brian K. Marks, as seller, in connection
with the purchase by Roux of A.P. Products Ltd.
Section 1.2 "Acquired Assets" means, to the extent not owned by the
Acquired Companies or the Subsidiaries, all of the right, title and interest
that the Sellers and their Affiliates possess in and to all of the assets,
rights or property held for use or used exclusively or primarily in the Business
(other than Excluded Assets) or, without duplication, as reflected on the Final
Statement of Net Assets, including, without limitation, all of the following:
(a) the Acquired Intellectual Property;
(b) the Acquired Contracts;
(c) the Acquired Leases and the Acquired Real Property Leases;
(d) the Acquired Books and Records;
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(e) all finished goods, work-in-process, samples, displays,
components, bulks, raw materials, and other inventories dedicated for use in the
Business (or otherwise reflected in the Final Statement of Net Assets) and that
portion of Common bulks, raw materials, components and other non-finished
inventories of the Sellers allocable to the Business (to the extent reflected in
the Final Statement of Net Assets), if any;
(f) all warranties or claims against third parties to the extent
arising out of the operation of the Business related exclusively or primarily to
the Business, other than rights and claims, whether now existing or arising
hereafter, for credits or refunds of (x) Income Taxes (with respect to
pre-Closing periods) and (y) Non-Income Taxes (but only to the extent that the
credits or refunds relate to a Non-Income Tax that is an Excluded Liability) and
other than any such claims or warranties to the extent relating to Excluded
Assets or Excluded Liabilities;
(g) all permits, certificates, licenses, orders, registrations,
approvals, concessions, franchises, and other authorizations of, and
applications to, all Governmental Entities to the extent transferable and
related exclusively or primarily to the ownership or use of any Acquired Assets
or maintenance and operation of the Business;
(h) all customers' files, correspondence, files, notes, invoices,
price lists, distributor lists, supplier lists, parts lists and vendor lists and
all Common items to the extent they relate to the Business, in each case, to the
extent related exclusively or primarily to the Business;
(i) all research and development equipment exclusively dedicated to
the Business and projects (i) conducted at any of the facilities of the Acquired
Companies or Subsidiaries and (ii) conducted at the Sellers' Edison, New Jersey
property and exclusively dedicated to the Business as set forth in Section
1.2(i) of the Disclosure Letter (collectively, the "R&D Projects");
(j) all marketing, advertising and promotional materials,
point-of-sale and point-of-purchase materials, brochures and advertising copy
relating exclusively or primarily to the Business subject, with respect to the
use of the trademarks and copyrights therein not included in the Acquired
Intellectual Property or the Acquired Companies' Intellectual Property, to the
licenses contemplated under Section 6.11 and 6.12 hereof;
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(k) all receivables from third parties to the extent arising from
the Business and all "Due From Sellers - - Receivable", to the extent reflected
on the Final Statement of Net Assets, which items shall be dealt with in
accordance with Section 2.7(d) hereof;
(l) the Acquired Manufacturing Equipment and all office equipment
and furniture located at the Sellers' 625 Madison Avenue offices and used
primarily or exclusively by the Affected Employees; and
(m) the Acquired Personal Property.
Section 1.3 "Acquired Books and Records" means all of the Sellers' and
their Affiliates' books and records to the extent related to the ownership or
use of the Acquired Assets or operations of the Business (or copies of relevant
portions thereof with respect to Common books and records used in the Sellers'
other businesses), including without limitation, all books and records related
to Affected Employees, the purchase of materials, supplies and services, the R&D
Projects, Proprietary Information, advertising and media, manufacture,
distribution and sale of Products and dealings with customers of the Business,
and all stock books, stock ledgers and minute books of the Acquired Companies
and the Subsidiaries. As used herein, books and records shall include without
limitation all computerized books and records and other computerized storage
media and the use of software used in connection therewith (to the extent such
rights to use software are transferable under any related software license)
except such books, records and software provided pursuant to the Transitional
Services Agreements or is otherwise an Excluded Asset. To the extent that
software relating to the Acquired Books and Records is not transferable or is
otherwise an Excluded Asset, Sellers shall make reasonable best efforts to
provide the relevant Acquired Books and Records in another format reasonably
acceptable to Buyer.
Section 1.4 "Acquired Companies' Intellectual Property" means all of
the right, title and interest that the Acquired Companies and each of the
Subsidiaries possess in, to and under the following rights, assets and
properties of the Business, together with all income, royalties, damages and
payments due or payable (including damages and payments for past, present and
future infringements or misappropriations thereof and the right to sue and
recover damages for past, present and future infringements or misappropriations
thereof):
(a) all trademarks, service marks, names, source identifiers, trade
dress, corporate names, business names, fictional names or "d/b/a's", trade
names, Internet domain names, logos, slogans and stylized renderings of any of
the foregoing
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and any and all registrations and applications relating thereto (collectively,
"Trademark Rights"), exclusively or primarily used or held for use in the
Business, including those registrations and applications listed in Section
1.4(a) of the Disclosure Letter (taking into account the footnotes thereon),
together with the goodwill of the Business symbolized thereby (in all cases,
excluding the Revlon Marks, but including any portion of the Revlon Marks that
is other than the word "REVLON" and/or the initial "R" (other than as part of an
actual word that begins with "R"), any derivative thereof, such as "REVLONISSMO"
or "RMEN", or any contractions, abbreviations, translations, or variations
thereof);
(b) all patents, patent applications and registrations, invention
disclosures, utility models, inventors certificates, reissues, continuations,
re-examinations, divisions, continuations-in-part, provisional applications,
design registrations and applications for such property (collectively, "Patent
Rights") exclusively or primarily used or held for use in the Business,
including those listed in Section 1.4(b) of the Disclosure Letter;
(c) all copyrights, copyrightable works, and registrations and
applications for copyrights and all extensions and renewals thereof
(collectively, "Copyrights") exclusively or primarily used or held for use in
the Business, including those listed in Section 1.4(c) of the Disclosure Letter;
provided, however, that the inclusion of a copyrighted work in the Acquired
Companies' Intellectual Property does not transfer or license any rights to the
Trademark Rights contained therein or imply any rights to use such work, to the
extent it contains Trademark Rights, unless such Trademark Rights are otherwise
included in the Business Intellectual Property or licensed pursuant to any other
license agreements between the parties, including those license agreements set
forth herein; and
(d) except as to research and development material which is covered
solely by Section 1.2(i), the intangible rights in all existing trade secrets
and proprietary information (whether or not patentable) or whether or not to be
reduced to practice, including but not limited to know-how, product formulas and
formulations, product testing and manufacturing processes and procedures,
material safety data sheets, testing specifications, and finished product
specifications, and all books, records, drawings or other indicia of each of the
foregoing in whatever form or medium ("Proprietary Information"), in each case
relating exclusively to the Products or relating exclusively to the current
manufacture of the Products (collectively, the "Acquired Companies' Proprietary
Information").
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Section 1.5 "Acquired Contracts" means all contracts, agreements and
commitments of the Sellers and their Affiliates to the extent related
exclusively or primarily to the Business (except as otherwise noted in Section
4.16 of the Disclosure Letter or except as otherwise provided herein), including
without limitation:
(a) the Acquired Leases and the Acquired Real Property Leases;
(b) the Acquired Intellectual Property Contracts;
(c) all sales contracts, customer orders, supplier contracts,
promotional commitments, advertising, media and customer commitments, service
agreements, purchase orders, dealer and distributorship agreements, leases,
licenses or other agreements; and
(d) the contracts, agreements and commitments either listed in
Section 4.16 of the Disclosure Letter or of a similar nature to those listed in
Section of the Disclosure Letter, but not listed therein because they do not
meet the dollar limits or other standards set forth in Section 4.16 (Certain
Contracts) of this Agreement but not including the employment contract of any
Person who is not an Affected Employee.
(e) Notwithstanding the foregoing, all contracts, agreements and
commitments (i) for Common bulks, Common raw materials, Common componentry,
other Common inventories and other Common assets shall be allocated in
accordance with the Final Statement of Net Assets, (ii) which relate to the
Business or the Acquired Assets and Sellers' other businesses shall be Acquired
Contracts to the extent allocable to the Business or the Acquired Assets and
(iii) set forth in Section 1.5(e) of the Disclosure Letter shall be allocated as
set forth in such Letter.
Section 1.6 "Acquired Intellectual Property" means all of the right,
title and interest of the Sellers and Sellers' Affiliates in, to and under the
following rights, assets and properties of the Business, together with all
income, royalties, damages and payments due or payable thereon (including
damages and payments for past, present or future infringements or
misappropriations thereof, and the right to sue and recover for past, present
and future infringements or misappropriations thereof):
(a) all Trademark Rights exclusively or primarily used or held for
use in the Business, including those registrations and applications listed in
Section 1.6(a) of the Disclosure Letter (taking into account the footnotes
thereon), together with the goodwill of the Business symbolized thereby, (in all
cases, excluding the Revlon
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Marks, but including any portion of the Revlon Marks that is other than the word
"REVLON" and/or the initial "R" (other than as part of an actual word that
begins with "R"), any derivative thereof, such as "REVLONISSMO" or "RMEN", or
any contractions, abbreviations, translations, or variations thereof);
(b) all Patent Rights exclusively or primarily used or held for use
in the Business, as listed in Section 1.6(b) of the Disclosure Letter (taking
into account the footnotes thereon);
(c) all Copyrights exclusively or primarily used or held for use in
the Business, including those listed in Section 1.6(c) of the Disclosure Letter
provided, however, that the inclusion of a copyrighted work in the Acquired
Intellectual Property does not transfer or license any rights to the Trademark
Rights contained therein or imply any rights to use such work, to the extent it
contains Trademark Rights, unless such Trademark Rights are otherwise included
in the Business Intellectual Property or licensed pursuant to any other license
agreements between the parties, including those license agreements set forth
herein; and
(d) Except as to research and development material which is covered
solely by Section 1.2(i), the Proprietary Information relating exclusively to
the Products or relating exclusively to the current manufacture of the Products
(the "Acquired Proprietary Information").
Section 1.7 "Acquired Intellectual Property Contracts" means all (i)
licenses to third parties of the Acquired Intellectual Property or the Acquired
Companies' Intellectual Property, including the license agreements as listed in
Section 1.7 of the Disclosure Letter, (ii) licenses to Sellers or their
Affiliates or to the Acquired Companies of Intellectual Property owned by third
parties which is exclusively or primarily used in or held for use in the
Business, as listed in Section 1.7 of the Disclosure Letter, and (iii) other
agreements to which any of the Sellers or their Affiliates or any of the
Acquired Companies or Subsidiaries are parties, either as licensor or licensee,
exclusively or primarily relating to the use of Acquired Intellectual Property
or Acquired Companies' Intellectual Property, as listed in Section 1.7 of the
Disclosure Letter.
Section 1.8 "Acquired Leases" means the personal property leases listed
in Section 1.8 of the Disclosure Letter.
Section 1.9 "Acquired Manufacturing Equipment" means all production
lines and equipment ("Equipment") which is used exclusively or primarily
8
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in the production of Products or which is set forth in Section 1.9 of the
Disclosure Letter.
Section 1.10 "Acquired Personal Property" means all right, title and
interest of Sellers or their Affiliates in or to tools, dyes, molds and other
personal property used exclusively or primarily in the Business or listed in
Section 1.10 of the Disclosure Letter.
Section 1.11 "Adjusted U.S. GAAP" means the accounting principles set
forth in (i) Section 1.11(a) of the Disclosure Letter with respect to the
September 30, 1999 Statement of Net Assets, and (ii) Section 1.11(b) of the
Disclosure Letter with respect to the Stub Period Operating Income Statement.
Section 1.12 "American Crew Agreement" means the stock purchase
agreement dated as of April 17, 1996 and among RCPC, as buyer, and the
shareholders of American Crew, Inc. and Frank Gironda, as sellers, in connection
with the purchase of American Crew, Inc. by RCPC.
Section 1.13 "Assumed Liabilities" consist, without duplication, of:
(a) (i) any Liability (other than Income Taxes) to the extent set
forth on the September 30, 1999 Statement of Net Assets, (ii) any Liability
(other than Income Taxes and other than interest and penalties in respect of
Non-Income Taxes) set forth on the Final Statement of Net Assets, but only to
the extent such Liability was accrued on such Final Statement of Net Assets and
arose during the periods between October 1, 1999 and the Closing Date, and (iii)
any Liability (other than Income Taxes, and for all periods prior to October 1,
1999, Non-Income Taxes, and for the periods between October 1, 1999 and the
Closing Date, interest and penalties in respect of Non-Income Taxes) relating to
the ownership, use or operation of the Business, the Acquired Companies, the
Subsidiaries or the Acquired Assets prior to the Closing Date which (A) is not
otherwise an Excluded Liability and (B) does not relate to, or arise out of,
employees or employee benefits to the extent covered by Section 6.8 herein
(other than those items which are accrued on the September 30, 1999 Statement of
Net Assets and the Final Statement of Net Assets in the ordinary course of
business consistent with past practices) and (C) is less than U.S. $150,000
individually or with respect to a series of related events and (D) is either (1)
not set forth on the September 30, 1999 Statement of Net Assets or the Final
Statement of Net Assets because it is not required by Adjusted U.S. GAAP to be
so set forth or (2) under-accrued on either such Statements of Net Assets, to
the extent of such under-accrual; provided that, the Liabilities assumed by
Buyer under this clause (iii) shall not in the aggregate exceed the
9
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lesser of (x) U.S. $3,000,000 and (y) the amount of general reserves set forth
on the Final Statement of Net Assets; and provided further that, all Liabilities
assumed by Buyer under this Section 1.13(a)(iii)(x) for employee severance shall
not, in the aggregate, exceed U.S. $150,000 and (y) shall not include
Liabilities in respect of Funded Debt (as defined herein).
(b) any Liability (other than Income Taxes) accruing or arising on
or after October 1, 1999 and paid on or prior to the Closing Date;
(c) except for Liabilities arising out of or relating to breach of
any of the Sellers' representations, warranties or covenants under this
Agreement or Ancillary Agreements, and except as otherwise expressly provided
herein, any Liability arising from the ownership, use or operation of the
Business, the Acquired Companies, the Subsidiaries or the Acquired Assets on or
after, the Closing Date, other than any earnouts or indemnification obligations
under the following agreements: (1) the American Crew Agreement, (2) the A.P.
Products Agreement, (3) the Creative Nail Agreement, (4) Pan-African J.V.
Agreement, (5) Stock Purchase Agreement dated as of September 5, 1998 and
amended as of September 28, 1998 by and among Aderans Co., Ltd., as Buyer, Roux,
as Seller, and RCPC, as Seller Guarantor, in connection with the sale by Roux of
General Wig Manufacturers, Inc., (6) the Huber Agreement and (7) the Intercosmo
Agreement; and
(d) any Liability explicitly assumed by the Buyer hereunder or under
any of the Ancillary Agreements.
The assumption by the Buyer of the Assumed Liabilities shall not create
any third party beneficiary rights.
Section 1.14 "Business Intellectual Property" means (i) Acquired
Intellectual Property, (ii) Acquired Companies' Intellectual Property and (iii)
Licensed Intellectual Property.
Section 1.15 "Common" means used or intended for use both in the
Business and the Sellers' and their Affiliates' other businesses.
Section 1.16 "Creative Nail Agreement" means the stock purchase
agreement dated as of November 1, 1995 by and among RCPC, as buyer, and the
shareholders of Creative Nail Design, Inc. and A. Nordstrom, Janet Nordstrom,
Arnold Nordstrom and Thomas Nordstrom, as sellers, in connection with the
purchase by RCPC of Creative Nail Design, Inc.
10
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Section 1.17 "Excluded Assets" means the assets and rights set forth in
Section 1.17 of the Disclosure Letter or, to the extent not owned by one or more
of the Acquired Companies or the Subsidiaries as of the Closing Date or not
reflected on the Final Statement of Net Assets:
(a) any asset or right, tangible or intangible, of Sellers not used
exclusively or primarily in the Business;
(b) all rights and claims, whether now existing or arising
hereafter, for credits or refunds of (x) Income Taxes (with respect to
pre-Closing periods) and (y) Non-Income Taxes (but only to the extent that the
credits or refunds relate to a Non-Income Tax that is an Excluded Liability);
(c) all claims or warranties to the extent relating to Excluded
Assets, as set forth in the other subclauses of this Section 1.17, or Excluded
Liabilities;
(d) cash and cash equivalents;
(e) the Revlon Marks ((regardless of the record owner thereof),
except for (i) the portion thereof that is other than the word "Revlon" and/or
the initial "R" (other than as part of an actual word that begins with "R")
assigned hereunder as set forth in Section 1.4(a) or Section 1.6(a), and (ii)
the rights granted to Buyer under the License Agreement (Revlon Marks)), the
Licensed Intellectual Property owned by Sellers or their Affiliates other than
the Acquired Companies or the Subsidiaries (except for the rights granted to
Buyer under the license agreements contemplated in Section 6.11), and all other
Intellectual Property, other than, in each case, the Acquired Intellectual
Property, the Acquired Companies' Intellectual Property and the Acquired
Intellectual Property Contracts; and
(f) the right to use any and all materials, including but not
limited to advertisements, promotional materials, and packaging (regardless of
their form and media) which embody or make reference to the names, likenesses,
images, photographs, voices, signatures or biographical information of
spokespersons and models under exclusive contracts with Sellers and their
Affiliates, as follows: Halle Berry, Cindy Crawford, Kim Delaney, Karen Duffy,
Emme Aronson, Melanie Griffith, Salma Hayek, Sarah O'Hare, Cybill Shepherd,
Courtney Thorne-Smith, Vendela Thomesson, and Shania Twain.
11
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Section 1.18 "Excluded Liabilities" means (a) any Liability set forth
in Section 1.18 of the Disclosure Letter and (b) any other Liability, whenever
asserted, arising from the ownership, operations or use of the Acquired Assets,
the Acquired Companies, the Subsidiaries or Sellers' operations of the Business
prior to the Closing which is not expressly identified as an Assumed Liability
hereunder, (c) any Liability explicitly assumed by Sellers hereunder or under
any of the Ancillary Agreements or (d) any Liability to any employee who is not
an Affected Employee except to the extent accrued on the September 30, 1999
Statement of Net Assets or the Final Statement of Net Assets.
Section 1.19 "Funded Debt" means, without duplication, all obligations
under indebtedness for borrowed money (including, without limitation, principal,
interest, overdrafts, penalties, premiums, fees, expenses, indemnities and
breakage costs), all obligations under capital leases, notes payable,
guarantees, mortgages and drafts accepted representing extensions of credit,
discounted receivables, any obligations under any security agreement, mortgage,
pledge or similar arrangement in respect of indebtedness of the type described
above.
Section 1.20 "General Wig Agreement" means the stock purchase agreement
dated as of September 5, 1998, as amended as of September 28, 1998, by and among
Aderans Co., Ltd., as buyer, Roux, as seller, and RCPC, as seller guarantor, in
connection with the sale of General Wig Manufacturers, Inc.
Section 1.21 "Governmental Entity" means any public body or authority,
including courts of competent jurisdiction, domestic or foreign.
Section 1.22 "Huber Agreement" means the transfer and assignment
agreement dated as of December 29, 1995, by and among Deutsche Revlon, as buyer,
and Mr. B. Huber, as seller, in connection with the purchase by Deutsche Revlon
of the Huber cosmetic distribution business.
Section 1.23 "Income Taxes" means any and all Taxes based on or
measured by income, net income, receipts, earnings or profits.
Section 1.24 "Non-Income Taxes" means any and all Taxes other than
Income Taxes.
Section 1.25 "Intercosmo Agreement" means the stock purchase agreement
dated as of May 26, 1993, by and among Revlon S.p.A. (changed to Europeenne de
Produits de Beaute, S.A.), as buyer, and Fabio Venturi, Maria Luisa
12
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Venturi and Ri. Fin. It, S.r.l., as seller, in connection with the purchase of
Intercosmo S.p.A.
Section 1.26 "Liability" means any and all claims, demands, Liens,
charges, agreements, contracts, covenants, actions, suits, causes of action,
obligations, controversies, debts, costs, expenses, damages, judgments, orders
and liabilities whatsoever, of whatever kind or nature, in law or equity, by
contract, statute or otherwise, accrued, absolute or contingent, whether now
known or unknown, vested or contingent, suspected or unsuspected, whether due or
to become due, whether or not concealed or hidden and regardless of when and by
whom asserted, which have existed or may have existed, which exist or which in
the future may exist.
Section 1.27 "Licensed Intellectual Property" means (a) the
Intellectual Property listed in Section 1.27 of the Disclosure Letter that is
owned by Sellers or their Affiliates (or by the Acquired Companies or the
Subsidiaries that is to be assigned to Sellers or their Affiliates) that will be
licensed to the Buyer, the Acquired Companies and/or the Subsidiaries by Sellers
or their Affiliates, in each case pursuant to the license agreements
contemplated by Section 6.11(a), and (b) the Licensed Revlon Marks.
Section 1.28 "Licensed Revlon Marks" means the Currently Used Marks, as
that term is defined in the License Agreement (Revlon Marks) and other Revlon
Marks that are being licensed to Buyer pursuant to such license.
Section 1.29 "Pan-African JV Agreement" means the joint venture
agreement dated as of November 27, 1995 by and among RCPC, United Pan-African
Beauty Establishment and Alan Wolowicz.
Section 1.30 "Revlon Marks" means any and all trademarks, service
marks, names, source identifiers, corporate names, business names, fictional
names or d/b/a's, trade names, Internet domain names, logos, and stylized
renderings of any of the foregoing and any and all registrations or applications
therefor, whether now in existence, or hereinafter filed or issued, which
include the word "REVLON" and/or the initial "R" (other than as part of an
actual word that begins with an "R"), whether in block print or in logo form and
whether alone, as part of a phrase or design, or in a derivative form such as
"REVLONISSIMO", and any contractions, abbreviations, translations or variations
thereof, together with the goodwill of the business symbolized thereby.
Section 1.31 "Other Definitions": Other terms defined herein include:
13
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<TABLE>
<CAPTION>
<S> <C>
60-Day Objection Period....................................................................................... (Section)2.9(b)
Accountant's Engagement Letter ................................................................................(Section)2.9(i)
Acquired Assets..................................................................................................(Section) 1.2
Acquired Books and Records.......................................................................................(Section) 1.3
Acquired Companies................................................................................................... recitals
Acquired Companies' Intellectual Property........................................................................(Section) 1.4
Acquired Companies' Proprietary Information...................................................................(Section) 1.4(d)
Acquired Contracts...............................................................................................(Section) 1.5
Acquired Intellectual Property...................................................................................(Section) 1.6
Acquired Intellectual Property Contracts.........................................................................(Section) 1.7
Acquired Leases..................................................................................................(Section) 1.8
Acquired Manufacturing Equipment.................................................................................(Section) 1.9
Acquired Personal Property......................................................................................(Section) 1.10
Acquired Proprietary Information..............................................................................(Section) 1.6(d)
Acquired Real Property Leases...........................................................................(Section) 4.12(d)(iii)
Act..............................................................................................................(Section) 5.8
Actual Statement of Net Assets................................................................................(Section) 2.9(a)
Actual Stub Period Operating Income Statement.................................................................(Section) 2.9(a)
Adjusted U.S. GAAP..............................................................................................(Section) 1.11
Affected Employees............................................................................................(Section) 6.8(a)
Affiliate ......................................................................................................(Section) 4.22
Affiliate Agreements............................................................................................(Section) 4.22
affiliated group..........................................................................................(Section) 6.9(a)(ii)
affiliation..................................................................................................(Section) 6.17(f)
Agreement.............................................................................................................recitals
American Crew Agreement.........................................................................................(Section) 1.12
Ancillary Agreements..........................................................................................(Section) 2.5(j)
A.P. Products Agreement..........................................................................................(Section) 1.1
Assumed Liabilities.............................................................................................(Section) 1.13
Auditor.......................................................................................................(Section) 2.9(c)
Balance Sheet Intercompany Liabilities........................................................................(Section) 2.7(d)
Benefit Plans................................................................................................(Section) 4.17(a)
Bill of Sale..................................................................................................(Section) 2.5(b)
Business..............................................................................................................recitals
Business Day..................................................................................................(Section) 2.4(a)
Business Intellectual Property..................................................................................(Section) 1.14
Business Material Adverse Effect..............................................................................(Section) 4.1(e)
Business Materials...........................................................................................(Section) 6.12(b)
Buyer.................................................................................................................recitals
Buyer Accountant..............................................................................................(Section) 2.9(a)
14
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<CAPTION>
<S> <C>
Buyer Competitive Activity...................................................................................(Section) 6.17(b)
Buyer Covered Taxes........................................................................................(Section) 6.9(b)(i)
Buyer Damages.................................................................................................(Section) 9.2(a)
Buyer Indemnitees.............................................................................................(Section) 9.2(a)
Buyer Material Adverse Effect.................................................................................(Section) 5.1(d)
Buyer Plans...................................................................................................(Section) 6.8(a)
Buyer Savings Plan............................................................................................(Section) 6.8(c)
Buyer UAW DB Plan.............................................................................................(Section) 6.8(d)
Buyer UAW DC Plan.............................................................................................(Section) 6.8(d)
Canada Plan...................................................................................................(Section) 6.8(h)
CEIL..................................................................................................................recitals
CERCLA..................................................................................................(Section) 4.19(a)(iii)
Charlie Agreement.......................................................................................(Section) 2.5(e)(viii)
Claim............................................................................................................(Section) 9.4
claims made.....................................................................................................(Section) 6.13
Closing..........................................................................................................(Section) 2.1
closing agreement............................................................................................(Section) 4.18(j)
Closing Date..................................................................................................(Section) 2.4(b)
COBRA...................................................................................................(Section) 4.17(b)(vii)
Code......................................................................................................(Section) 6.9(a)(ii)
Commitment Letters...............................................................................................(Section) 5.4
Common..........................................................................................................(Section) 1.15
Company Permits.................................................................................................(Section) 4.24
Company Transaction.............................................................................................(Section) 6.16
Competition Laws..............................................................................................(Section) 6.4(a)
Confidential Information.....................................................................................(Section) 6.18(a)
Confidentiality Agreement........................................................................................(Section) 6.3
Continuation Period...........................................................................................(Section) 6.8(g)
control.........................................................................................................(Section) 4.22
controlled by...................................................................................................(Section) 4.22
Conveyance Taxes..............................................................................................(Section) 6.9(j)
Copyrights....................................................................................................(Section) 1.4(c)
Cosmetics Agreement.......................................................................................(Section) 2.5(e)(vi)
Creative Nail Agreement.........................................................................................(Section) 1.16
Current Skin Care Products................................................................................(Section) 6.17(a)(v)
Cut-off Date...............................................................................................(Section) 6.9(a)(i)
CVC..............................................................................................................(Section) 2.8
Deficiency Amount..........................................................................................(Section) 2.9(e)(i)
Deutsche Revlon.......................................................................................................recitals
Disclosure Letter.....................................................................................................recitals
15
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<CAPTION>
<S> <C>
Due From Sellers-Receivable...................................................................................(Section) 1.2(k)
Due From Sellers-Receivables..................................................................................(Section) 2.7(d)
Due To Sellers-Inventories....................................................................................(Section) 2.7(d)
Due To Sellers-Receivables....................................................................................(Section) 2.7(d)
EBP Italy.............................................................................................................recitals
Election...................................................................................................(Section) 6.9(l)(i)
employee benefit plans........................................................................................(Section) 6.8(a)
Environmental Law............................................................................................(Section) 4.19(b)
EPB...................................................................................................................recitals
Equipment........................................................................................................(Section) 1.9
ERISA........................................................................................................(Section) 4.17(a)
ERISA Affiliate..............................................................................................(Section) 4.17(a)
Estimated Cash Deficieny................................................................................(Section) 2.9(f)(i)(y)
Estimated Purchase Price......................................................................................(Section) 2.7(a)
Estimated Statement of Net Assets.............................................................................(Section) 2.7(e)
Estimated Stub Period Operating Income Statement..............................................................(Section) 2.7(e)
Estoppel Certificate............................................................................................(Section) 6.21
Estoppel Certificates...........................................................................................(Section) 6.21
Excess Amount.............................................................................................(Section) 2.9(e)(ii)
Excluded Assets.................................................................................................(Section) 1.17
Excluded Liabilities............................................................................................(Section) 1.18
Fermodyl..............................................................................................................recitals
Final Cash Deficiency.................................................................................. (Section) 2.9(f)(i)(y)
Final Statement of Net Assets.................................................................................(Section) 2.9(d)
Final Net Assets..............................................................................................(Section) 2.9(d)
Final Stub Period Operating Income Statement..................................................................(Section) 2.9(d)
Final Stub Period Operating Income............................................................................(Section) 2.9(d)
Funded Debt.....................................................................................................(Section) 1.19
General Wig Agreement...........................................................................................(Section) 1.20
good reason...................................................................................................(Section) 6.8(f)
Governmental Entity.............................................................................................(Section) 1.21
Group Pension Plan............................................................................................(Section) 6.8(k)
Guaranty.....................................................................................................(Section) 6.15(a)
Guarantees...................................................................................................(Section) 6.15(a)
HSR Act.......................................................................................................(Section) 2.4(a)
Historical and Budgeted Financial Information.................................................................(Section) 4.6(b)
Huber Agreement.................................................................................................(Section) 1.22
Hypermarket Receivables.......................................................................................(Section) 2.7(d)
Improvements.................................................................................................(Section) 4.12(e)
including.......................................................................................................(Section) 10.7
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<CAPTION>
<S> <C>
Incremental Tax Liability of Sellers and M&F..............................................................(Section) 6.9(l)(ii)
Indemnified Party................................................................................................(Section) 9.4
Indemnifying Party...............................................................................................(Section) 9.4
Indemnity Period..............................................................................................(Section) 9.1(a)
Instruments of Assumption.....................................................................................(Section) 2.6(b)
Intellectual Property........................................................................................(Section) 4.13(b)
Intercompany Liability Statement..............................................................................(Section) 2.9(a)
Intercosmo Agreement............................................................................................(Section) 1.25
Internal rate of return..........................................................................................(Section) 2.8
IRS.................................................................................................................4.17(b)(i)
Judgment........................................................................................................(Section) 6.22
Leased Real Property......................................................................................(Section) 4.12(d)(i)
Lessee...................................................................................................(Section) 4.12(d)(iv)
Liability.......................................................................................................(Section) 1.26
License Agreement (COLORLOCK)..............................................................................(Section) 2.5(e)(i)
License Agreement (INTERACTIVES)..........................................................................(Section) 2.5(e)(iv)
License Agreement (Revlon Marks).........................................................................(Section) 2.5(e)(iii)
Licensed Intellectual Property..................................................................................(Section) 1.27
Licensed Revlon Marks...........................................................................................(Section) 1.28
Liens.........................................................................................................(Section) 4.4(b)
Losses and Damages............................................................................................(Section) 9.2(a)
M&F.......................................................................................................(Section) 6.9(a)(ii)
Material Adverse Effect.......................................................................................(Section) 7.2(a)
Material Agreements..............................................................................................(Section) 4.5
materiality...................................................................................................(Section) 7.2(a)
MIS............................................................................................................ (Section) 6.37
MIS Agreement...................................................................................................(Section) 6.37
Monthly Fees..................................................................................................(Section) 6.8(g)
multiemployer pension plan..............................................................................(Section) 4.17(b)(iii)
Net Assets....................................................................................................(Section) 2.7(b)
Natural Honey Agreement...................................................................................(Section) 2.5(e)(ix)
Nederlanden Plan.............................................................................................(Section) 6.8 (j)
Noncompete Period............................................................................................(Section) 6.17(a)
Objection Notice..............................................................................................(Section) 2.9(b)
Off-Balance Sheet Intercompany Liabilities......................................................................(Section) 2.10
Off-Balance Sheet Intercompany Liability Settlement.............................................................(Section) 2.10
Offset Right....................................................................................................(Section) 6.22
Offsetting Party................................................................................................(Section) 6.22
Organizational Documents.........................................................................................(Section) 2.1
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<CAPTION>
<S> <C>
Other Definitions .............................................................................................(Section) 1.31
Owned Real Property.........................................................................................(Section) 4.12(b)
Pan-African JV Agreement.......................................................................................(Section) 1.29
Patent Formula and Know-How License Agreement (Revlon to Buyer)..........................................(Section) 2.5(e)(ii)
Patent Rights................................................................................................(Section) 1.4(b)
PBO...........................................................................................................(Section)6.8(d)
pension.....................................................................................................(Section) 4.17(a)
Permitted Encumbrances......................................................................................(Section) 4.12(c)
Person.......................................................................................................(Section) 4.1(e)
Products............................................................................................................ recitals
Proprietary Information......................................................................................(Section) 1.4(d)
Public Company..............................................................................................(Section) 6.17(d)
Purchase Price...............................................................................................(Section) 2.7(a)
qualified...............................................................................................(Section) 4.17(b)(iv)
R&D Projects.................................................................................................(Section) 1.2(i)
RCPC.................................................................................................................recitals
Real Property...............................................................................................(Section) 4.12(e)
Real Property Leases....................................................................................(Section) 4.12(d)(ii)
REMEA................................................................................................................recitals
REMEA LTD............................................................................................................recitals
Restructuring........................................................................................................recitals
retiree treatment............................................................................................(Section) 6.8(n)
Revlon...............................................................................................................recitals
Revlon Argentina.....................................................................................................recitals
Revlon Belgium.......................................................................................................recitals
Revlon Canada........................................................................................................recitals
Revlon Chile.........................................................................................................recitals
Revlon Coiffure......................................................................................................recitals
Revlon Hong Kong.....................................................................................................recitals
Revlon Manufacturing.................................................................................................recitals
Revlon Marks...................................................................................................(Section) 1.30
Revlon Mexico........................................................................................................recitals
Revlon Nederland.....................................................................................................recitals
Revlon New Zealand...................................................................................................recitals
Revlon South Africa..................................................................................................recitals
Revlon Suisse........................................................................................................recitals
Revlon Venezuela.....................................................................................................recitals
Revlon DC Plans..............................................................................................(Section) 6.8(c)
Revlon Pension Plans.........................................................................................(Section) 6.8(b)
Revlon Savings Plan..........................................................................................(Section) 6.8(c)
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<CAPTION>
<S> <C>
Revlon S.L...........................................................................................................recitals
RIC..................................................................................................................recitals
Roux.................................................................................................................recitals
RPHC...........................................................................................................(Section) 6.27
RPHC Term Sheet.............................................................................................(Section) 6.33(a)
RRSP.........................................................................................................(Section) 6.8(h)
SEC Financial Statements.......................................................................................(Section) 4.26
Sellers' Consolidated Group Taxes........................................................................(Section) 6.9(a)(ii)
Sellers' Covered Taxes...................................................................................(Section) 6.9(a)(ii)
Sellers' Separate Return Taxes............................................................................(Section) 6.9(a)(i)
Sellers..............................................................................................................recitals
Sellers Affiliated Group.....................................................................................(Section) 6.9(f)
Sellers Damages..............................................................................................(Section) 9.3(a)
Sellers Indemnitees..........................................................................................(Section) 9.3(a)
Sellers Intellectual Property Rights........................................................................(Section) 6.12(b)
Sellers Representative.........................................................................................(Section) 10.6
Sellers UAW DB Plan..........................................................................................(Section) 6.8(d)
September 30, 1999 Statement of Net Assets...................................................................(Section) 4.6(a)
Settlement Accountants....................................................................................(Section) 6.9(c)(v)
Shares...............................................................................................................recitals
single employer.............................................................................................(Section) 4.17(a)
South Africa Agreement..................................................................................(Section) 2.5(e)(vii)
South Africa Plan............................................................................................(Section) 6.8(i)
Spain Cosmetics Inventory....................................................................................(Section) 2.7(d)
Spanish Tax Loss Carryforwards..............................................................................(Section) 4.18(k)
Stub Period Operating Income.................................................................................(Section) 2.7(b)
Subsidiaries.........................................................................................................recitals
Target Net Assets............................................................................................(Section) 2.7(b)
Taxes.......................................................................................................(Section) 4.18(e)
Tax Claim.................................................................................................(Section) 6.9(c)(i)
Tax Indemnified Party.....................................................................................(Section) 6.9(c)(i)
Tax Indemnifying Party....................................................................................(Section) 6.9(c)(i)
Tax Return..................................................................................................(Section) 4.18(e)
Tax Sharing Agreements.......................................................................................(Section) 6.9(h)
Toiletries Agreement......................................................................................(Section) 2.5(e)(v)
Trademark Rights.............................................................................................(Section) 1.4(a)
transfer amount..............................................................................................(Section) 6.8(d)
Transition Country.............................................................................................(Section) 6.24
Transition Phase...............................................................................................(Section) 6.24
Transitional Services Agreements.............................................................................(Section) 2.5(j)
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<CAPTION>
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UAW Affected Employees.......................................................................................(Section) 6.8(d)
UAW Agreement................................................................................................(Section) 6.8(d)
under common control with......................................................................................(Section) 4.22
U.S. GAAP .....................................................................................................(Section) 6.25
WARN........................................................................................................(Section) 4.21(b)
welfare.....................................................................................................(Section) 4.17(a)
</TABLE>
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale of Shares. Upon the terms and subject to
the conditions of this Agreement, at the Closing provided for in Section 2.4
hereof (the "Closing"), the Sellers shall, directly or indirectly, sell,
transfer and deliver to Buyer or its Affiliates, and Buyer or its Affiliates
shall, directly or indirectly, purchase, acquire and accept from the Sellers,
the Shares free and clear of all Liens and restrictions on transfer (other than
such restrictions as set forth in the relevant certificate of incorporation,
by-laws, or other organizational or analogous documents, excluding any
shareholder agreement (the "Organizational Documents"). Notwithstanding the
prior sentence, Buyer and Sellers intend that part of the purchase of Shares of
Roux by Buyer or its Affiliates from Sellers shall actually occur as the result
of a redemption transaction in which Roux and each of A.P. Products Ltd.,
Creative Nail Design, Inc., and American Crew, Inc. shall enter into loans with
Buyer or its Affiliates in amounts to be mutually agreed to by Buyer and
Sellers, and the proceeds of such loans shall be used at the Closing by Roux to
redeem from Sellers an amount of shares held by Sellers in Roux.
Section 2.2 Purchase and Sale of Certain Assets. Upon the terms and
subject to the conditions of this Agreement, at the Closing (a) the Sellers or
their Affiliates shall sell, transfer and deliver to the Buyer or its Affiliates
all of the Sellers' or their Affiliates' right, title and interest in and to the
Acquired Assets free and clear of all Liens and restrictions on transfer (other
than such restrictions as set forth in the Sellers' Organizational Documents and
other than Permitted Encumbrances); and (b) the Buyer or its Affiliates shall
purchase, acquire and accept from the Sellers or their Affiliates the Acquired
Assets free and clear of all Liens and restrictions on transfer (other than such
restrictions as set forth in the Sellers' Organizational Documents and other
than Permitted Encumbrances) and shall assume the Assumed Liabilities.
Section 2.3 Consideration. Upon the terms and subject to the conditions
of this Agreement, in consideration of the aforesaid sale, transfer and
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delivery of the Shares contemplated by Section 2.1 (Purchase and Sale of
Shares), the sale and transfer of Acquired Assets contemplated by Section 2.2
(Purchase and Sale of Certain Assets), and the rights and obligations of the
parties under this Agreement and the Ancillary Agreements, at the Closing Buyer
shall, by wire transfer of immediately available funds to the bank accounts set
forth on Section 2.3 of the Disclosure Letter, paid in accordance with
applicable law and allocated in a manner based in all material respects on the
Purchase Price allocation set forth in Section 6.9(i) herein, pay the Estimated
Purchase Price (as defined in Section 2.7 (Determination of Estimated Purchase
Price) below) and shall assume the Assumed Liabilities.
Section 2.4 Closing.
(a) Subject to the satisfaction or waiver of the conditions set
forth in Article VII, the Closing will take place at the offices of Skadden,
Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New York and at
the other locations provided for in the Ancillary Agreements, as soon as
practicable, but not later than three Business Days, following the expiration or
termination of any required waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and any
consents, approvals or filings under other Competition Laws, provided that, the
Buyer has had at least three Business Days to review any consents to be
delivered pursuant to Section 2.5 (Deliveries by Sellers) and all bills of sale,
Intellectual Property instruments of assignment, releases of all Liens on
Acquired Assets (other than Permitted Encumbrances) and the Shares, deeds,
consents to the assignment of contracts and leases, Acquired Companies and
Subsidiaries stock powers, copies of Acquired Companies and Subsidiaries stock
certificates, assignments of accounts receivable and any other material
instruments or documents to be delivered at the Closing pursuant to Section 2.5
(Deliveries by Sellers) or at such other place or time or both as the parties
may agree in writing. "Business Day" shall mean any day excluding (i) Saturday
and Sunday, (ii) any day which shall be in New York State, England or Spain a
legal holiday, or (iii) a day on which banking institutions in New York State,
England or Spain are authorized or required by law or other government action to
close.
(b) Each of the parties hereto shall cause each of their respective
Affiliates which is a party to any Ancillary Agreement in which Acquired Assets
on the Closing Date are being transferred to the Buyer or its designated
Affiliates, to consummate the closing contemplated under such Ancillary
Agreement on the Closing Date, except as otherwise set forth therein. The date
of the Closing is sometimes referred to herein as the "Closing Date."
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Section 2.5 Deliveries by the Sellers. At the Closing, Sellers shall
deliver or cause to be delivered to Buyer (unless delivered previously) the
following:
(a) The stock certificates representing all of the Shares,
accompanied by stock powers duly executed in blank or duly executed stock
transfer forms or instruments of transfer, with any applicable transfer stamps
affixed, which validly transfer title to the Shares to Buyer (or its designated
Affiliates) free and clear of any Liens and restrictions on transfer other than
such restrictions set forth in the relevant Organizational Documents;
(b) Duly executed bills of sale in a form to be agreed upon by Buyer
and Sellers or pro forma purchase agreements and in the case of France and
Argentina, such other purchase agreement as mutually agreed to by Buyer and RCPC
(provided that, in no event shall such Argentinian and French agreements alter
the Liability allocation of Buyer or Sellers under this Agreement), in each case
modified or drafted as necessary to conform to local law (the "Bill of Sale")
transferring to the Buyer or its designated Affiliates all of the assets which
are included in the Acquired Assets;
(c) Duly executed instruments of assignment relating to the Acquired
Contracts;
(d) A duly executed instrument of assignment relating to the
Acquired Real Property Leases;
(e) Duly executed counterparts of the license agreements
contemplated in Section 6.11 including:
(i) a License Agreement (COLORLOCK), having the material terms
set forth on the term sheet attached hereto as Exhibit B (the "License
Agreement (COLORLOCK)");
(ii) a Patent and Formula and Know-How License Agreement having
the material terms set forth on the term sheet attached hereto as Exhibit C
(the "Patent Formula and Know-How License Agreement (Revlon to Buyer)");
(iii) License Agreement (Revlon Marks), substantially in the form
attached hereto as Exhibit D (collectively, the "License Agreement (Revlon
Marks)");
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(iv) A License Agreement (INTERACTIVES) having the material terms
set forth on the term sheet attached hereto as Exhibit E (the "License
Agreement (INTERACTIVES)");
(v) A Toiletries Manufacturing Distribution and License Agreement
for Spain, Portugal and Andorra having the material terms set forth on the
term sheet attached hereto as Exhibit F (the "Toiletries Agreement");
(vi) a Cosmetics Distribution Agreement for Spain, Portugal and
Andorra having the material terms set forth on the term sheet attached
hereto as Exhibit G (the "Cosmetics Agreement");
(vii) a Manufacturing and Distribution Services Agreement for
South Africa having the material terms set forth on the term sheet attached
hereto as Exhibit H (the "South Africa Agreement");
(viii) a Distribution Agreement for Charlie Cosmetics in Italy
having the material terms set forth on the term sheet attached hereto as
Exhibit I (the "Charlie Agreement"); and
(ix) a Manufacturing and Distribution License Agreement(s) for
Natural Honey having the material terms set forth on the term sheet
attached hereto as Exhibit J (the "Natural Honey Agreement").
(f) Duly executed instruments of assignment relating to the Acquired
Intellectual Property as a whole and additional separate assignments each in a
form suitable for recording in the United States Patent and Trademark Office for
the Acquired Intellectual Property which is the subject of registrations or
applications in the U.S. and in the applicable Intellectual Property registry
offices in such other country or countries as are required by any secured lender
to Buyer as a condition of providing financing (as provided to Sellers in
writing no later than one week prior to Closing) (the remaining assignments in
recordable terms shall be delivered to Buyer post-Closing pursuant to Section
3.2(b));
(g) The resignations, effective immediately prior to the Closing, of
all officers and members of the Board of Directors of the Acquired Companies and
the Subsidiaries other than those specified by Buyer at least five Business Days
prior to the Closing Date;
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(h) The officer's certificates referred to in Section 7.3(e)
(Conditions to Obligations of Buyer) hereof and the consents, approvals,
terminations, and certificates set forth in Section 2.5(h) of the Disclosure
Letter;
(i) the documents, instruments and agreements contemplated by the
RPHC Term Sheet (as defined herein);
(j) One or more agreements, to be effective as of the Closing Date,
between the Sellers or one or more of their respective Affiliates on the one
hand, and the Buyer or one or more of its Affiliates or the Acquired Companies
or Subsidiaries or one or more of their respective Affiliates on the other hand,
pursuant to which (A) the Sellers or their Affiliates would obtain certain
transitional services from the Acquired Companies or the Subsidiaries, and (B)
the Acquired Companies or one or more of the Subsidiaries or Buyer or one or
more of its Affiliates would obtain certain transitional services from the
Sellers or their Affiliates, substantially on the terms of the term sheets
annexed as Exhibits K attached hereto (collectively, the "Transitional Services
Agreements" and together with the agreements identified in Section 2.5(e),
Section 2.5(i) and the MIS Agreement, the "Ancillary Agreements"), duly executed
by the Sellers and/or their Affiliates; and
(k) All other documents, instruments and writings required or
reasonably requested to be delivered by the Sellers at or prior to the Closing
pursuant to this Agreement or otherwise required in connection herewith or
therewith.
Section 2.6 Deliveries by Buyer. At the Closing, Buyer shall tender or
cause to be tendered to the Sellers (unless previously delivered) the following:
(a) The Estimated Purchase Price;
(b) Instruments of assumption in a form to be agreed upon by Buyer
and Sellers (the "Instruments of Assumption") under which the Buyer shall assume
the Assumed Liabilities, duly executed by Buyer and one or more of the Acquired
Companies or one or more of the Subsidiaries;
(c) The officer's certificate referred to in Section 7.2(c)
(Conditions to Obligations of the Sellers) hereof;
(d) Duly executed counterparts of the license agreements
contemplated in Section 6.11 including;
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(i) the License Agreement (COLORLOCK);
(ii) the Patent Formula and Know-How License Agreement (Revlon to
Buyer);
(iii) the License Agreement (Revlon Marks);
(iv) the License Agreement (INTERACTIVES);
(v) the Toiletries Agreement;
(vi) the Cosmetics Agreement;
(vii) the South Africa Agreement;
(viii) the Charlie Agreement; and
(ix) the Natural Honey Agreement.
(e) The Transitional Services Agreements, duly executed by Buyer or
one or more of its Affiliates; and
(f) All other documents, instruments or writings required or
reasonably requested to be delivered by the Buyer at or prior to the Closing
pursuant to this Agreement or otherwise required in connection herewith or
therewith.
Section 2.7 Determination of Estimated Purchase Price.
(a) The "Estimated Purchase Price" (and with respect to calculating
the "Purchase Price" under Section 2.9 below, the "Purchase Price") shall be
equal to: U.S. $315,000,000 minus the sum of (i) the amount, if any, by which
the Net Assets as set forth on the Estimated Statement of Net Assets is less
than the Target Net Assets; (ii) the aggregate "transfer amount" pursuant to
Section 6.8(d); and (iii) the amount of Funded Debt set forth on the Estimated
Statement of Net Assets (net of the amount of cash and cash equivalents other
than statutory requirements, if any as set forth on the Estimated Statement of
Net Assets).
(b) "Target Net Assets" means the sum of (A) U.S. $119,000,000,
representing the Net Assets of the Business as set forth on the September 30,
1999 Statement of Net Assets plus (B) the Stub Period Operating Income for the
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purposes of Section 2.7, set forth on the Estimated Stub Period Operating Income
Statement and for the purposes of Section 2.9, the Final Stub Period Operating
Income. "Net Assets" means, with respect to the Business, the excess of total
assets over total liabilities, calculated in accordance with Adjusted U.S. GAAP.
"Stub Period Operating Income" means, the operating income of the Business (but
not loss) for the period from October 1, 1999 to the Closing Date as set forth
on the Estimated Stub Period Operating Income Statement prepared in accordance
with Adjusted U.S. GAAP.
(c) Sellers shall not allocate corporate overhead of the type
reflected in Section 4.6(c) of the Disclosure Letter to the Business (as
reflected on the Stub Period Operating Income Statement) on or prior to and
including February 15, 2000; thereafter, Sellers shall allocate corporate
overhead to the Business in an amount equal to U.S. $20,000 for each day from
February 16, 2000 to and including the Closing Date.
(d) Netting Adjustment. If, and to the extent that, the items set
forth in (A) below are greater than the items set forth in (B) below, the
Sellers shall pay to the Buyer or its Affiliates, or the Buyer or its Affiliates
shall pay to the Sellers if, and to the extent that, the items set forth in (B)
are greater than the items set forth in (A), in either case, in four equal
installments on the 30th, 60th, 90th and 120th day following the Closing;
provided, that the amounts under this Section 2.7(d) shall be adjusted, as
appropriate, in accordance with the determination of the Final Balance Sheet
Intercompany Liabilities in accordance with Section 2.9 and, for purposes of
payment, the conversion from the U.S. dollar to the local currency will be done
based on the rate as of September 30, 1999 in accordance with Adjusted U.S.
GAAP. The items set forth in (A) are "Due From Sellers-Receivables" and "Due
From Sellers-Inventories" reflected on the Estimated Statement of Net Assets.
The items set forth in (B) are "Due to Sellers-Receivables" (other than those
receivables related to sales of cosmetics in Spain and Portugal to Hypermarket
accounts (the "Hypermarket Receivables")) and "Due to Sellers-Inventories"(other
than one-third of the cosmetics inventory in Spain and Portugal (the "Spain
Cosmetics Inventory")) set forth on the Estimated Statement of Net Assets. The
items set forth in (A) and (B) are referred to herein as the "Balance Sheet
Intercompany Liabilities." All Hypermarket Receivables shall be paid in cash by
the Buyer or its Affiliates to the Sellers within five business days of
collection thereof. All Spain Cosmetics Inventory shall be paid in cash by the
Buyer or its Affiliates to the Sellers on the 120th day following the Closing.
(e) Five days prior to the Closing Date, Revlon in good faith shall
(and shall cause the other Sellers and the Acquired Companies to) prepare and
deliver to the Buyer (i) an estimated unaudited statement setting forth an
estimate of the
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Net Assets as of the Closing Date, reflecting Net Assets of U.S. $117,300,000
(the "Estimated Statement of Net Assets") prepared in accordance with Adjusted
U.S. GAAP and based on the Business' books and records and other information
then available, (ii) an estimated unaudited operating income statement setting
forth an estimate of the Stub Period Operating Income of not less than U.S.
$7,500,000 (the "Estimated Stub Period Operating Income Statement") prepared in
accordance with Adjusted U.S. GAAP and based on the Business' books and records
and other information then available and (iii) a calculation of the Estimated
Purchase Price.
Section 2.8 Contingent Consideration. In addition to the Purchase
Price, the Buyer or its Affiliates shall pay to RCPC via wire transfer in
immediately available funds, U.S. $10,000,000 in cash within thirty business
days after the "internal rate of return" has been achieved or exceeded by CVC
Capital Partners Limited ("CVC") on its investment in Buyer common stock.
"Internal rate of return" shall mean (i) if calculated on or prior to the third
anniversary of the Closing, a compound rate of return of 25% per annum; or (ii)
if calculated thereafter, that compound rate of return per annum that is the
weighted average of a compound rate of return of 25% per annum for 36 months and
a compound rate of return of 20% per annum for that number of months (calculated
to the nearest whole month) from the third anniversary of the Closing to the
date of such calculation, in either case, calculated based upon monthly cash
outflows and inflows with respect thereto from the date of the investment
through the date upon which the internal rate of return is achieved or exceeded.
Cash outflows to and inflows from CVC used in the internal rate of return
calculations will be documented by CVC through bank statements, and, in the
event that bank statements are not available, other supporting evidence. For
purposes of the foregoing, CVC's investment in Buyer common stock shall be
determined using the consideration paid by CVC to acquire, directly or
indirectly, Buyer common stock at or prior to the Closing or, in the event CVC
purchases, directly or indirectly, Buyer common stock in the future, the
consideration paid by CVC for such Buyer common stock.
(a) In calculating CVC's internal rate of return, the following
shall be taken into account as of the time of the occurrence of the specified
event:
(i) All dividends or other distributions, whether or not in cash,
received in respect of Buyer common stock; provided that, any stock
dividend made prior to an initial public offering of Buyer's equity shall
be excluded from this clause (i);
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(ii) The fair market value of any securities of Buyer received as
a result of the reclassification of, or in exchange for, Buyer common
stock.
(iii) Any cash or other consideration received by holders of
Buyer common stock in the event of sale or merger of Buyer; and
(iv) Any consideration received by CVC as a result of the sale of
all or a portion of its shares of Buyer common stock. For purposes of the
foregoing, in the event of an "initial public offering" of Buyer common
stock and solely in order to calculate CVC's then internal rate of return,
CVC shall be presumed to have sold all of its shares of Buyer Common Stock
at the net offering price thereof and any other equity securities of the
Buyer received in respect of the Buyer common stock and then held by CVC,
at the fair market value thereof. An initial public offering shall mean the
sale of at least 15% of Buyer common stock pursuant to a registration
statement, or series of registration statements, filed under the Securities
Act of 1933 with the Securities and Exchange Commission or any similar
filings under applicable rules, laws or regulations of any foreign
government or stock exchange.
(b) CVC's internal rate of return shall be calculated upon the
occurrence of each event set forth in subclause (a) above until the earlier of
the time a payment is made to RCPC pursuant to this Section 2.8 and CVC no
longer holds any shares of Buyer common stock.
(c) Buyer and RCPC shall jointly determine in good faith the fair
market value of any non-cash dividends or distributions of such securities or
property and in the event of any disagreement in respect thereof, Buyer and RCPC
shall engage an internationally recognized investment bank unaffiliated with
either Buyer or RCPC for purposes of making such determination.
(d) Buyer will promptly advise RCPC of the occurrence of any event
listed under subclause (a) above.
(e) Any amount paid pursuant to this Section 2.8 shall be treated as
an adjustment to the Purchase Price for all Tax purposes.
Section 2.9 Post-Closing Adjustments.
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(a) As promptly as practicable, but in no event later than 90 days
after the Closing Date, the Sellers in good faith shall prepare and deliver to
Buyer (i) an audited special purpose statement setting forth the Sellers'
determination of the Net Assets as of the Closing Date prepared in accordance
with Adjusted U.S. GAAP (the "Actual Statement of Net Assets") based on the
Business' books and records and other information then available, (ii) the
special purpose statement of operating income of the Business setting forth the
Sellers' determination of Stub Period Operating Income accompanied by a review
report (the "Actual Stub Period Operating Income Statement") prepared in
accordance with Adjusted U.S. GAAP, (iii) a calculation of the Purchase Price
and (iv) a statement of adjustments to the Balance Sheet Intercompany
Liabilities, if any (the "Intercompany Liability Statement"). During the
preparation of the Actual Statement of Net Assets and the Actual Stub Period
Operating Income Statement and the Intercompany Liability Statement, and all
activities in connection therewith, the Buyer shall be entitled to designate one
or more representatives of Buyer's independent accounting firm (the "Buyer
Accountant") to observe and comment on the preparation of the Actual Statement
of Net Assets, the Actual Stub Period Operating Income Statement and the
Intercompany Liability Statement and the calculation of the Purchase Price and
procedures relating thereto.
(b) After the Sellers' delivery of their calculation of the Actual
Statement of Net Assets, the Actual Stub Period Operating Income Statement and
the Intercompany Liability Statement and the Purchase Price to Buyer, the
Sellers shall permit the Buyer, Buyer Accountant and their representatives to
have reasonable access to the books, records and other documents (including work
papers of the Sellers) pertaining to or used in connection with the Sellers'
calculation of the Actual Statement of Net Assets, the Actual Stub Period
Operating Income Statement and the Purchase Price and the Intercompany Liability
Statement. If Buyer disagrees with the Sellers' calculation of the Actual
Statement of Net Assets or the Actual Stub Period Operating Income Statement, or
any adjustment to the Balance Sheet Intercompany Liabilities or absence thereof
Buyer will notify the Sellers in writing of such disagreement (the "Objection
Notice") (such Objection Notice setting forth the basis for such disagreement in
reasonable detail) within 60 days after Buyer's receipt of the Actual Statement
of Net Assets and the Actual Stub Period Operating Income Statement (the "60-Day
Objection Period"). The Sellers and Buyer thereafter shall negotiate in good
faith to resolve any such disagreements with respect to the calculation of the
Actual Statement of Net Assets, the Purchase Price and the Actual Stub Period
Operating Income Statement and the Intercompany Liability Statement. If the
Buyer fails to notify the Sellers of any such dispute within the 60-Day
Objection Period, the Actual Statement of Net Assets, the Purchase Price and the
Actual Stub Period Operating Income Statement and the Intercompany Liability
Statement shall be deemed accepted and approved by the Buyer.
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(c) If the Sellers and Buyer are unable to resolve any such
disagreements within 15 days after Buyer's delivery of its Objection Notice to
the Sellers, the Sellers and Buyer shall submit the dispute to a "Big Five"
public accounting firm jointly selected by the Sellers and Buyer (the "Auditor")
for resolution. If the Sellers and Buyer are unable to agree upon the Auditor,
the Auditor shall be a "Big Five" accounting firm selected by lot (after the
Sellers and the Buyer each exclude one such accounting firm).
(d) The Sellers and Buyer shall use their respective commercially
reasonable best efforts to cause the Auditor to resolve all disagreements over
the Actual Statement of Net Assets, the Actual Stub Period Operating Income
Statement and the Purchase Price and the Intercompany Liability Statement as
soon as practicable, but in any event shall direct the Auditor to render a
determination within 30 days of its retention. The parties shall make available
to the Auditor all work papers and all other information and material in their
possession relating to the matters in any dispute. The Auditor shall consider
only those items and amounts which are identified in the Objection Notice which
the Sellers and Buyer are unable to resolve. In addition, the Auditor's
determination must be, with respect to each disputed item, (1) within the range
of values established for such item as determined by reference to the value
assigned to such amount by the Sellers, on the one hand, and Buyer, on the other
hand, in the Actual Statement of Net Assets, the Actual Stub Period Operating
Income Statement and the Intercompany Liability Statement and Objection Notice,
respectively, and (2) determined in accordance with Adjusted U.S. GAAP, this
Section 2.9 and the other definitions in this Agreement. The determination of
the Auditor shall be made promptly and, if made in accordance with the preceding
sentence, shall be final, conclusive and binding upon the Sellers and the Buyer
and shall be deemed a final arbitration award that is enforceable pursuant to
all terms of the Federal Arbitration Act, 9 U.S.C. ss.ss. 1 et. seq. Any
expenses relating to the engagement of the Auditor shall be shared equally by
the Buyer and the Sellers. "Final Net Assets" means the Net Assets amount set
forth on the Actual Statement of Net Assets where an Objection Notice has not
been delivered in accordance with Section 2.9(b), or if such a notice has been
so delivered, then "Final Net Assets" means the Net Assets amount (A) as
determined by the Auditor in accordance with Section 2.9(d), or (B) as mutually
agreed in writing between the Sellers and Buyer pursuant to Section 2.9(b),
whereupon the Actual Statement of Net Assets as so adjusted shall become the
"Final Statement of Net Assets." "Final Stub Period Operating Income" means the
Stub Period Operating Income amount determined on the Actual Stub Period
Operating Income Statement where an Objection Notice has not been delivered in
accordance with Section 2.9(b), or if such a notice has been so delivered, then
"Final Stub Period Operating Income"
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means the Stub Period Operating Income amount (A) as determined by the Auditor
in accordance with Section 2.9(d), or (B) as mutually agreed in writing between
the Sellers and Buyer pursuant to Section 2.9(b), whereupon the Actual Stub
Period Operating Income Statement shall become the "Final Stub Period Operating
Income Statement" or the "Stub Period Operating Income Statement."
(e) Within five business days after the Final Net Assets and the
Final Stub Period Operating Income are determined pursuant to this Section 2.9
then the Purchase Price shall be determined in accordance with Section 2.7(a)
and the first sentence of Section 2.7(b) substituting (except for clause (A) of
the first sentence of Section 2.7(b)) the Final Statement of Net Assets, Final
Net Assets, Final Stub Period Operating Income and the Final Stub Period
Operating Income Statement for the Estimated Statement of Net Assets, Net
Assets, estimate of the Stub Period Operating Income and the Estimated Stub
Period Operating Income Statement and shall be adjusted as follows:
(i) if the final Purchase Price as determined above is less than
the Estimated Purchase Price (the difference, with interest at the rate of
9.5% per annum from the Closing Date until the date of payment, being
defined as the "Deficiency Amount"), the Sellers shall pay to the Buyer an
amount equal to the Deficiency Amount by wire transfer of immediately
available funds to an account designated by the Buyer; or
(ii) if the final Purchase Price as determined above is greater
than the Estimated Purchase Price (the difference, with interest at the
rate of 9.5% per annum from the Closing Date until the date of payment,
being defined as the "Excess Amount"), the Buyer shall pay to the Sellers
an amount equal to the Excess Amount, by wire transfer of immediately
available funds to an account designated by the Sellers.
Any amount paid pursuant to Sections 2.9(e) and 2.9(f) shall be treated as
an adjustment to the Purchase Price for all Tax purposes.
(f) Within five business days after the Final Net Assets are determined
pursuant to this Section 2.9:
(i) if Final Net Assets exceed Target Net Assets, then Buyer
shall pay to Sellers the lesser of (A) the amount calculated pursuant to
subclause (x) or (y), as applicable, and (B) the amount of the excess of
the Final Net Assets over the Target Net Assets.
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(x) If the amount of cash and cash equivalents set forth on
the Final Statement of Net Assets is greater than the amount of Funded Debt
set forth on the Final Statement of Net Assets, the sum of (i) the amount
by which such cash and cash equivalents (other than statutory requirements,
if any) exceeds Funded Debt plus (ii) the amount (if any) by which the
Estimated Purchase Price was reduced pursuant to Section 2.7(a)(iii).
(y) If the amount of cash and cash equivalents (other than
statutory requirements, if any) set forth on the Final Statement of Net
Assets is less than the amount of Funded Debt set forth on the Final
Statement of Net Assets (the amount of such deficiency, the "Final Cash
Deficiency") and, the amount of cash and cash equivalents (other than
statutory requirements, if any) set forth on the Estimated Statement of Net
Assets is less than the amount of Funded Debt set forth on the Estimated
Statement of Net Assets (the amount of such deficiency, the "Estimated Cash
Deficiency"), and the Final Cash Deficiency is less than the Estimated Cash
Deficiency, an amount equal to the excess of the Estimated Cash Deficiency
over the Final Cash Deficiency.
(ii) If the Final Cash Deficiency is greater than the Estimated
Cash Deficiency, then Sellers shall pay to Buyer an amount equal to the
excess of the Final Cash Deficiency over the Estimated Cash Deficiency.
(iii) If there is a Final Cash Deficiency and the amount of cash
and cash equivalents (other than statutory requirements, if any) set forth
on the Estimated Statement of Net Assets is greater than or equal to the
amount of Funded Debt set forth on Estimated Statement of Net Assets, then
Sellers shall pay to Buyer the amount of the Final Cash Deficiency.
(g) All payments made pursuant to subclause (f), above, shall be
without duplication of any other adjustment to the Purchase Price made pursuant
to this Section 2.9; (ii) shall be paid within five business days after the
Final Net Assets are determined pursuant to this Section 2.9 by wire transfer of
immediately available funds to an account designated by the Buyer or the
Sellers, as the case may be; and (iii) shall be accompanied by interest in the
amount of 9-1/2% per annum from the Closing Date until the date of payment.
(h) Buyer's and Sellers' rights to indemnification pursuant to
Article VI or Article IX hereof (and any limitations on such rights) shall not
be deemed to limit, supersede or otherwise affect Buyer's or Sellers' rights to
a full Purchase Price
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adjustment pursuant to this Section 2.9; provided however, that no party shall
be entitled to indemnification pursuant to Article VI or Article IX hereof with
respect to any matter that resulted in a Purchase Price adjustment, if and to
the extent that such party is the beneficiary of a Purchase Price adjustment
with respect to such matter pursuant to this Section 2.9.
(i) Sellers acknowledge that Buyer's execution of an engagement
letter with an independent public accounting firm to enable Buyer's review of
Sellers' Books and Records pursuant to Section 3.1 herein (the "Accountant's
Engagement Letter"), does not constitute a waiver of any claims Buyer may have
under this Section 2.9, including Buyer's ability to object to the Actual
Statement of Net Assets or the Actual Stub Period Operating Income Statement.
Section 2.10 Intercompany Liabilities. Prior to the Closing, the
Sellers and the Acquired Companies and the Subsidiaries shall settle or
otherwise repay (and shall cause their respective Affiliates to settle or
otherwise repay) all intercompany Liabilities between the Sellers and their
respective Affiliates (other than the Acquired Companies and the Subsidiaries),
on the one hand, and the Acquired Companies and the Subsidiaries on the other
hand, other than the Balance Sheet Intercompany Liabilities (the "Off-Balance
Sheet Intercompany Liabilities" and the foregoing procedures being the
"Off-Balance Sheet Intercompany Liability Settlement") such that none of Buyer,
the Acquired Companies or the Subsidiaries shall have any Off-Balance Sheet
Intercompany Liabilities to any Seller or Affiliate of any Seller. To the extent
there are any Off-Balance Sheet Intercompany Liabilities which are not fully
settled as of the Closing Date, Buyer and Sellers shall cooperate in using their
respective commercially reasonable efforts to complete the Off-Balance Sheet
Intercompany Liability Settlement as to such remaining Liabilities through
journal entries on the books and records of the Sellers, and their respective
Affiliates, on the one hand, and the Acquired Companies and Subsidiaries, on the
other hand, or through credits or other adjustments in continuing arrangements
between the Sellers and their respective Affiliates, on the one hand, and the
Acquired Companies and the Subsidiaries on the other hand, or contribution of
cash to the Acquired Companies in amounts necessary to repay any outstanding
Off-Balance Sheet Intercompany Liabilities owing from any of the Acquired
Companies and Subsidiaries to Sellers or any of their Affiliates, provided that
Buyer shall, at Sellers' sole expense, use reasonable efforts to cooperate with
Sellers to settle such Off-Balance Sheet Intercompany Liabilities. In accordance
with Section 9.2(a)(v) hereof, Sellers shall indemnify and hold harmless the
Buyer, the Acquired Companies, the Subsidiaries and their Affiliates from any
and all amounts incurred by the Buyer, the Acquired Companies and the
Subsidiaries to complete the Off-Balance Sheet Intercompany Liability Settlement
and for any Tax liabilities or other Liabilities
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arising out of the Off-Balance Sheet Intercompany Liability Settlement, in each
case whether occurring before, on, or after the Closing.
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ARTICLE III
RELATED MATTERS
Section 3.1 Books and Records of the Acquired Companies. The Sellers
shall deliver to Buyer at or as soon as practicable after the Closing, all
Acquired Books and Records (including, but not limited to, correspondence,
memoranda, minute books, books of account, personnel and payroll records and the
like), except for books and records required pursuant to the performance of any
of the Ancillary Agreements and preparation of the Tax Returns (as defined in
Section 4.19(e) hereof) and any Letters, workpapers, memoranda, rulings or other
documentation related to the preparation of such Tax Returns relating to the
Acquired Companies or the Subsidiaries that contain material Tax information
regarding operations other than the Business. Any books and records of the
Acquired Companies or the Subsidiaries which are not delivered to Buyer
hereunder shall be preserved by the Sellers for the longer of (i) seven years
following the Closing, or (ii) 30 days past the end of the applicable statute of
limitations for Taxes, including all extensions thereof, and Sellers shall
permit Buyer and its authorized representatives to have reasonable access to,
and examine and make copies of, all such books and records as reasonably
requested by Buyer. All books and records delivered by the Sellers to Buyer
shall be preserved by